Inside new CEO Costolo’s plans for Twitter

October 4, 2010, 8:44 PM UTC

Fortune spoke with then COO Costolo earlier this year to find out about the tech veteran’s plans for monetizing Twitter. Describing the company as at a “juncture,” it’s now his job as CEO to navigate the company Jack Dorsey and Evan Williams founded, through it.

According to a company blog post, current COO Dick Costolo will replace Evan Williams as Twitter CEO. Williams, who stepped in for creator Jack Dorsey in October of 2008 for unspecified reasons, announced in a 133-character Tweet that he will focus on product strategy moving forward, though his new official title remains unknown.

The move comes at a crucial time for Twitter, as the social network experiments with different revenue streams in an effort to capitalize on its success — it now claims more than 75 million users. The revenue plays have included Promoted Tweets, 140-character Tweets from companies that on first appearance look like any other; Promoted Trends; the aborted @earlybird sales feed; and more recently, Promoted Accounts. That last program, which expands upon Promoted Tweets, rolled out in April, and lets companies essentially pay to be included in those highly-coveted “Who to Follow” suggestion lists which Twitter uses to help new users seed their accounts with interesting content.

Costolo, 46, is a former Google (GOOG) executive and Feedburner CEO who was tapped by Twitter in September of 2009 to head up the social media giant’s monetization efforts. We spoke with him earlier this year for Fortune’s 50 Smartest People in Tech. While he said this year would be chock-full of ad experimentation, he also admitted it was an important period for the company as pundits have questioned whether Twitter is a business that can actually profit.

“It’s a juncture for us,” Costolo said. “There are going to be bumps in the road along the way. Nothing ever goes according to plan when you’re talking about business models. But I’m a callous pragmatist when it comes to forecasting how these things are going to go. I anticipate that we’ll have challenges.”

One early casualty appears to be @earlybird. Announced in July, the sales feed was intended to highlight “special time-bound deals, sneak-peeks, and events,” but failed to gain traction. In a statement, Costolo said Twitter is “setting aside” @earlybird but leaving open the possibility that Twitter could revamp the product and bring it back — though in our opinion, chances of that are slim.

During his interview, Costolo also outlined his general plans for the company:

“Everything we’re doing on the business model side is about preserving the existing nature of the relationship between users, and Twitter, and the developers, and not adding money into the equation in a way that throws that off balance.” To do that, he and his team were providing companies with a roadmap that gives them examples of Twitter-friendly ad formats that work and don’t work.

“For example, one of the things we tell people right off the bat is — look just because it’s just 140 characters doesn’t mean you should cut and paste your ad words ad into a promoted tweet and hit the tweet button — that’s not an effective communication . . . What you now have to think about is that you’re now in the environment where you’re integrating your paid media and your earned media so anything you say has to resonate with your existing organic followers, and the new people you’re trying to reach with paid media.”

“It’s not so much rules as us trying to provide a ‘here’s how to engage with your customers on Twitter.’ And this goes whether you’re doing it for free or with paid provided tweets.” If that’s still the way Costolo is thinking about Twitter, it appears the company will turn heavily towards figuring out how to monetize and service businesses on Twitter — while of course protecting the integrity of the service’s essential function, much the way Google has consistently protected its search results while finding other ways to monetize and retain its user base.

With Costolo’s respectable track record, it’s possible Twitter may now have the leadership necessary to make this growth and change actually happen.