Square, the Twitter Boss’s Other Company, Could Pass It in Value

SAN FRANCISCO — Jack Dorsey has become a household name in Silicon Valley thanks to his role as the chief executive and co-founder of Twitter, President Trump’s favourite megaphone.

People will sometimes mention, as an afterthought, that Mr. Dorsey also runs another start-up he helped found, the payment company Square.

Sometime in the very near future, though, the value of Mr. Dorsey’s distinctly less-sexy second company, where he tends to work in the afternoon, is likely to become more valuable than his more well-known first company, where he works in the morning, separated by a short walk between the two companies’ headquarters in San Francisco.

Thanks to its steadily ascending stock price, Square’s value — as measured by the value of its outstanding shares — has been closing in quickly on Twitter, which has seen its stock price stuck in neutral for months. On Wednesday, Square was worth $12.62 billion, or just $3 million less than Twitter. Just a year ago, Square was worth less than half as much.

If current trends continue, the two could switch places as soon as Thursday, when Twitter announces its most recent quarterly financial results. Square, coming off five straight quarters of exceeding Wall Street expectations, will provide its results in November. (By one method of counting shares, including options given to employees, Square is already worth more than Twitter.)



Twitter’s offices in San Francisco. Mr Dorsey returned in 2015 to lead the company he helped found in 2006. Credit Jason Henry for The New York Times
“Square — that’s a company that is well grounded for future success,” said Ron Shevlin, the director of research at Cornerstone Advisors. “Twitter? Who knows. They’ve got a gazillion users but they’ve struggled on the revenue side.”

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Both of Mr. Dorsey’s children, as he is known to refer to the companies, bear the imprint of their creator and his careful, trimmed-down aesthetic.

But Mr. Dorsey’s eye for simple solutions has not been enough to turn around Twitter since he returned in 2015 to lead the company he helped found in 2006. He has failed to rein in the use and abuse of the service by trolls and political actors, and he has not found a convincing way to make money despite its ardent user base.

At Square, Mr. Dorsey has led one of Silicon Valley’s more understated success stories, built on the little plastic white square that allowed small businesses to accept credit card payments via their iPhones. Square has grown into a much broader financial services company, despite some hiccups, like a much-heralded partnership with Starbucks that flamed out.

Although Twitter’s overall revenue shrank 5 percent in the second quarter from the year before, expanding the company’s losses, at Square, revenue grew 26 percent, moving the company closer to profitability.

The divergent fate of Mr. Dorsey’s two companies can be understood simply as a matter of timing and control. When he began his second stint as Twitter’s chief executive in 2015, the company was already struggling and had a series of internal problems that were hard to change, including executive turnover and competing for strategic visions.

At Square, on the other hand, Mr. Dorsey was able to build the whole company from the ground up, with knowledge from Twitter of how things can go wrong.

“Square wasn’t Jack’s first rodeo,” said Randy Reddig, who was on the founding team at Square in 2009. “It was obvious early on at the company that he took lessons learned from his time at Twitter and applied them at Square.”

Mr. Reddig said that Mr. Dorsey’s education from Twitter’s fractious early years was particularly apparent in the control that Mr. Dorsey kept over hiring and compensation decisions at Square, with a focus on creating a loyal team.

Through Twitter and Square, Mr. Dorsey declined to comment for this article.

Mr. Dorsey’s success at Square and his trouble at Twitter also tell a broader story about Silicon Valley, where the boring, back-end businesses often end up generating more money than the flashy social networks and consumer services that capture the public’s eye.

Mr Dorsey trained Square’s sights on a mostly invisible business — electronic payments — that has momentum as more and more commerce moves online.

The big banks had aimed to challenge Venmo with their own service, Zelle, but that has not posed a credible challenge to either Venmo or Square Cash so far, the rankings show.

Mr. Dorsey and his team made several early design choices with Square Cash that helped make it different from Venmo. As would be expected from Mr. Dorsey, Square’s app has a clean, green interface, compared with Venmo’s busy blue dashboard.

Square also made an apparently boring technical decision, to use the debit card networks rather than bank transfers, to move money around. That has made it easier for Square Cash to put money instantly into the bank accounts of its users, and to collect a fee for the service.

These differences appear to have made Square Cash more popular with lower-income customers who more often need instant access to their money and who don’t have as wide a variety of credit cards and other financial options.

“We are reaching an audience that may not have a bank account or may not have a full suite of services from a bank,” Mr. Dorsey told analysts last quarter.