Twitter (TWTR) co-founder Jack Dorsey reportedly will become the permanent CEO of the company.
Not a big surprise. And not exactly news that should build hope in TWTR stockholders, either.
According to a Re/code report, Twitter is expected to announce Dorsey’s ascension as soon as Thursday. That will finalize his replacement of Dick Costolo, who resigned at the beginning of July.
Where, Oh Where, Will Jack Dorsey Be?
While TWTR stock climbed more than 5% by the end of Wednesday’s trading, it’s fair to posit that much of Twitter’s recent woes had something to do with the expected return of Jack Dorsey, who has been running the company on an interim basis since Costolo stepped down. Twitter shares were off 29% since Costolo’s June 11 announcement through Tuesday, compared to a 5.5% rise in Facebook (FB) and a bad-but-still-better 14% decline for LinkedIn (LNKD).
That’s not to say that Jack Dorsey is a terrible executive. The man has built two multibillion-dollar companies — Twitter and payments firm Square, where he still has the helm. In both cases, he has demonstrated strong chops in terms of product development.
But that’s the nagging issue for TWTR stock — according to the report, Jack Dorsey will continue to run Square as well, meaning that he’ll still be a part-time CEO of Twitter.
The Square job is no light gig. In fact, it looks like Square will attempt to pull off an initial public offering within the next couple months — an intensely time consuming process. And the Square IPO could be even more complicated, as the markets aren’t particularly interested in tech deals right now; activity in the sector is at the lowest point since the financial crisis in 2008.
In short: Twitter’s CEO will almost have to dedicate a lot of his attention to Square for the first few months of his new “full-time” gig.
That’s a worry if you hold TWTR stock, as the next few months appear to be critical for the social media company. Big changes are afoot, including Twitter mulling a massive change to its longstanding 140-character format.
“Spearheading” the effort? Jack Dorsey.
At the same time, TWTR is planning to launch Project Lightning, which will allow for the curation of tweets and multimedia to make it easier for users to find interesting content.
But will Jack Dorsey, as a dual leader, really have enough time to ensure smooth transitions at both companies?
In the meantime, Twitter is feeling competitive pressure. For instance, Instagram is continuing to gain lots of ground, hitting 400 million monthly active users (MAUs) recently, up by 100 million since the start of the year.
And Facebook has been adding more resources to include Twitter-type functionality. For example, the company recently launched Instant Articles, which allows publishers to distribute content.
Twitter? Twitter has stalled. In the latest quarter, the company added only 8 million MAUs, bringing the total to 316 million. But on the earnings call, CFO Anthony Noto noted that there will likely be no “meaningful” MAU growth for a “considerable” amount of time. TWTR stock unsurprisingly plunged on the news.
Bottom Line
To put things into perspective, Facebook was in a similar situation several years ago. The company’s mobile platform was horrific — and there were few signs of improvement.
However, the difference might lie in what happened next — Mark Zuckerberg devoted 100% of his focus to solving the problem.
Jack Dorsey simply can’t do that as things stand today.
The role of Twitter CEO needs someone with the obsessive passion to get the platform back on track and become a dominant player again.
It’s certainly not a side gig.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
