At first, Wall Street punished Google with a nearly 3 percent drop in its stock price in after-hours trading. But anger seemed to fade, as the stock was up slightly in pre-market activity on Friday before it faced a slight drop from Thursday's closing price.
The minor rollercoaster of reaction is understandable when you look at Google's numbers. Even with missing analyst expectations, the company put in an impressive performance. Revenue, at $16.52 billion, was up 20 percent over the third quarter of 2013. Net income was still $2.81 billion, although 2013 saw $2.97 billion.
But there are signs that upper management may have taken some missteps and that the underlying advertising business has a grave, inherent weakness.
One lingering bit of evidence was the discontinued operations of Motorola Mobile. Google decided that it would enter the device world in a big way, after having commissioned other companies to produce its phones and tablets for some time. Having a hardware division would, in theory, allow it to better compete with Apple (AAPL) and diversify its revenue sources beyond a historical heavy dependence on advertising.
But Google management evidently found that owning a hardware business and making one thrive are entirely different undertakings. Ultimately the company agreed to sell Motorola Mobile to Chinese electronics giant Lenovo in January.
So much for diversification. But, as has been the case for some time now, the quarter's results again showed the slowing pace of growth in paid clicks -- search ads in which Google is paid only if consumers click on the advertisements.
Furthermore, the money that Google collects from each click continued to decline, although at a more moderate 2 percent rate than previously. Because Google's ads are sold on an auction basis, advertisers ultimately decide how much they are willing to pay. Continued decline suggests that companies may have found the ads less useful than in the past.
Slower growth combined with lower prices means that Google will continue to face challenges in pleasing analysts and investors. The need to diversify also means Google may need to acquire other companies and spend to establish new businesses, which will put additional pressure on profits.