FORTUNE — The news buzzing all around Silicon Valley is probably one and the same: “@jack is back.”
@jack is, of course, Twitter creator and co-founder Jack Dorsey, who confirmed, via Twitter, naturally, that he’s returning to the social network he cooked up and founded in 2006, leading overall product development from his perch as Executive Chairman.
Hot on the heels of the news, Dorsey took some time out to appear at Columbia University earlier this morning. As was widely reported, Dorsey was pushed out of his role as Twitter CEO in 2008, just as the social network was gathering steam, replaced by once-pal and co-founder Evan Williams. (Williams himself stepped down last October making way for COO Dick Costolo to take the top spot.) The move was something Dorsey described to Vanity Fair recently as being “punched in the stomach.”
Dorsey doesn’t view his return as anything but a welcome one, and he doesn’t regret any of his actions over the last few years. (Some have speculated his removal then was due, at least in part, to a relative lack of communication and managerial skills, a weakness Dorsey has alluded to in previous interviews with Fortune, and something he says he’s improved upon since.)
“I have a greater context for it, but I would not change anything,” he reflected. “And one amazing thing that came out of it was that we created this company called Square, which has the potential to have just as large an impact, if not greater, than Twitter.”
Dorsey will work both at Twitter and remain CEO of Square, the mobile payments start-up that turns your mobile device — iPhone, iPad, Android device — into a credit card transaction machine with the help of a dongle. For all intents and purposes, the Square part of the equation is doing well: the staff now hovers around 100 employees, conducts $1 million-plus worth of daily transactions and recently raised $27.5 million that valued the company at $240 million.
As for Twitter, Dorsey admitted a lot needs to be done.
“I think the biggest challenge is building a cohesive user experience and enabling and allowing for multiple views,” he said. If there’s one thing in particular he’s concerned about, it’s the myriad of third party clients out there: Hootsuite, Tweetdeck, and so on.
“They’re all doing different things in different ways, but it doesn’t necessarily provide the best user experience to go to the app store, search for Twitter, and see a hundred different Twitter clients that all do different things in different ways and confuse the user experience. As a developer, there’s far more interesting stuff to build on top of Twitter than just purely a client.”
What that “stuff” entails Dorsey isn’t entirely sure about, but he thinks there’s a lot of potential in services and products, both Twitter-related and beyond, that aren’t significantly new tech, but combine current technologies, like geolocation and user-filtering, as Instagram manages with photos, and Foursquare does with restaurant and bar reviews.
His first few months in the redefined role will focus heavily on surveying what’s going on within the 450-person strong company, what needs to be fixed, and making the Twitter experience more accessible to the 80% of users who primarily use it for consuming information instead of disseminating it. And no doubt he’ll also have a hand in the company’s advertising and marketing efforts, the latter of which have remained pretty lean. (For instance, Dorsey admits the company has spent just $10,000 in marketing over the last four years or so, and all of that was at SXSW in 2007.)
Moving forward, he thinks the next great big tech challenge for the next five years will be extracting information in a relevant way in real time.
“At Twitter, we need to build technologies that surface what’s most relevant and most meaningful to you, and that’s still a very large challenge. You have to follow all these accounts, and sometimes you miss Tweets that were extremely relevant for you. We can solve that through technology and we will solve that, but it is going to be quiet difficult.”
Twitter’s 200-plus million user base will be watching. So will all of Silicon Valley, where company founders everywhere just got an arrow in their quiver for when they have to defend themselves from backers who think they are replaceable or inessential to the companies they helped dream up in the first place.
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