Dismal Twitter forecast and flat user growth send its stock lower

The shares fall 13% on revenue forecast

Jack Dorsey, the co-founder and newly returned chief executive of Twitter, seems to be quite adept at scaring investors.

On Tuesday, Twitter gave a dismal forecast for its fourth-quarter revenue and profits. Shares in Twitter, a social media company, plunged as much as 13 per cent in after-hours trading as Dorsey and his lieutenants offered little explanation for the gloom in a conference call with investors. In a similar call three months ago, Dorsey's pointed critique of Twitter's product failings sent the stock down 11 per cent.

The new projections, delivered as the company exceeded analysts' expectations for its third-quarter results, provided fresh evidence that Twitter is failing to win over advertisers, the source of most of its revenue, as it confronts stiffening competition from Facebook, Instagram and Google. "The company is finding real challenges gaining traction with advertisers," said Mark Mahaney, an Internet analyst with RBC Capital Markets, citing the new forecasts and an advertiser survey his firm conducts twice a year.

Mr. Mahaney, who has a neutral rating on Twitter's stock, said he was struck by the contrast between the upbeat tone of Twitter's executives on the call and the company's deteriorating outlook. "Everything sounds so good, yet you reduced your forecast pretty materially. Why?"

Mr. Dorsey didn't answer that question, although Adam Bain, the company's former ad chief and new chief operating officer, offered a clue: Ad prices plunged 39 per cent in the third quarter, which he said was partly because of improved efficiency of video ads.

©2015 The New York Times News Service