Trouble @Twitter

April 14, 2011: 5:00 AM ET

Boardroom power plays, disgruntled founders, and CEO switcheroos are clipping the wings of this tech high flier.

By Jessi Hempel, senior writer

FORTUNE -- In March, shortly after Jack Dorsey went back to work for Twitter, the company he co-founded four years ago, he did a Q&A session with an entre­preneurship class at Columbia Business School. As students tapped away on their laptops (were they sending tweets?), Dorsey, 34, answered questions about his commitment to his new gig as Twitter's product chief. Dorsey, after all, is also CEO of Square, a hot payments business, and he returns to Twitter after a rocky run as its CEO -- the board demoted him in 2008. (Co-founder Evan Williams took over and held the job for almost two years; then operating chief Dick Costolo assumed the top job.) "Seems like a revolving door," mused the interviewer.

Dorsey laughed lightly and replied, "You know, we're just individuals. We're just humans running these companies." And he compared managing a startup to, of all things, supervising a theater company.

There's no shortage of drama at Twitter these days: Besides the CEO shuffles, there are secret board meetings, executive power struggles, a plethora of coaches and consultants, and disgruntled founders. (Like Williams. The day after Dorsey announced his return to the company -- via tweet, naturally -- Williams quit his day-to-day duties at the company, although he remains a board member and Twitter's largest shareholder, with an estimated 30% to 35% stake.) These theatrics, which go well beyond the usual angst at a new venture, have contributed to a growing perception that innovation has stalled and management is in turmoil at one of Silicon Valley's most promising startups, which some 20 million active users rely on each month for updates on everything from subway delays to election results -- and which a growing number of companies, big and small, seek to use to market themselves and track customers.

One of Twitter's earliest and most avid users, Ashton Kutcher (@aplusk), confers with company co-founder Dorsey.

One of Twitter's earliest and most avid users, Ashton Kutcher (@aplusk), confers with company co-founder Dorsey.

Just two years ago Twitter was the hottest thing on the web. But in the past year U.S. traffic at Twitter.com, the site users visit to read and broadcast 140-character messages, has leveled off. Nearly half the people who have Twitter accounts are no longer active on the network, according to an ExactTarget report from January 2011. It has been months -- an eternity in Silicon Valley -- since the company rolled out a new product that excited consumers. Facebook's Mark Zuckerberg used to watch developments at Twitter obsessively; now he pays much less attention to the rival service. Meanwhile companies are hungry to advertise, but Twitter hasn't been able to provide marketers with enough opportunities. Last year the company pulled in a mere $45 million in ad revenue, according to research firm eMarketer. Facebook brought in $1.86 billion. More

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