Google reported net revenue - excluding traffic acquisition costs - of $11.3 billion for the third quarter, below Wall Street's expectations for about $11.9 billion.
For the fourth consecutive quarter, the company reported a decline in average cost-per-click (CPC), a critical metric that denotes the price advertisers pay Google.
The core business has slowed down pretty significantly, which is shocking.
Average CPC declined 15 per cent from a year ago and 3 per cent from the second quarter of this year. Analysts said Google, like many of its peers in the internet industry, has been struggling to adapt to the rapid consumer uptake in mobile devices. Advertisers pay far less for ads on smartphones and tablets than for similar ads on desktop computers.
"The core business seems to have slowed down pretty significantly, which is shocking," said B. Riley analyst Sameet Sinha. "The only conclusion I can look at is, search is happening more and more outside of Google, meaning people are searching more through apps than through Google search."
"That could indicate a secular change, especially when it comes to ecommerce searches. The big fear has always been, what if people decide just to go straight to Amazon and do their searches? And potentially that's what could be happening."
But Ryan Jacob, chairman and chief investment officer of Jacob Funds, said he viewed Google's results as only "minorly disappointing," with most of the weakness coming from Motorola as expected.
"Unfortunately, by dropping an 8K in the middle of a trading day, people kind of shoot first, ask questions later," said Jacob, whose fund owns Google shares.
JP Morgan analyst Doug Anmuth said in a note that the Google results were "light" but not as bad as they appeared at "first blush."
Premature filing
Google, which recently overtook Microsoft Corp to become the second-largest U.S. technology company by capitalization, had been due to release its results after the market close.
The second paragraph of the press release merely read "Pending Larry quote," suggesting that space was reserved for comment from CEO Larry Page.
"Earlier this morning RR Donnelley, the financial printer, informed us that they had filed our draft 8K earnings statement without authorization," Google said in a statement. "We have ceased trading on NASDAQ while we work to finalize the document. Once it's finalized we will release our earnings, resume trading on NASDAQ and hold our earnings call as normal at 1:30 PM PT."
Shares of RR Donnelley, the U.S. printing services company, slid as much as 5 percent. They closed down 1 percent at $10.76.
Reed Kathrein, a plaintiff lawyer with Hagens Berman who sues companies on behalf of investors, said investors would not have a claim against either Google or RR Donnelley because the earnings disclosure was likely a mistake.
"There's no fraudulent intent here," Kathrein said.
However, Google could have a negligence claim against RR Donnelly to recover any additional costs it incurred in responding to the incident, Kathrein added.
"Everyone is trying to figure out if there's any legal issue with respect to RR Donnelley," said Michael Matousek, senior trader at U.S. Global Investors Inc, which manages about $3 billion in San Antonio.
