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Twitter Co-Founder Dorsey to Become Executive Chairman Amid Facebook Fight

Twitter Inc. co-founder Jack Dorsey will become executive chairman and head of product development as the company aims to narrow Facebook Inc.’s lead in online advertising and get users to be more active on its site.

The move means Dorsey, who stepped down as Twitter’s chief executive officer and became chairman in 2008, will play a more hands-on role at the San Francisco-based provider of microblogging. He will also remain CEO of Square Inc., the mobile-payments provider he co-founded in 2009.

Twitter needs to be “more approachable so that people can get into it immediately and it’s extremely relevant right away,” Dorsey said today during a lecture at Columbia University’s Graduate School of Journalism. “Mainstream relevancy is still a challenge.”

The company needs Dorsey, who helped build its blogging platform, to develop other products that get users to spend more time on the site, said Debra Aho Williamson, an analyst at EMarketer Inc. Twitter may generate less than a 10th the advertising sales of Facebook this year, her firm says, and its user base is expanding more slowly.

“Twitter is recognizing that it might have a product problem,” said Williamson, whose firm is based in New York. “To be anywhere close to the success that Facebook has achieved, Twitter just needs to be used by more people on a more regular basis.”

Photographer: Jin Lee/Bloomberg

Jack Dorsey co-founded Twitter and is chief executive officer of Square. Close

Jack Dorsey co-founded Twitter and is chief executive officer of Square.

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Photographer: Jin Lee/Bloomberg

Jack Dorsey co-founded Twitter and is chief executive officer of Square.

Advertising Sales

Ad sales on Twitter may more than triple to about $150 million this year, according to EMarketer. Facebook brought in ad revenue of $1.86 billion last year, the firm estimated. Facebook had 151 million users in the U.S. in February, up 35 percent from a year earlier, according to ComScore Inc. in Reston, Virginia. Twitter had 23 million, up 16 percent.

Users of Facebook, founded two years before Twitter, will be equal to 42 percent of the total U.S. population this year, up from 38 percent last year, according to EMarketer. Twitter users should be equivalent to 8.7 percent of the country’s adult population this year, up from 7 percent last year.

Twitter says it has more than 200 million registered accounts and that it’s creating almost 500,000 accounts a day. It took about 18 months to sign up the first 500,000 accounts.

Still, a minority of users contribute an inordinately high percentage of the service’s messages, according to a study by researchers at Yahoo! Inc. and Cornell University earlier this month. About 50 percent of the messages consumed on Twitter’s service are generated by 20,000 users, researchers found.

‘Power Users’

“Twitter currently is a platform that is dominated by a small group of power users,” said Arnie Gullov-Singh, CEO of social media advertising startup Ad.ly Inc. “The question is, ‘How do you get more consumers on the site creating more content?’ If you can get to 100 million uniques in the U.S., it would be a dominant media platform that no brand can ignore.”

The company’s product development is likely to thrive under Dorsey’s direction, said Robin Chan, who has invested in Twitter and Square. He compared Dorsey’s role to that of Apple Inc. (AAPL) CEO Steve Jobs, who founded animated film studio Pixar while running a different company.

“This is Jack’s decade,” Chan said. “Not since Steve Jobs have we seen an entrepreneur innovate with two disruptive companies. Managing his time between both companies will be a challenge. Fortunately he is surrounded by great business leaders.”

Square will remain Dorsey’s “top priority,” said Kay Luo, a spokeswoman for San Francisco-based Square.

Management Change

“As executive chairman, Jack will dive in to work with more than 450 people, led by an experienced executive team,” Twitter said. “Not only is Twitter experiencing record growth, but we also now have a new infrastructure that will keep us ahead of that growth and enable us to launch products that will make Twitter more instant, simple and always present.”

Dick Costolo, who helped introduce a new advertising service for companies on Twitter last year, became CEO in October, replacing co-founder Evan Williams. Costolo, who joined in 2009, had been chief operating officer. Williams became CEO in 2008, replacing Dorsey, who was then named chairman.

While Williams was set to work on product strategy after he stepped down, he decided to become less involved day-to-day a few months ago, Twitter said. He is now a “key adviser” for Costolo and the company on strategy, Twitter said.

Billion Users

The company aims to get 1 billion users, Williams said in October. Facebook founder Mark Zuckerberg had previously said that signing up a billion members is “almost a guarantee.”

Twitter revamped its site in September with the aim of being faster, easier to use and able to better handle photos and videos. The service now features a second column that lets users quickly look at messages without leaving a page.

Twitter, founded in 2006, said in December it was valued at $3.7 billion after receiving a $200 million round of funding led by venture-capital firm Kleiner Perkins Caufield & Byers. The company had a valuation of about $1 billion in 2009, according to a person familiar with the matter.

“It’s a wonderful thing when an inventor comes back to the service they created,” said Peter Fenton, a general partner at Benchmark Capital and a Twitter board member. “In the development of any company, you benefit from having the founder as a voice of moral authority. We’re ecstatic that that voice is now back at the center of the company.”

To contact the reporters on this story: Brian Womack in San Francisco at Bwomack1@bloomberg.net; Douglas MacMillan in San Francisco at dmacmillan3@bloomberg.net.

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net.

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