Twitter CEO Jack Dorsey surprised everybody.
It was March of 2016, and Dorsey was making an appearance on NBC's "The Today Show" to celebrate Twitter's 10th anniversary. As the camera panned toward Dorsey — dressed in slim black jeans, a black sweater and bright orange high-tops — host Matt Lauer jumped in with a question.
"140 characters, the limit," he said. "Is it staying? And if it's going away — when?"
Lauer was talking about Twitter's iconic 140-character limit for tweets, which had been around since the company's founding. Twitter was preparing to launch a feature that would extend that limit almost indefinitely, first reported on Recode a few months earlier. Known internally as "Beyond 140," the product was fully built, and essentially awaiting the green light for launch.
Dorsey chuckled. "It's staying," he said of the limit. "It's a good constraint for us."
Back at Twitter headquarters, the product team that built Beyond 140 was shocked, according to sources. Launching longer tweets had been one of the company's top priorities since Dorsey had officially returned as CEO five months earlier, and his comments to Lauer were the first time the group had heard that Twitter's 140-character limit was sticking around.
Dorsey, according to numerous former employees, had gotten cold feet after users freaked out about the potential change. One source described the decision as "playing not to lose."
Fast-forward 18 months, and Twitter finally did ship longer tweets, though with a much smaller character limit still in place than originally planned.
But that fear of straying too far from what was comfortable — and the protracted two-year timeline from product conception to launch — sums up Dorsey's return as CEO of the company he founded, which happened exactly two years ago this Thursday. In that time, Twitter has survived, but it has failed to take big swings or move with the kind of urgency necessary of a company that's fighting for its life.
That kind of tepid leadership can be seen in the numbers. Twitter's stock price is down more than 40 percent. The company has added just 21 million new users in the past two years, less than one million a month on average, and last quarter it didn't add any new users. Twitter is still not profitable. And it's bringing in less revenue this year than it did last year.
By all available metrics, Dorsey has failed.
Twitter disagrees. When presented with our reporting, the company pointed out that daily active user growth has increased by double digits for three straight quarters. (Twitter only shares the growth uptick, not the actual figures.) A spokesperson also referenced Twitter's redesign, its algorithmic timeline and its lite version for international markets as examples of "big bets."
Twitter's executive turnover, another major issue, seems to be slowing down, but the company still lost more than a dozen key product and business leaders in the past two years.
And Dorsey is still a part-time CEO, as he is also CEO of payments company Square. Nearly every source we've spoken to over the past two years, from leadership all the way down to Twitter's rank-and-file, expected Dorsey to have picked one or the other by now.
At the same time, you'll be hard-pressed to find a Twitter employee, past or current, who doesn't believe Dorsey's heart is in the right place. He cares about Twitter immensely. When Dorsey returned, the hope was that he'd use his clout as a co-founder to make the kind of massive changes that only an architect of the service can make. That hasn't happened.
Dorsey's first big move was to initiate layoffs, a tough but necessary decision to rein in Twitter's high costs as well as enforce hiring discipline at a time when some departments were overflowing with personnel. He made changes to Twitter's timeline, using an algorithm to put the most popular tweets up top instead of relying on the the reverse-chronological order the company was known for.
But the excitement around Dorsey's return quickly faded as projects like Beyond 140 were stalled. Executive turnover continued, and the company failed to improve its numbers.
One blow to morale occurred during one of the company's executive retreats in January 2016, a meeting of Twitter's top 100 executives in San Francisco for a day of meetings and presentations. Dorsey gave everyone a book, "Mindset: The New Psychology of Success," by Carol Dweck, who also had given a TED talk titled, "The power of believing that you can improve."
But as the day wrapped up and Twitter's executives awaited dinner at a downtown tavern near San Francisco's Union Square, news broke that the company's head of product, Kevin Weil, was headed to rival Instagram. (Weil, who was at the dinner, left once he saw the news got out.) Sources say the move blindsided many inside the company, including Dorsey.
