(Reuters) -- Google Inc's quarterly results fell short of Wall Street's heightened expectations for the holiday season as declining search advertising rates contributed to a rare miss, triggering a 9 percent slide in its shares Thursday.

The No. 1 Internet search engine underperformed on both revenue and earnings in the fourth quarter, disappointing investors who had counted on record U.S. online-commerce to prop up results.

Its shares dived to about $583 in after-hours trade, from the Nasdaq close of $639.57 before the results. Several analysts zeroed in on an 8 percent drop in cost-per-click, or money paid by advertisers to the company, versus analyst estimates of a slight increase.

Expectations had got ahead of themselves for Google, largely because investors don't have a good feel for what happens outside the U.S., said Stifel Nicolaus analyst Jordan Rohan. North America has remained strong, but there are parts of the world where there's a lot of economic pressure.

I would have to assume Europe -- particularly Germany and some others undergoing austerity measures -- the underlying demand in those countries is weak.

Google's net revenue, which excludes fees shared with partner websites, was $8.13 billion in the fourth quarter, versus $6.37 billion a year earlier. Analysts polled by Thomson Reuters I/B/E/S were looking for $8.4 billion.

That shortfall marks an unusual slip-up for a company that has exceeded Wall Street's revenue targets for eight consecutive quarters.

The number of clicks on Google's search ads increased sharply during the last three months of the year, but the cost per clicks -- the money that Google charges advertisers for the ads -- decreased 8 percent from the third quarter and 8 percent from the year ago period.

Executives on a conference call blamed foreign currency effects and changes in ad quality formats.

EXPENSES SWELL AGAIN

Operating expenses increased to 32 percent of revenue during the fourth quarter, from 30 percent of revenue in the year-ago quarter.

Google said on Thursday it earned $2.71 billion, or $8.22 per share, in the fourth quarter, compared with $2.54 billion, or $7.81 per share, a year earlier.

Excluding certain items, Google earned $9.50 per share, lagging estimates for $10.49 a share.

Some analysts questioned whether Google was investing heavily on projects -- such as its Android mobile software or Chrome Internet browser -- at the expense of the bottom line.

Another new initiative -- the fledgling Google+ -- appeared to be gaining momentum. Executives said three-fifths of the service's estimated 90 million users engage with it daily, and four-fifths do so weekly. User engagement or time spent on the social network, which Google hopes can eventually take on Facebook, is key to determining future revenue potential.

Google+ investments are showing some results. They are investing in future revenue growth, said Global Equities Research analyst Trip Chowdhry.

For now, Wall Street wants answers on Google's mobile strategy as it dives into a fiercely competitive smartphone market through its $12.5 billion acquisition of Motorola.

Investors have been uneasy about Google's plans to buy Motorola, a deal the companies expect to close early this year. Chief Executive Larry Page has never fully detailed his long-term strategy for the asset other than saying it will be run as a separate company. Analysts say the company fears alienating Samsung Electronics and other Motorola rivals that helped Android become the world's foremost mobile-software system.

Executives said more than 250 million devices powered by Android had been activated since its inception.

Google got hit with the ugly stick, said Fort Pitt Capital analyst Kim Forrest. You've got to ask yourself, 'Where is the money going? What are they spending it on?' I have a feeling it is on platforms like Chrome and Android, and things like that.

(Reporting by Alexei Oreskovic in San Francisco; Editing by Phil Berlowitz, Edwin Chan and Steve Orlofsky)

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