Google Net Up 16% on Ad Growth; Results Miss Views

Google Inc.'s (GOOG) second-quarter profit grew 16% as the Internet giant's core advertising business continued to grow.

Results missed expectations, sending shares down 5% to $863.48 after hours. Through the close, the stock was up 29% so far this year.

A greater amount of activity on Google's Web-search engine is taking place on mobile devices such as smartphones and tablets, where online ads generally cost less than those on sites accessed on desktop PCs. While that shift in consumer habits has been a challenge for Google and other Internet companies, there have been signs that the prices of ads sold by Google on mobile devices is improving.

The company also has made a big push to boost mobile-ad prices, in part by encouraging its biggest advertisers to create websites that work better for mobile devices' smaller screens.

Google said its rate of paid clicks, or the number of times users clicked on search ads, rose 23% from a year earlier. Meanwhile the prices paid for those clicks was down 6%, compared with a 4% drop in the first quarter.

Total advertising revenue--by far the company's largest revenue engine--was up 15%.

Google posted a quarterly profit of $3.23 billion, or $9.54 a share, up from $2.79 billion, or $8.42 a share, a year earlier. The latest period included a gain of $1.99 a share from discontinued operations related to the sale of its Motorola set-top box business, compared with a year-ago loss of 14 cents a share. Excluding stock-based compensation and other items, earnings fell to $9.56 from $10.16 a share.

Total revenue grew 19% to $14.11 billion.

Analysts surveyed by Thomson Reuters expected adjusted earnings of $10.78 a share and revenue of $14.41 billion.

Write to Ben Fox Rubin at [e-mail]

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