Twitter Inc (TWTR.N) Chief Executive Officer Jack Dorsey is stepping down from his role and Chief Technology Officer, Parag Agrawal will now lead the company, the social networking site announced on Monday.

 

The appointment of Agrawal, a 10-year veteran of Twitter, signaled a tacit endorsement by the board of a strategy the company previously laid out to double its annual revenue by 2023, even if investors were not so sure.

 

Twitter shares surged nearly 10% after the announcement and closed down 2.7%.

Dorsey, who co-founded Twitter in 2006, is leaving after overseeing the launch of new ways to create content through newsletters or audio conversations while simultaneously serving as CEO of his payments processing company Square Inc (SQ.N).

 

He also navigated the tumultuous years of U.S. President Donald Trump’s administration before banning the Republican from the platform after the Jan. 6 attack on the U.S. Capitol.

The CEO change is effective immediately and Dorsey will remain on the board until his term expires at the 2022 annual shareholder meeting, the company said.

 

In an email to employees on Monday, Dorsey said he chose to step down due to the strength of Agrawal’s leadership, the naming of Salesforce Chief Operating Officer Bret Taylor as the new chairman of the board and his confidence in the “ambition and potential” of Twitter’s employees.

 

“I’m really sad … yet really happy,” he wrote. “There aren’t many companies that get to this level,” adding that his move to step down “was my decision and I own it.”

 

“We recently updated our strategy to hit ambitious goals, and I believe that strategy to be bold and right,” Agrawal said in an email to employees. “But our critical challenge is how we work to execute against it and deliver results.”

 

Over the past year, Twitter has fought to end years-long criticism that it has been slow to introduce new features for its 211 million daily users and was losing ground to social media rivals like Instagram and TikTok.

 

Under Dorsey’s leadership, Twitter acquired email newsletter service Revue and launched Spaces, a feature that lets users host or listen to live audio conversations.

 

The company also rolled out advertising improvements to help brands find Twitter users likely to be interested in their product, a key component of the company’s goal to double annual revenue by 2023.

 

However, shares of Twitter have slumped in recent months, adding pressure on Dorsey to end his unusual arrangement of being CEO of two public companies.

 

In early 2020, Dorsey faced calls from Elliott Management Corp to step down, after the hedge fund argued that he was paying too little attention to Twitter while also running Square Inc.

 

Dorsey fended off the pressure by giving Elliott and its ally, buyout firm Silver Lake Partners, seats on Twitter’s board.

In a joint statement issued after the announcement, Elliott Managing Partner Jesse Cohn and Marc Steinberg, a senior portfolio manager, endorsed the baton passing. “We are confident that they (Agrawal and Taylor) are the right leaders for Twitter at this pivotal moment for the company.”

 

Dorsey will now focus on leading Square and other pursuits such as philanthropy, a source familiar with the matter told Reuters.

 

The company’s board has been preparing for Dorsey’s departure since last year, the source said.

 

Why Agrawal?

The appointment of Parag Agrawal as Twitter’s new CEO suggests the company has picked engineering as its top priority.

 

Agrawal has helped lead Twitter’s work on incorporating cryptocurrencies and blockchain technologies into the company and also pursue its long-term ambition to rebuild how social media companies operate.

 

He has been a key figure in Bluesky, a Twitter-funded organization that is seeking to build a “decentralized” common standard for social media companies. Such a standard would allow different social platforms to operate on the same technology and let users post content across the services, for instance.

 

Bluesky’s work will likely take years to complete, Dorsey has said.

 

For now, investors are hoping Agrawal’s technical prowess will help Twitter’s advertising “engine” grow, said analysts from Baird Equity Research in a note on Monday.

 

Twitter earns the majority of its revenue from selling advertising on its website and app. But its ability to offer highly targeted advertising to drive product sales has lagged far behind larger rival Facebook (FB.O), advertising experts have said.

 

The company previously said it sought to grow its highly targeted advertising segment to 50% of its business — it currently constitutes just 15%.

 

As investors digested the news, the market likely realized Agrawal’s “mountain to scale” to reach the company’s revenue targets and felt “some disappointment that a Twitter outsider hasn’t been brought in to offer fresh ideas,” said Susannah Streeter, an analyst at Hargreaves Lansdown.

 

Jack DORSEY

Mr. Dorsey, 45, who is also the chief executive of the payments company Square, was fired from the top job at Twitter in 2008 but returned in 2015. His departure represents the second recent significant shake up at a major social media company. Last month, Facebook rebranded itself as Meta. The change was accompanied by a new corporate logo and an emphasis on a virtual world called the metaverse, but Mark Zuckerberg, its high-profile chief executive, will still run the company.

The departure of Mr. Dorsey is a critical changing of the guard for the company. Mr. Dorsey’s name has been as closely associated with Twitter as Mr. Zuckerberg’s has been with Facebook, although Twitter is nowhere near as large. Mr. Dorsey has become a celebrity outside of Silicon Valley, parodied on “Saturday Night Live” and needled on his own social media platform for his long facial hair and his personal wellness pursuits.

 

“If you stand back and you think about who’s had a big influence on social media over the past decade, the name Jack Dorsey is always going to come up,” said Tim Hubbard, an assistant professor of management at the University of Notre Dame’s Mendoza College of Business to Newyork Times.

