Twitter CEO’s credibility on the line after social network reports weak earnings

Credibility of Twitter chief executive officer, Dick Costolo, is at the risk as the CEO failed to forecast a slowdown that forced the online social networking service company to miss first-quarter revenue estimates of the analysts. After the company announced first quarter numbers, Twitter's stock declined by 18 percent.

In a note to investors, Mark Mahaney, an analyst at RBC Capital Markets, said, "Management will again have to address credibility concerns. The quarter's performance raises the question of how much visibility into advertiser and consumer demand for its offerings Twitter really has".

In a statement on Tuesday, Twitter said that even after introducing new products, growth in the number of monthly active users decelerated as the number of member increased about 18% to 302 million in the latest quarter.

Twitter, which is based in San Francisco, fell about $9.39 to $42.27 at the close in New York. The company's stock traded at the equivalent of $41.90 in Frankfurt. According to the reports, revenue could be a new concern for investors as Twitter predicted sales of about $470 million to $485 million in the second quarter. The forecast was short of the average estimate for $538 million.

Twitter has also cut full-year revenue guidance to 2.17 billion to $2.27 billion. The company's previous full-year revenue guidance ranged from $2.3 billion to $2.35 billion. According to Costolo, the performance of Twitter's advertising team disappointed him. The team drew less revenue because the company raised its requirements for click on its ads.

James Cakmak, an analyst at Monness, Crespi, Hardt & Company, said that it is important to place the right ad in front of the right person. If a user will find the right ad, the person clicks on it.