Rare Google misstep hints at tech landscape shift

Fri Jan 20, 2012 3:52pm EST
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By Alexei Oreskovic and Soham Chatterjee

SAN FRANCISCO (Reuters) - Google Inc's accelerated efforts to carve out a position in the fast-growing mobile and social networking markets leapt into the spotlight Friday, a day after the giant Internet company reported a rare earnings miss.

The company's investments in its Android mobile software and fledgling Facebook-like Google+ social network represent some of the company's key growth opportunities going forward. But Wall Street is still trying to understand the near-term impact on Google's business.

On Friday, Google's shares fell more than 8 percent. Google missed both its revenue and earnings targets after cost-per-click (CPC) -- or money that marketers pay Google when Websurfers click on its search ads -- decreased for the first time in two years despite record U.S. online commerce during the holiday season. Several brokerages cut their price targets on the stock.

Google+ -- the company's recently-launched social network -- has 90 million users now, up from 40 million three months ago. Android is now the world's most-used mobile software platform, ahead of Apple Inc's iOS, providing an important avenue for consumers to reach Google's various Web services and increasing the total number of people who view its ads.

In the short run, however, the rates for mobile advertising appear to be cheaper than on the company's mainstay desktop search engine.

"We could be seeing a little bit of an effect of more of a proportion of their searches becoming mobile," said Ryan Jacob chairman and chief investment officer of Jacob Funds, which owns Google shares. "They are just not getting the same kind of pricing on the mobile side as they do on the desktop," he said.

Google's heavy investments in mobile and social network initiatives -- to stave off competition from rivals Apple and Facebook -- and its planned $12.5 billion acquisition of smartphone maker Motorola Mobility Holdings Inc have raised investors' concerns.

Larry Page, who took over as chief executive officer in April, said in July that the company was moving to put "more wood behind fewer arrows."   Continued...