The rise of smartphone use to access the Internet, and slowing clicks on ads, cut into profits by Google in the third quarter, the company has revealed.
Shares in Google fell after the technology giant said that although overall revenues had risen sharply, underlying performance suffered from a buying spree to recruit top talent.
Google said Thursday its profit in the past quarter dipped slightly from the level a year earlier.
Net third-quarter profit fell five per cent to US$2.8 billion (S$3.6 billion), while revenue grew 20 per cent to US$16.5 billion.
Shares in Google tumbled 2.3 per cent to US$512.20 in after-hours trading on the results, which disappointed Wall Street.
Paul Ausick at the finance blog 24/7 Wall Street said Google's revenue fell short of expectations, and that revenue from "paid clicks" from online ads was also disappointing.
A key indicator for the market, the number of clicks on ads on its sites rose by 17.0 per cent on a 12-month comparison, but this was sharply down from growth of 28.0 per cent in the second quarter.
Each click generates a payment by the company which has placed the ad.
The market also pays close attention to another indicator, the average price of each click. This fell by 2.0 per cent after a fall of 9.0 per cent in the previous quarter.
This is in line with a falling trend for two years.
Analysts say it reflects the rise of use of smartphones on which companies can run ad campaigns at lower cost.
Google's expenses were also higher, led by some US$2.4 billion in costs for data centers