 

Like Mr. Zuckerberg, Mr. Dorsey has been called to Washington to testify about his company’s content moderation and censorship complaints. But the decision to remove Mr. Trump’s account was made by one of Mr. Dorsey’s lieutenants, a contrast with Mr. Zuckerberg’s direct involvement in high-profile moderation decisions. Mr. Dorsey was working on a private island in French Polynesia when it happened — adding to concern that he was not fully engaged with his company.

Mr. Dorsey said in an email to Twitter employees, which he also posted publicly, that he wanted Twitter to stop being a founder-led company, which could be a weakness over time.

 

“I’ve worked hard to ensure this company can break away from its founding and founders,” Mr. Dorsey wrote, adding: “I believe it’s critical a company can stand on its own, free of its founder’s influence or direction.”

 

“There aren’t many companies that get to this level. And there aren’t many founders that choose their company over their own ego,” Mr. Dorsey said.

 

Mr. Dorsey’s leadership and focus had been questioned by employees and investors for some time. His departure comes a year and a half after he survived an attempted ouster from the activist investor Elliott Management.

 

Chief among Elliott’s concerns was that Mr. Dorsey’s attention was divided between the two companies he led. The firm believed that Twitter had fallen behind social media rivals in increasing its stock price and adding innovative new products.

 

Some employees rallied around Mr. Dorsey during the attempt to force him out, using the hashtag #WeBackJack as a rallying cry.

 

In March 2020, Elliott Management struck a deal with Silver Lake, one of Silicon Valley’s biggest investors in technology companies, that allowed Mr. Dorsey to remain at Twitter. The deal also gave Jesse Cohn, the Elliott executive who oversaw the Twitter campaign, a seat on Twitter’s board. Mr. Cohn joined a five-member committee that led a review of Twitter’s C.E.O. succession planning.

 

Last November, that committee completed its review, saying that it had “updated the C.E.O. succession plan in line with best practices,” according to a regulatory filing, laying a path for the transition. Twitter’s stock began to climb, and in February, Mr. Dorsey announced an ambitious plan to double Twitter’s revenue by the end of 2023. The company also sped up its product pace, releasing new features like audio chat, newsletters and tipping.

Mr. Cohn stepped down from Twitter’s board in June.

 

“Our collaboration with Jack and the company for the past two years has been productive and effective,” Mr. Cohn and Marc Steinberg, a senior portfolio manager at Elliott, said in a joint statement. They also praised Mr. Agrawal and Bret Taylor, the president of Salesforce and Twitter’s incoming board chairman, saying: “We are confident that they are the right leaders for Twitter at this pivotal moment for the company.”

 

But some of Twitter’s stock market gains have slipped away in recent months, with shares now worth roughly the same as they were a year ago. Twitter said its revenue grew 37 percent in the third quarter from a year prior, to $1.28 billion, but it lost $537 million.

 

Some legislators have demanded that Twitter do more to address misinformation and hate speech on the platform, while others have accused Mr. Dorsey of censorship and argued that Twitter should allow more content to remain online.

 

The moderation issues have been a persistent irritation for Mr. Dorsey. He had envisioned Twitter as a platform for free speech and bristled at the idea of removing content, especially from world leaders and other newsworthy figures.

 

Mr. Trump’s incendiary tweets tested Mr. Dorsey’s stance. Twitter at first compromised by labeling some of Mr. Trump’s tweets as misinformation before finally removing his account.

 

Mr. Dorsey, who will remain on Twitter’s board until its next election in 2022, stressed that he had made the decision to leave and had not been forced to go. He had recently discussed his desire to leave Twitter and to focus on projects in cryptocurrency and philanthropy, said a person familiar with his thinking who was not authorized to speak publicly.

 

In recent years, Mr. Dorsey has become increasingly interested in cryptocurrencies and the principle of technology decentralization. He said in 2019 that Twitter would help to build a decentralized form of social media that would allow users to set their own algorithms for promoting content and moderate their own communities rather than relying on tech companies to make those decisions.

 

Mr. Dorsey tapped Mr. Agrawal to oversee Twitter’s contributions to the project, known as Bluesky, which is funded by Twitter but operates independently. In August, Twitter hired Jay Graber, a cryptocurrency developer and the founder of a social events start-up, to lead Bluesky.

 

Mr. Agrawal, 37, is a low-profile figure who started his career at Twitter over a decade ago as an engineer. He worked his way up through the company and was made its chief technology officer in 2017.

“Parag has been behind every critical decision that helped turn this company around,” Mr. Dorsey said in his email. “My trust in him as our C.E.O. is bone-deep.”

The majority of Mr. Dorsey’s wealth comes from Square, which he co-founded in 2009 during his last departure from Twitter. Last year, Mr. Dorsey announced that he would donate $1 billion, or nearly a third of his total wealth at the time, to relief programs related to the coronavirus and other philanthropic endeavors. Mr. Dorsey also has given $15 million to guaranteed-income projects, which allow cities to provide financial support to residents in need. Forbes estimates Mr. Dorsey’s net worth at over $11 billion.

 

Twitter’s stock jumped 5 percent on the news of Mr. Dorsey’s departure before a halt in trading. It closed down about 2.7 percent.

 

On Sunday night, perhaps foreshadowing the news to come, Mr. Dorsey tweeted, “I love Twitter.”