Oct 18, 2012 · 3 minutes

This, apparently, is how a crisis begins for Web giants these days: It starts with a simple glitch – a computerized trading platform being overwhelmed, say, or a human being issuing a press release hours too early. That halts trading in the stock for hours, while a sense of panic in the markets begins to simmer. When the stock resumes trading, it's much, much cheaper. The online conversation focuses on what went wrong. And suddenly the company finds itself on the defensive.

It happened to Facebook in May, and this week it's happening to Google. Google, of course, has been one of the biggest beneficiaries of the problems that have plagued Facebook since its IPO. But now it's facing its own crisis. Because the prematurely released earnings data showed Google's not doing nearly as well as many people were expecting. Really not well at all.

Facebook, of course, has yet to recover from its own crisis, with its stock worth a little more than half what it was, when it debuted five months ago. Once trading resumed mid-day, Google's stock plummeted 9 percent to $685 a share – losing $20 billion of its market value – in a matter of minutes. Once CEO Larry Page began to talk about the earnings, it recovered a bit to $702 a share, still down 7 percent on what was must have been a very trying day for Mr. Page.

Are investors over-reacting, or is Google worse off than it appeared to be even a few days ago?

The headline numbers certainly don't look good. Google brought in $11.5 billion in revenue (excluding taxes), but analysts had been looking for $11.9 billion. Profits were even more disappointing. Analysts expected $10.7 per share. Google delivered $9 a share. That's 15 percent below the forecast number, Google's biggest disappointment in at least two years, and one of its largest ever. And this from a company with a strong history of beating its forecasts.

But much of that weakness comes from Motorola Mobility, the struggling mobile device manufacturer Google paid $12.5 billion for last year. Google took a $349 million charge related to restructuring Motorola, which was widely expected. What wasn't expected was how poorly Motorola performed: Its revenue from mobile devices fell 26 percent to $1.78 billion from a year ago, while the operating loss ballooned to $505 million from a loss of $41 million.

Outside of Motorola, Google's performance was more in line with expectations. Revenue from its sites grew 19 percent to $7.7 billion and those from its partner sites grew 21 percent to $3.1 billion. But even in its core business, Google faced some rising costs, especially in stock-based compensation.

To compete in what is becoming a cut-throat job market for Silicon Valley talent, Google paid $764 million in stock-based compensation in the third quarter, compared with $571 million a year ago. That pushed operating profit down to 34 percent of revenue in the quarter from 37 percent a year earlier.

Another metric showed ad rates declining quickly. Average cost-per-click fell 15 percent from last year, even though click-throughs on Google ads grew 33 percent. Only a few quarters ago, cost-per-click was growing by more than 5 percent. In a call discussing earnings, Google attributed the decline to more ads in emerging markets.

The other interesting data point to emerge from the call is a positive one. The company's mobile business is generating revenue at an annual rate of $8 billion a year, up from $2.5 billion a year ago. Google said “the vast majority” of that is coming from ads, although some is also coming from media commerce through Google Play.

So where does this leave Google? The Motorola acquisition is -- no surprise -- weighing down the company's performance. Beyond a rich patent portfolio, it's still not clear what Motorola offers Google. I sometimes wonder if Google isn't going to do a private-equity style turnaround of the company and sell it at a profit. But even if successful, such a project would be a distraction from where Google needs to be focusing.

In its core business, Google is being forced to pay a handsome premium to hire the talent it needs to go forge ahead. But the growth that the company is seeing in mobile ads, as well as its ability to monetize YouTube, suggests that hiring and keeping talent in the Googleplex is worth it for now.

Google has had a great run in the past few months. After today, some of that investor enthusiasm will weaken. And it will remain weak as long as Motorola is a brick weighing down the company. But in many ways – especially in mobile – Google is doing a decent job of keeping its ad revenue growing. That may not be the ideal scenario for Google, but it's better than what Facebook is facing right now.