Looks like Jack Dorsey may return as permanent chief executive officer of Twitter. Twitter co-founder Dorsey formerly served as Twitter's CEO from its inception in 2006 until his ousting by co-founder Evan Williams in 2008.
The Twitter stock price responded positively to the news by rising 3.42% mid-day Wednesday from its opening price of $25.94.
After former Twitter CEO Dick Costolo stepped down from Twitter Inc. (NYSE: TWTR) in July, Dorsey has served an interim role.
Dorsey is currently the CEO of Square, a financial processing service company. Twitter's board announced in June that it would only consider a candidate willing to make a full-time commitment.
The potential IPO of Square in the fall of 2015 leaves investors wondering if Jack Dorsey could handle both positions.
Questioning Dorsey's commitment is not a new theme. You see, New York Times reporter Nick Bilton wrote in his 2014 book "Hatching Twitter: A True Story of Money, Power, Friendship and Betrayal" how Dorsey would leave work early for fashion shows, yoga, and drawing classes.
Ultimately, Dorsey's lack of experience cost him his job. The then-30-year-old had a background in dispatching and programming. He did not have any experience running a company and was highly criticized for not having a clear vision as Twitter's CEO.
Nine years later, Dorsey finds himself back at the helm - potentially for the long term.
Jack Dorsey's history has led to comparisons between him and Steve Jobs. After Jobs was removed from his position as CEO of Apple Inc. (Nasdaq: AAPL), he became the leader of Pixar. He found himself as CEO of both companies in 1997.
Investors are focusing on the Twitter co-founder being able to handle two roles.
At Money Morning, we're looking at the bigger picture: Do these changes make Twitter a good stock to invest in?
Jack Dorsey's Vision for Twitter
The chief critiques of Dorsey's early days were largely based around a perceived lack of vision.
In hindsight, the criticism Dorsey received was unwarranted. Twitter was not in the same position for monetization in 2006 that it is today. Keeping the site up and running was one of Dorsey's main concerns.
Pingdom, a service that provides data for the uptime and downtime of websites, reported Twitter amassed a 98% uptime in 2007. Uptime is vital for user retention. Wall Street didn't pay attention to the better uptime performance.
Wall Street wanted to see profitability.
Now with downtimes far and few between, Dorsey can center his focus on driving revenue growth.
But that leads to one big reason why Twitter's interim CEO may not succeed...
Why Twitter Interim CEO Jack Dorsey Could Fail
A big concern for Dorsey and for Twitter investors is how much the social networking site trails behind other social media services in monthly active users (MAUs).
Twitter is heavily behind Facebook Inc. (Nasdaq: FB) in MAUs. Twitter currently reports on its website 316 million MAUs. Facebook reported 1.49 billion (MAUs) on June 30, 2015, and Instagram just surpassed Twitter by reporting 400 million MAUs on Sept. 24.
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Research service BI Intelligence projects mobile ad spending will reach $42 billion by 2019. That's a 57% increase from the $17.96 billion spent on mobiles ads reported by research company eMarketer in 2013. The increased revenue through mobile ads is good news for the social media industry, but advertisers pay up for extensive reach.
Twitter reported an increase of just 2 million MAUs from Q1 to Q2 of 2015. Wall Street tracks MAU growth as a strong indicator for the profitability of the business.
Dorsey will have a challenge adding new MAUs. Advertisers and investors will notice if he doesn't.
Jack Dorsey is also walking into a situation where the Twitter stock price mirrors its IPO price of $26. Twitter went public on Nov. 7, 2013.
Dorsey does have a few key advantages this time around...
Twitter's interim CEO started with the company during two initial rounds of funding. He has an insider's perspective that could help him avoid potential pitfalls down the road. He saw what worked and what didn't from the beginning.
Dorsey also has an expanded knowledge of the inner workings of monetization from running Square. Unlike when he first ran Twitter, Dorsey now has the experience of running a successful company to add to his resume.
Jack Dorsey could be officially named the new Twitter CEO as soon as today, Oct. 1.
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