Google Misses Q4 Estimates as Advertising Prices Drop; Shares Plunge (GOOG)

Shares of search engine giant Google Inc. (NASDAQ: GOOG) are sinking in early trading today after the company’s fourth-quarter results missed Street estimates. The company’s fourth-quarter results were hurt by a drop in advertising prices.

Google’s earnings miss came as a surprise as investors had assumed that a sharp rise in online holiday shopping in the U.S. would allow the Mountain View, California-based company to charge more for its ads. However, the company’s average price for the quarter dropped 8% on a year-over-year basis.

Google executives said that the decline was partly due to technical changes targeted at delivering more ads that attract people’s interest. According to Benchmark Co. analyst Clayton Moran, most of the troubles seemed to be rooted in Europe where the debt crisis is hurting the economy. Moran said that he everyone underestimated how quickly the European online ad market would suffer. Google’s profit was also hurt by exchange rate fluctuations.

Google’s net income for the fourth quarter rose an anemic 6% on a year-over-year basis. The company reported revenue of $10.58 billion for the quarter ended December 31, 2011, representing an increase of 25% on a year-over-tear basis. Google-owned sites generated revenues of $7.29 billion, or 69% of total revenue, in the fourth quarter of 2011. The company’s partner sites generated revenue of $2.88 billion, or 27% of total revenues, in the quarter.

Larry Page, CEO of Google, said that he is super excited about the growth of Android, Gmail and Google+, which now has 90 million users globally. Page said that by building a meaningful relationship with users through Google+, the company will create amazing experiences across its services.

Page’s comments, however, failed to reassure investors as Google shares have tumbled in early trading today. At last check, the stock was down 8.13% to $587.58.

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Post Written By: Ed Liston Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.