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Tough challenges ahead for Twitter CEO Jack Dorsey

Job No. 1 for the new CEO: Revamp the stagnating microblogging service to make it more inviting for regular folks.

Jack Dorsey is once again the CEO of Twitter, the company he co-founded. Mike Blake/Reuters/Corbis

Seven years after he was ousted as Twitter's chief executive, Jack Dorsey has another shot running the social network.

Dorsey's first priority: Make Twitter more appealing to more people. It's a tall order. His to-do list includes a simpler, more visually appealing interface so that regular folks can more easily follow topics, people and live events. He has to launch a marketing campaign to convince average users that Twitter is as essential to their daily lives as Facebook. And he has to boost revenue by attracting more advertisers.

Twitter is "still confusing not only to novice users, but even to medium-level, sophisticated users," said Morgan Downey, the chief executive of Money.Net, a New York-based financial information service for investors.

Dorsey told investors Monday that he's already made improvements over the summer while interim CEO. These include the ability to use more than 140 characters when directly sending a message to a specific person, and making it easy for users to purchase products by clicking on a new "Buy Now" button. He said teams have been "plotting out ambitious road maps for 2016," across Twitter and its video-streaming services, Periscope and Vine. Dorsey is also the chief executive of Square, the mobile payments company he founded in 2009.

Dorsey, who has been interim CEO since July 1, was named permanent CEO after demonstrating "product innovation," "execution cadence" and leadership ability, said Twitter board member Peter Currie, who led the CEO search.

"Frankly, the board's view is the entire team has found a new gear under his leadership," Currie said on Monday's conference call. "Over time it became clear to us that Jack was not only meeting, but surpassing our expectations of him as interim CEO while running Square."

Investors appear to be comfortable with Twitter's new CEO. Shares rose more than 7 percent after Dorsey's announcement.

But Elon Musk, the CEO of both electric car maker Tesla and space transportation company SpaceX, on Tuesday warned that Dorsey shouldn't take on a dual role.

"I wouldn't recommend running two companies. It decreases your freedom quite a lot," said Musk during a panel discussion at the Vanity Fair New Establishment Summit in San Francisco. Musk said he spends about 70 percent of his time on engineering and design, and about 2 to 3 percent on press events and speaking engagements. He wants to cut that down to about 1 percent, he added.

However, now that Twitter's CEO drama is over with Dorsey re-installed, the company can get back to building products that users want to use, Forrester analyst Nate Elliott said in a note to customers. "Twitter is stagnating because its product looks almost exactly like it did when it launched.

In July, Twitter said the number of people who log into its service at least once a month rose 3 percent to 316 million in the second quarter of the year. In comparison, about 1.5 billion people regularly turn to to Facebook.

Facebook has been able to add users because it's constantly offering new features, said Elliott. The user base matters because companies naturally want to invest their advertising dollars where they can reach the biggest audience.

"They need to make a very slight, but critical adjustment to [Twitter's] user interface to make it more intuitive," Downey said. "That alone will bring in a lot more users."

Investors are also expecting Twitter's to help grab new users. Formerly known as "Project Lightning," the new feature debuted Tuesday. It highlights curated streams of tweets, photos and videos from live events, including concerts, breaking news and sports.

"We remain optimistic on [Moment's] potential to attract new users to the platform through curation, better organization of content and a live feed" that integrates videos from Twitter's Periscope and Vine video-streaming services," JP Morgan analyst Douglas Anmuth wrote in a note to investors Monday.

Now it's up to Dorsey to show investors Twitter's potential is as high as executives say it is.

"No one is more determined than I am," he said.

Updated October 6 at 6:45 p.m. PT: Added comments from Elon Musk.