San Francisco: 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 sank in on Thursday after Google's fourth-quarter earnings report 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 in the US would enable Google to charge more for its ads. Instead, the average price decreased by 8 per cent 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 per cent from the previous year.
Most of the trouble seemed to be rooted in Europe, where government debt woes are hurting the economy, said Benchmark analyst Clayton Moran. "I think everyone underestimated how quickly the European online ad market would suffer."
The weakening euro also converted into fewer dollars during the quarter, another factor that undercut Google.
It all added up to a dramatic slowdown in Google's earnings growth that alarmed investors. Net income edged up just 6 per cent from the same October-December period in 2010, coming off year-over-year increases of more than 25 per cent in each of the previous two quarters.
Google shares plunged $57.67, or 9 per cent, to $581.90 in extended trading after the results were announced.
