Jack Dorsey is stepping down as chief executive officer of Twitter Inc., handing over control of the microblogging site he founded and helped build into a global communications platform that, despite being widely used, has struggled to keep up with its social media peers.
Chief Technology Officer Parag Agrawal, who joined Twitter in 2011, was promoted to CEO. Dorsey will stay on the board of the San Francisco-based company until his term expires in 2022, Twitter said in a statement Monday. Agrawal is also joining the board, and director Bret Taylor was named independent chairman.
“The company is ready to move on from its founders,” Dorsey said in the statement. “My trust in Parag as Twitter’s CEO is deep. His work over the past 10 years has been transformational. I’m deeply grateful for his skill, heart and soul. It’s his time to lead.”
The 45-year-old Dorsey is also the head of payments company Square Inc., and has been focusing more of his attention on cryptocurrencies, particularly Bitcoin, in recent years. After co-founding Twitter in 2006, he stepped down as CEO in 2008, then returned to the job in 2015. He will continue running Square, according to a company spokesperson.
Dorsey’s departure marks the end of a complicated and eventful six-year run at the helm, which featured an attempted sale of the company, a business turnaround that saw Twitter reach profitability, and an effort by activist investors to boot Dorsey from his job. When Dorsey returned as CEO, many analysts and investors predicted that he would eventually leave Square and run Twitter full-time. But Dorsey instead stuck to a hands-off management style to run both companies for years.
While Twitter’s business has improved since Dorsey took over — Twitter’s user base, which was once shrinking, has been growing steadily for years — the company hasn’t delivered the same kind of returns as peers like Snap Inc. and Facebook owner Meta Platforms Inc. Twitter stock has climbed 67% since Dorsey’s return in 2015. Meta stock is up 260% in that same period.
“The headline takeaway here is Twitter’s execution,” said Mandeep Singh, an analyst at Bloomberg Intelligence. “When you compare Twitter to all the other social media platforms, the level of engagement they had, they never were able to monetize it as well as some” rivals, he said. “Investors recognize having one man be the CEO of two companies wasn’t very effective in terms of execution.”
In early 2020, Dorsey came under attack by activist investor Elliott Management Corp., which criticized Twitter’s performance and how the CEO was spending his time. A year earlier, Dorsey had said he planned to spend as much as six months of the year working in Africa to better understand the continent’s internet users, a move that was ultimately scrapped because of the Covid-19 pandemic.
The hedge fund reached an agreement with Twitter and private equity group Silver Lake in March 2020 to appoint three new directors to Twitter’s board and create a committee to review its leadership and governance.
That arrangement with Elliott came at a cost, though: Twitter was required to increase its monetized daily users by 20% or more and boost revenue growth. Dorsey was at risk of losing his position if those goals weren’t met, Bloomberg reported. In November 2020, the committee concluded that Dorsey should maintain his role.
In a statement on Monday, Elliott said its collaboration with Dorsey and Twitter for the past two years has been “productive and effective.” It said Twitter now has an “ambitious multiyear plan to dramatically increase the company’s reach and value,” and the firm is confident that Agrawal and Taylor, who is chief operating officer of Salesforce.com Inc., are “the right leaders for Twitter at this pivotal moment for the company.”
Dorsey has a net worth of $12.3 billion, with Square accounting for more than $10 billion of that amount. He’s publicly pledged much of his stake in Square to charitable causes, according to data compiled by Bloomberg. CNBC reported the news of Dorsey’s exit earlier Monday.
Twitter investors initially cheered the move, sending the shares up as much as 11%. But the rally fizzled, and the stock was down 1.3% to $46.48 as of 2:02 p.m. in New York.
Agrawal’s appointment signals that Twitter will continue to focus on blockchain and decentralized technologies, which have become a major point of interest for Dorsey. As CTO, Agrawal was the point person inside Twitter as it created Bluesky, which aimed to create a “decentralized standard” for social media, a project Dorsey said was his “biggest focus” during an interview in July. Agrawal, who was named CTO in 2017, has also been involved in Twitter’s crypto and blockchain teams.
In his second term as CEO, Dorsey also navigated Twitter through widespread pressure from politicians and activists to take a more proactive role in moderating hate speech, misinformation and other forms of objectionable content from political leaders.
Dorsey took a stronger line than his social-media peers during Donald Trump’s presidency, permanently banning the former president from Twitter and telling Congress that he takes some responsibility for online organizing that led to the Jan. 6 riot on Capitol Hill. The company also recently introduced a program to crowd-source fact-checking of misinformation on its platform.
Dorsey has also led Twitter as it experimented with innovations in social media, including most recently live audio products and subscription services. In June, the company unveiled Twitter Blue, a long-awaited premium service that allows users to rescind tweets and organize their posts. It launched Twitter Spaces, a live audio-chat service that was meant to compete with upstart Clubhouse. None of the new features has broken through in a significant way, though, and Twitter has historically moved much slower with new products than investors would like.
Agrawal’s appointment is a “clear indication that Twitter’s focus needs to remain centered around products and technology,” Youssef Squali, an analyst at Truist Securities, wrote in a research note. “That’s been the company’s Achilles’ heel.”
In recent months, Twitter stepped up its pace of acquisitions after years of languid deal-making, as the company made a renewed effort to increase the addition of new features. In May the company purchased the news-reader service Scroll.
But the company has also faced competition for users’ attention from newer rivals including TikTok and Snapchat, which have large audiences among the youngest age cohorts with short-form video products.
Twitter said earlier this year it wants to double annual revenue to $7.5 billion by 2023, and expects to increase its user base by an average of almost 20% in each of the next three years, according to a regulatory filing. The company is forecast to bring in $5.09 billion in sales this year.
In the third quarter, Twitter said it had 211 million daily users, 5 million more than the previous period and a 13% increase from a year earlier. The social media service attributed the growth to “ongoing product improvements and global conversations around current events.”
©2021 Bloomberg L.P.