Jul 18, 2013 · 5 minutes

There are two ways to look at Google's earnings miss in the second quarter. Bears who think the stock has risen too far too quickly (up 58 percent in the past year, or nearly three times as much as the Dow Industrial) note that the company is seeing online-ad rates decline as Google relies more on mobile, a slowdown that coincides with costly investments in unproven businesses like Fiber.

Bulls who were hoping for the stock's quick sprint to the $1,000 mark, however, see Google adhering to its traditional strategy of investing in areas where it sees long-term growth, even if that investment drags down profit margins in the short term. As for mobile advertising, the medium is in its early days yet. Companies will figure out how to better monetize mobile ads, and Google is in a better position than most to do just that.

So which is it, is Google losing its mojo or not?

For now, I would side with the bulls. Not just because Google has done a pretty good job under Larry Page of defying skeptics and finding ways to keep its business growing in a highly competitive, changing market. But because, even if you can point to metrics like price-per-click (which declined 6 percent from the same quarter a year ago), it would be hard to argue that the company do much that's different from what it's doing now.

To recap, Google reported that revenue grew 19 percent in the second quarter to $14.1 billion and that non-GAAP net profit fell 6 percent to $9.56 a share (GAAP profit grew 13 percent to $9.54 a share). Wall Street analysts had been forecasting $14.4 billion in revenue and $10.80 a share in profit.

Quickly, Google shares lost nearly 6 percent of their value in after-hours trading to $860.49. As a conference call discussing earnings went on, the stock recovered a bit to $876.90. In the call, Google executives made the bullish case, arguing that the company's long-term growth remains intact, the grim appearance of some headline numbers notwithstanding.

Part of the decline may have been tied to a growing sense that Google was the new Apple, a huge company with rapid profit growth and an unstoppable stock rally. Some stories ahead of Google's earnings showed an optimism that got a little ahead of itself. One thing Google's report showed was near-term uncertainty. Investors, who loathe uncertainty, may have opted to cash in gains that Google's stock has shown in recent months.

With the earnings miss, a sense of pessimism soon emerged that may also be a little ahead of itself. In the call, CFO Patrick Pichette acknowledged that the shift of users from desktops to mobile devices is one factor that is pushing down cost-per-click rates, but he also warned not to put too much emphasis on that one metric. “It's always dangerous to look at CPCs or paid clicks by themselves,” he said. “A combination of the two gives the best mix.” (Paid clicks rose 23 percent in the quarter.)

Another factor pushing down CPC's in general (Yahoo's CPC, for example, declined 8 percent last quarter) is simple supply and demand. In 2010 and most of 2011, as advertisers were gunshy about online ads in the wake of the recession, Google's CPC's grew steadily. In the fourth quarter of 2011, growth turned negative as paid clicks surged, and they have continued to decline since then as online ad inventories expanded.

More worrisome for Google's short-term future is the sudden drop in profit margins. Non-GAAP operating margins went from 33 percent a year ago to 28 percent in the most recent quarter, mostly because of an increase in cost of revenues and general and administrative expenses. This during a quarter when advertising revenue grew 15 percent – well below the 20-percent rate for all of 2012 and the 29 percent in 2011.

Google blithely responded to analysts questions about these numbers. Larry Page repeatedly cited Android and Chrome as two businesses questioned early on by investors but which have proven to be central to the platforms Google uses today to bring in revenue. Pichette tossed out old chestnuts on how “we're not in the business of losing money” and how Google looks less at near-term profit margins than on long-term shareholder value.

Both pointed to initiatives like AdWords Enhanced Campaigns, which try to deliver more targeted ads across multiple devices as users move among them. Nikesh Arora, Google's chief business officer, said knowing whether someone is searching for information about cars at a dealership lot or in their homes will allow for more targeted ads. But Enhanced Campaigns may take several quarters to show a material impact on financials.

In short, Google's executives made a bullish case that wasn't strong enough to dispel the uncertainty facing the company but still strong enough to ask investors for patience. Page didn't help his case much by saying dozens of times how excited he was about every aspect of the company that came up. But when he was asked about preserving the entrepreneurial culture of the company he slipped into one of his rare moments of unfiltered thinking on earnings calls.

“It always starts with one or two people, then 10 people, and they can get a lot of things done,” Page said. “Partly, I measure health of company in that way - can we start out on new things and make traction on them? Some people like to work on really crazy things that are going to change the world and we make sure we grow them into things like Gmail and Android and Chrome.”

In a way, that comment was as insightful as anything in Google's earnings report. Much like Jeff Bezos, Page is asking Google investors to have faith in the company's approach. We don't know whether mobile ad rates can pay as much as the traditional online ads – or, if they can, what ad formats will best accomplish this. We don't know if Fiber or self-driving cars or even Google+ will turn into profit machines the way YouTube has. So Google's future comes down to a question investors may not like: Do you believe in Google's mojo?