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It was the start of a tough year. Twitter initiated its push into livestreaming video, and even won the rights to stream some NFL football games. But the year was punctuated by a series of setbacks, including more layoffs, and the shuttering of its video app, Vine, which slowly faded as those users who gained fame on the service moved on to other platforms.
Twitter also ran a sales process in hopes of finding an acquirer, but nothing materialized. In Disney's case, a report surfaced that the media giant was afraid of associating its family-friendly brand with Twitter's reputation for abuse and harassment. Another possible suitor, Salesforce, had to rethink its play when shareholders reacted aggressively against the idea. CEO Marc Benioff ultimately backed off.
Facebook, meanwhile, was pushing into live video, virtual reality, messaging bots and augmented reality. Twitter's leaders were focused on pushing deeper into live video, but even that effort felt half-baked.
Despite Twitter's focus on this new direction, the company still hasn't created a dedicated tab or page for live video, and it lost the NFL streams — the real pillar of its livestreaming effort — to Amazon. (A Twitter spokesperson: "The NFL was thrilled with their experience with Twitter. Their decision was due to a desire to test a different business model.")
Periscope, the live video app Twitter acquired in early 2015, has fallen almost completely out of the spotlight. It's unclear how many people use it — it hasn't released an updated user metric in two years, and some sources expect that the app's technology will eventually just exist inside Twitter without the need for a standalone app.
One former employee Recode spoke with cited Facebook's well-known mantra, "Move fast and break things," as a stark comparison to Twitter's approach. "Twitter was more, 'move slow and don't break anything,'" this person said.
When Dorsey took over, people were hoping for a wartime CEO, the kind of ruthless, win-at-all-costs leader who, as Andreessen Horowitz partner Ben Horowitz once wrote, "cares about a speck of dust on a gnat's ass if it interferes with the prime directive."
That is not Dorsey's personality; it never has been. When considering Twitter's challenges, he's deliberate and tends to focus on company culture, according to sources. After Twitter's first round of layoffs in 2015, Dorsey gave more than $200 million of his own stock back to employees.
What does he not care about? Twitter's stock price, or powering through a product update, like Beyond 140, if he's not entirely comfortable with it.
So what happens next?
Given Twitter's falling stock price and unclear product direction, it is likely that the company will be acquired at some point. The most-talked-about potential buyer is still Google, and Twitter has two former Google executives on its board of directors. But if a sales process starts up again, its banking advisors will put out feelers in an effort to find the best possible price. (We also think Amazon makes a lot of sense.)
But if Twitter's numbers don't improve, an activist investor could take advantage of the weak numbers to force a change. In a sign of Twitter's good corporate governance, it has one share class, with each share getting an equal vote, unlike other Silicon Valley companies like Alphabet and Facebook, where founders exercise disproportionate control relative to their ownership stake.
But that also leaves Twitter more susceptible to an investor willing to write a big check in exchange for some control. (Twitter staggers its board seat renewals to make it harder for anyone to change anything too quickly, though.)
Still, no one person or entity owns a significant share of the company. Co-founder Ev Williams, who had the largest ownership stake a year ago, has been selling a lot of his shares. The only other investor with more than 5 percent ownership is Vanguard; Dorsey owns just over 2 percent.
There have been some positives to Dorsey's tenure. Fixing abuse on Twitter is a company-wide priority because of Dorsey, and Twitter claims its efforts are working. (Many users still disagree.) Twitter's live video push has attracted early advertiser attention, and while it took two years, Beyond 140 is finally out in the wild.
But Twitter recently added more controversy to its plate. The company is now facing public scrutiny for the role it may have played in last fall's U.S. presidential election, in which Russia-linked "bots and misinformation networks" used Twitter to spread fake news during the lead up to the election.
And when Twitter presented its findings to Congress last week, Sen. Mark Warner of the Senate Intelligence Community summed up the company's presentation in glaringly harsh terms: "Frankly inadequate."
—By Kurt Wagner, Recode.net.
CNBC's parent NBCUniversal is an investor in Recode's parent Vox, and the companies have a content-sharing arrangement.