Google’s search juggernaut is showing some cracks

The numbers: Google reported first quarter net income of $3.45 billion, slightly up on 2013, but well shy of consensus estimates for $4.3 billion, according to FactSet.

Revenue was $15.4 billion, up 19% on 2013, but only $12.2 billion once commissions paid to partners for traffic were taken out. FactSet expectations were for revenue of $12.4 billion, after the partner commissions. With a miss on both profit and revenue, Google shares have sunk by about 6% in after-hours trade.

The takeaway: The average cost per click for advertisements (a measure of how much Google charges advertisers in its auction-based systems) fell by 9% during the quarter, while traffic acquisition costs -- the amount it pays to partners for traffic (for example to Apple for default Google searches via the Safari browser on iPhones) rose to $3.23 billion compared to $2.96 billion in 2013.