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Nov. 29, 2021, 6:26 p.m. EST

Jack Dorsey didn’t change Twitter’s trajectory. What happens now?

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By Therese Poletti

Jack Dorsey leaves behind an improved Twitter Inc. since his heralded return in 2015, but it wasn’t good enough for Wall Street, which puts high hopes on the incoming chief executive.

Dorsey said he was stepping down as Twitter CEO /zigman2/quotes/203180645/composite TWTR -1.61% on Monday, after an early report by CNBC. Of course, co-founder Dorsey confirmed the news on Twitter’s core service, where he also made a cryptic statement about founder-led companies, a practice he said ultimately is “severely limiting,” and said how he has worked hard to ensure Twitter can break away from its founding and its founders.

It was a strange statement from Dorsey, who has spent the past six years as CEO of both large public companies he founded, Twitter and Square Inc. /zigman2/quotes/205989440/composite SQ -3.73% , after finagling his way back into the top seat at the social network in 2015 . Twitter even paid off investors to the tune of $2 billion less than two years ago to keep Dorsey in his part-time job at the helm of the company.

See also: Crypto community ponders Jack Dorsey’s next move

In his years back at the top of Twitter — and especially since the March 2020 deal with activist investors — Dorsey has made many changes. While he has improved the product of Twitter itself, the company has not seen the expected growth in users, advertising revenue or its stock price, while social-media rivals have soared.

Since Dorsey’s return to the CEO job on June 12, 2015, Twitter’s stock is up 27.5%, while the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.15% has increased 117.9% over the same period. Since its stock-repurchase deal with Elliott Management in March 2020, Twitter’s shares are up 41%, while the S&P is up 67.3%, Facebook (now calling itself Meta Platforms Inc.) /zigman2/quotes/205064656/composite FB -1.84% rose 99.4%, Snap Inc. /zigman2/quotes/205087158/composite SNAP -6.62% soared 326.6% and Pinterest Inc. /zigman2/quotes/211319641/composite PINS -6.04% gained 150.1%.

Wall Street’s consistent gripe is that Twitter cannot capitalize financially on its importance, and the uncertainty showed in Monday’s trading. Initially, Twitter’s shares soared nearly 11% on the news that Dorsey was stepping down, but closed down nearly 3% at $45.76.

“The company has long faced a customer-value proposition challenge, especially with its marketer/advertiser customers,” Mark Mahaney, an analyst with Evercore ISI, wrote in a note. He believes Alphabet Inc.’s /zigman2/quotes/202490156/composite GOOGL +1.81% /zigman2/quotes/205453964/composite GOOG +1.98% Google, Facebook, Pinterest and Snap all have better direct-response marketing tools for advertisers, and that brand advertising still accounts for the majority of Twitter’s ad revenue.

From 2017: The Dorsey divergence — As Twitter stalls, Square still in high growth mode

It’s a bit tricky to try and look back at Twitter’s user growth during Dorsey’s most recent tenure, because in 2019, the company made an Apple Inc. /zigman2/quotes/202934861/composite AAPL -0.06% – like move, and phased out the reporting of monthly active daily users . Instead, it began reporting so-called monetizable daily active users, which have grown to 211 million in the most recent quarter, from 145 million in the third quarter of 2019.

But even with that newish metric, which eradicated the company’s declining monthly active user data, monetizable data is not much better. Third-quarter numbers of 211 million users only increased 3% on a year-over-year basis, and the performance trailed user and advertising targets that Dorsey set for the company.

Twitter “is behind schedule in mDAU [mobile daily average users] (20% CAGR) and DR [direct response] targets (50% of revenues) established during its Analyst Day,” Mizuho Securities analysts wrote in a note Monday.

Analysts have high hopes that incoming CEO Parag Agrawal, who has been the company’s chief technology officer, and Salesforce.com Inc. /zigman2/quotes/200515854/composite CRM -2.04% President Bret Taylor, who will take over the chairman role, will be able to address the company’s nagging growth issues.

Read also: Who is Parag Agrawal, the new CEO of Twitter?

“We are confident that they are the right leaders for Twitter at this pivotal moment for the company,” Elliott Investment Management LP, the hedge fund that led the campaign to remove Dorsey, said in a statement.

In addition to Agrawal’s chops as a techie, investors now also have the peace of mind knowing that the CEO is working full time on Twitter, and does not have his attention diverted by a second company. There is plenty beyond just user and revenue growth for Agrawal to focus on, including the company’s cultural conflict that was reported in the New York Times this summer.

Dorsey leaves a tough road for Agrawal, who will struggle to affect any big changes in the company’s results soon. But it didn’t look like Dorsey was ever going to be able to provide the type of growth Wall Street wants anyway, so — for a second time — he will let someone else take a shot with Twitter.

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