SAN FRANCISCO -- Halfway through a year in which Google's stock price had climbed 27 percent, its financial report Thursday indicated to investors that its performance had not matched their expectations.
Google reported second-quarter results that missed analysts' expectations for revenue and profit and showed that its desktop search business continues to slow while ad prices fall as it struggles to make as much money on mobile devices.
Colin W. Gillis, a technology analyst at BGC Partners, wrote a haiku before the earnings announcement: "The results should be/pretty as a picture to/justify the stock." Apparently they were not.
Google reported second-quarter revenue of $14.11 billion, up 19 percent from $12.21 billion a year ago. Net revenue, which excludes payments to ad partners, was $11.1 billion, up from $9.61 billion. Net income rose to $3.23 billion, or $9.54 a share, from $2.79 billion, or $8.42 a share. Excluding the cost of stock options, Google's second-quarter profit was $9.56 a share.
Analysts had expected net revenue of $11.33 billion and earnings, excluding the cost of stock options, of $10.78 a share.
"One of the reasons why people like Google is you can look forward and see what they're doing with Glass and laying fiber and driverless cars and Chrome, chasing after new revenue streams," Mr. Gillis said. "But those are still pretty far away. Google's core business is all about advertising and clicks, and the core business is absolutely maturing."
Mobile ads, he added, are inexpensive yet "overpriced because the conversion rates are so low."
"It's still too hard to transact on a phone," Mr. Gillis said.
Google shares, which fell 1 percent ahead of the earnings release Thursday, fell another 4 percent in after-hours trading immediately after the report.
For more than a year, Google has been struggling to solve this mobile riddle: Even though people are using Google on their mobile devices more than ever, how does Google make more money on mobile ads? Even though the company seemed to have finally found a solution to the riddle, it has not solved it yet.
The price that advertisers pay when Google users click on their ads decreased 6 percent from last year and 2 percent from last quarter, declining for the seventh quarter in a row.
Still, Larry Page, Google's chief executive, called it "a great quarter" and said mobile devices were a boon.
"The shift from one screen to multiple screens and mobility creates tremendous opportunity for Google," he said in a statement. "With more devices, more information and more activity online than ever, the potential to improve people's lives even more is immense."
Analysts expect the declines in ad prices to reverse soon, because of Google's new program to give advertisers less choice about advertising on mobile devices, in that way increasing prices.
The program of what are called enhanced campaigns, which were introduced in February and will be mandatory for all advertisers Monday, automatically includes desktop, tablet and cellphone ads for all campaigns. Advertisers can choose not to buy cellphone ads but are required to buy tablet ads.
Google says that it simplifies the process for advertisers and makes it easier to reach customers who use devices indiscriminately. More important than the type of device, the company says, is whether someone is at a desk or on the sofa, in the mood to shop or eat.
But it also means that the price of mobile ads, which has been about half that of desktop ads, will increase. Google's ads are sold at auction, and one reason mobile prices have been low is that there has been less demand. Enhanced campaigns should change that.
For example, the price per ad click for clients of the Search Agency, a search ad firm, rose 22 percent in the quarter, largely because of Google's ad-buying changes. It was the first time that tablet ads cost more than those on desktops, and advertisers increased spending on smartphones 25 percent, the most of any device category.
Adding to Google's poor results was a $342 million operating loss at Motorola Mobility, which is expected to introduce a new phone, the Moto X, this summer.
This article originally appeared in The New York Times.