Google Earnings Disappoint

What was supposed to be a celebration of the most prosperous quarter in Google's 13-year history instead turned into a major letdown. The disappointment came with today's release of fourth-quarter earnings that showed the Internet search leader fetched less money per click on its ubiquitous online ads. That came as an unsettling surprise because investors had assumed a surge in online holiday shopping during November and December would enable Google to charge more for its ads. Instead, the average price decreased by 8% from the same time in 2010.

Google executives traced part of the decline to technical changes aimed at delivering more ads that attract people's interest. Those tweaks apparently paid off as the total clicks on Google's ads increased 34% from the previous year. The lower prices still contributed to a dramatic slowdown in Google's earnings growth. The performance fell well below analyst estimates, and Google shares plunged $57.07, or nearly 9%, to $582.50. The company earned $2.7 billion, or $8.22 per share, in the fourth quarter. That's just a 6% increase from $2.5 billion at the same time in 2010. (More Google stories.)