Jack Dorsey goes Square—leaving Twitter at a time of his choosing

“THE COMPANY IS ready to move on from its founders,” explained Jack Dorsey, chief executive of Twitter, a distributor of short messages, as he announced on November 29th that he would step down and hand the reins to the firm’s chief technology officer, Parag Agrawal. “About time,” was the grumpy reaction of more than one stockmarket analyst, many of whom had long criticised Mr Dorsey for spreading himself too thinly by running both Twitter and Square, a fast-growing fintech company which he will continue to head. (The chairman of The Economist’s parent company is a director of Square.)

Yet the timing makes sense. Over the past several years Mr Dorsey has pushed through changes at the company that only a founder could (he launched the company with several friends in 2006, was ousted as chief executive in 2008 and took over again in 2015). Now Mr Agrawal will build on the foundations Jack built.

Mr Dorsey was almost shown the door again in early 2020 when Elliott Management, an activist fund, amassed a stake of 4%, becoming one of Twitter’s largest shareholders. The fund pushed for Mr Dorsey’s ouster. After some drama a deal was struck. Silver Lake, a big investor in technology firms, invested $1bn in the firm to finance share buy backs. In addition, Twitter agreed to a series of financial targets, and gave board seats to Elliott and Silver Lake. Elliott’s activism pushed Mr Dorsey into a more hands-on role (he had previously intended to spend time in Africa).

Since then Twitter has undergone a reboot of sorts. It ditched its custom-built technology infrastructure and moved most of its computing to big clouds such as Amazon Web Services. As a result, it can more easily introduce new product features. It also rebuilt its advertisement platform, allowing it to better target ads. And it toughened its corporate culture, which even by Silicon Valley’s standards was considered especially cosy (at meetings to teach employees how to criticise each other, people reportedly cried).

The results have been noticeable. The firm, which even Mr Dorsey had called “slow” and “not innovative”, has been churning out far more new features and services in the past two years than previously. These include “topics” that users can subscribe to (instead of just following other people), ways for professional tweeters to make money and, most recently, a subscription service called “Twitter Blue”, which for $2.99 a month offers additional features, such as an undo button and a bookmarks folder.

Financial results have been improving, too, although not as fast as some investors would like (there is talk that Mr Dorsey left before activist funds waxed active again). Revenue mostly comes from ads, and in the third quarter it increased by 37% compared with a year before, reaching $1.3bn. Profits would also have continued rising were it not for a settlement in a shareholder lawsuit, which resulted in a posted loss of $537m. And daily users reached 211m, up 13% year-on-year. “Progress is a process, but it’s good enough for now,” noted Mark Shmulik of Bernstein, a broker.

If he is to truly win over investors, Mr Agrawal will need to speed up progress. Twitter’s share price is back to where it was before Mr Dorsey announced the firm’s new ambitions at an investor day in February (it promised to grow the number of users to 315m by the end of 2023 and double annual revenue, to more than $7.5bn). Wall Street’s reaction to the news of Mr Dorsey’s departure was mixed. After the news broke, Twitter’s shares rose by 10%, then fell back, ending the day down almost 3%.

Mr Agrawal is not a member of the Silicon Valley aristocracy like his old boss, who founded several successful startups and whose habits—eating once a day, immersing himself in cold water and growing his whiskers long—receive close attention. Mr Agrawal appears more straightforward: he is an engineer with a PhD in computer science from Stanford University.

The two men worked closely together on Twitter’s recent changes and share two long-term goals for the firm. One is to turn Twitter into a crypto company, perhaps by introducing a TwitterCoin to allow users to tip the authors of good tweets. Another is to fashion the firm into a decentralised undertaking, or in Mr Dorsey’s words, a “standard for the public conversation layer of the internet”. Instead of remaining a unified social-media service, it would become a platform on which other firms could, for example, compete with offerings that filter Twitter’s massive volume of content.

An effort called “Project Bluesky” to work this out is already under way. The company recently made it easier for other companies’ software to access its services. A big drawback, however, is that a decentralised Twitter would probably find it even harder to make profits.

Which raises the question of what will happen if Twitter’s current plans, and its new boss, underwhelm. When announcing his successor Mr Dorsey also presented a new chairman of the board: Bret Taylor, the president and chief operating officer of Salesforce, a business software company. Mr Taylor is also expected to take over from Marc Benioff, Salesforce’s co-founder and chief executive, in the not-too-far future. Perhaps the two firms, which in 2016 broke off merger talks, could eventually become one.

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