Twitter chooses Jack Dorsey as CEO in hopes of turnaround

Twitter is embracing Jack Dorsey as its CEO in hopes that its once-spurned co-founder can hatch a plan to expand the short messaging service's audience and end nearly a decade of financial losses.

Twitter stock gained three per cent in early trading on the news.

Twitter dumped Dorsey his first time around, but its board of directors now appears convinced he has the maturity to fix the problems that has caused the company's stock to lose nearly half its value in the past five months.

Dorsey, 38, has already had dress rehearsal for the job, having become Twitter's interim CEO in July after former stand-up comedian and veteran entrepreneur Dick Costolo stepped down amid shareholder discontent.

• Jack Dorsey on Twitter, Square and Kitchener-Waterloo
• Twitter's slow uptake creates doubts it will ever be mass market

Twitter is believed to have considered its chief revenue officer, Adam Bain, and several other CEO candidates before settling on Dorsey. Bain, 42, was named chief operating officer concurrent with CEO announcement.

Continuing work at Square

Dorsey will no longer be Twitter's chairman, but he will continue as CEO of Square Inc., a company he co-founded in 2009, as he prepares that for its initial public offering of stock.

In doing so, Twitter's board recanted on a pledge issued in late June when it vowed to pick a CEO who would be able to make a "full-time commitment" to the company.

As CEO of two companies simultaneously, Dorsey can draw more parallels to Apple co-founder Steve Jobs a comparison that Dorsey has never discouraged.

After being ousted from Apple in the mid-1980s, Jobs came back as the company's interim CEO in 1997 and then stayed on oversee the creation of the iPod, iPhone and iPad.

While running Apple, Jobs also was CEO of computer animation pioneer Pixar until the company was sold to Disney in 2006.

The headquarters of Twitter and Square are within a block of each other, possibly making it easier for Dorsey to split his duties at the two companies.

Need for vision

R.W. Baird analyst Colin Sebastian said the decision is a step in the right direction for Twitter.

"We believe Dorsey has the requisite vision and organizational clout to address some of Twitter's major challenges (i.e., user acquisition, pace of platform improvement, long-term monetization prospects," Sebastian wrote.

Dorsey's biggest challenge at Twitter will be finding a way to make the site easier to navigate and broaden its appeal beyond media junkies, athletes, celebrities and politicians.

The short messaging service has amassed more than 300 million users, but its growth has been slowing to the frustration of investors even as people spend more time online, particularly on their smartphones.

Facebook has hooked 1.5 billion people on its online social network and even its photo-sharing application, Instagram, has surpassed Twitter in size. Unlike Twitter, Facebook has been making money for years and its stock has more than doubled from its IPO price. In contrast, Twitter's stock is barely above its IPO price of $26 nearly two years after its market debut.

Dorsey should be highly motivated, given he owns a 3 per cent stake in Twitter currently worth about $600 million.

Dorsey might attempt to draw more traffic to Twitter and engage more people by lifting the 140-character limit that he originally imposed on tweets so they would fit under the restrictions imposed at that time on phone texting. Since Dorsey became interim CEO, Twitter already has already tossed out the 140-character limit private messages sent through Twitter.

Increasing the length of tweets, though, might alienate some of Twitter's most loyal and active users, who have embraced the 140-character limit as an exercise in eloquence.

Dorsey has must ensure that Twitter's steadily rising revenue begins to produce profits relatively soon. Although the company generated $938 million in revenue during the first half of this year, Twitter still lost $299 million. That raised Twitter's total losses since its inception to $1.9 billion.