Mr. Costolo also left Twitter’s board of directors on Monday, the company announced, and Twitter is in the midst of finding a new, outside candidate for the role of chairman to serve on the board. Previously, Mr. Dorsey served as Twitter’s chairman.
This week, Mr. Dorsey and other executives are also expected to preview for advertisers a new video product and a feature that will show top tweets by subject, code-named Project Lightning.
Mr. Dorsey faces the difficult task of figuring out how to attract new users to the company’s namesake social network while continuing to improve its advertising products. Twitter had an average of 316 million monthly users in the second quarter, a number that has been largely flat for some time.
Despite some changes to make the service easier for newcomers to understand, Twitter still lags other social networks like Facebook and Instagram and major messaging platforms like WhatsApp in popularity. It has also been slow to capitalize on the public’s enormous demand for video, although its new Periscope app has established a strong position in streaming live events.
”Now that Twitter’s C.E.O. drama is out of the way, the company can get back to doing its job: Building products people want to use,” said Nate Elliott, a social media analyst for Forrester Research, in an email. “Not every new idea launched will succeed, but if it launches enough new features, some will surely find a wider audience. And a wider audience is exactly what Twitter needs.”
Twitter’s challenges have unnerved investors, who were counting on it to match the rapid growth of its early days. Mr. Costolo, who became Twitter’s chief executive in 2010, stepped down after largely failing to meet Wall Street’s expectations after the company’s initial public offering of stock in November 2013.
On Monday, Twitter shares rose about 1 percent in early trading.
Colin Sebastian, an analyst with Baird Equity Research, said that he had concerns over Mr. Dorsey splitting his attention between two companies but that the appointment was generally positive news. “His role as founder provides the legitimacy and vision to lead Twitter perhaps as well as anyone else,” Mr. Sebastian wrote in a research note.
Twitter has become a household name, with political leaders and celebrities around the world using the network to broadcast text messages and images to millions of followers. When news happens, word often spreads first on Twitter.
But the company has struggled to convey to ordinary people why they should regularly use the service, which carries roughly half a billion messages a day. Twitter has long lacked a product visionary, although Mr. Dorsey has tried to play that role while serving as Twitter’s interim chief.
Twitter is caught in the classic chicken-and-egg dilemma: The service is difficult to use unless you take time to choose relevant accounts to follow, but without obvious uses for it, no one will invest the time to set it up properly.
The company has tried to break out of the trap by offering casual visitors a taste of the “best of Twitter” on its home page before requiring that they create an account, and by setting up “instant timelines” of tweets based on who is on a person’s cellphone contact list. Similarly, it has begun exploring the possibility of selling ads that would be shown to more casual visitors.
So far, it is too early for those nascent efforts to show results.
Born in St. Louis, Mr. Dorsey has often said he grew up enamored with the niceties of densely urban areas — mass transit, maps and the nature of dispatch and communication. While he enrolled as a computer science student at the University of Missouri, Rolla, (now the Missouri University of Science and Technology) he left school and moved to New York in the mid-1990s, excited by the thought of living in Manhattan and working as a dispatcher at a bike messenger company.
After a brief stint at New York University, Mr. Dorsey left school just shy of receiving a diploma and moved to the San Francisco Bay Area in 2000. Soon after, he met Evan Williams, founder of Blogger, which Mr. Williams sold to Google, and of an Internet podcasting company called Odeo. With a handful of other people, the two would go on to create Twitter.
Twitter’s history over the last 10 years mirrors its current struggles: a revolving door of management and leadership, fighting for power among founders and, of course, Mr. Dorsey’s ouster from Twitter’s top job. He became executive chairman of Twitter’s board in 2008 when Mr. Williams took over the chief executive job.
Mr. Dorsey did not rest long after being pushed out of his own company. He went on to start Square, the commerce and payments company, with a small group of friends and entrepreneurs. Today, Square is valued at more than $6 billion.
But friends say Mr. Dorsey has been consumed with having a larger influence at Twitter, particularly as the company has struggled with slowing growth.
Correction: October 5, 2015
Because of an editing error, an earlier version of this article misstated a role that Adam Bain will take on. He will be chief operating officer, not president and chief operating officer. Also because of an editing error, the earlier version described incorrectly the board’s actions related to the company’s leadership. The board is looking for a chairman; it has not named Evan Williams, a founder, to the post.
Correction: October 5, 2015