U.S. stocks are little changed on Friday, with the Dow Jones Industrial Average (DJINDICES:^DJI) and the S&P 500 (SNPINDEX:^GSPC) up 0.04%, and down 0.46%, respectively, at 12 p.m. EDT.


Twitter CEO Jack Dorsey in 2006. Image source: Jack Dorsey. Re-published under a CC license.

Twitter finally announced that co-founder Jack Dorsey's position as interim chief executive has turned into a permanent assignment, although he will continue to maintain two "residences" -- he remains the CEO at payments start-up Square. Twitter's board initially said it would not accept a part-time CEO, but it relented -- which was a mistake.

Dorsey's supporters point to other high-profile technology CEOs who have led two companies simultaneously in Elon Musk (Tesla Motors/SpaceX) and Steve Jobs (Apple/Pixar). However, as if running two companies weren't enough, Dorsey happens to be at both helms with each company at a critical juncture in its development.

On one hand, Square is expected to go public before the year is out, with things moving very rapidly in the online payments industry.

Meanwhile, at Twitter, user growth appears to have stalled; with a stock priced at 46 times next year's earnings-per-share estimate, that's not something Wall Street will countenance. The slowdown in user growth is symptomatic of a wider problem: Twitter has yet to figure out what it wants to be when it grows up.

Dorsey's remarks during the second-quarter conference call suggest he will continue to pursue his predecessor's "total audience" strategy with the aim of building a mainstream application comparable to Facebook in terms of reach.

To achieve that extremely ambitious -- some might say unrealistic -- goal would necessitate a fundamental rethink of the product in order to:

  • Nail down Twitter's value proposition in order to communicate succinctly and coherently to new and potential users what they'll get out of a service none of their friends belong to.
  • Radically simplify Twitter's structure and grammar. There's no getting around it: Facebook is simply easier to use.

The founder of a company isn't necessarily the best person to oversee such an overhaul, as it is harder for these individuals to approach such challenges with a clean slate.

The good news is that Dorsey said on the call they were continuing to question the reverse chronological feed, and Twitter is reportedly considering scrapping the 140-character limit on the length of tweets. This suggests there are no sacred cows -- which is exactly the required mind-set in this situation.

The board should have held firm and required Dorsey to step down from his role at Square in order to lead Twitter. Dorsey has his work cut out for him if he's going to prove they were justified in taking this leap of faith.

Alex Dumortier, CFA, has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple, Tesla Motors, and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.