Shares of Google Inc fell 8 percent after the Internet giant posted a rare quarterly earnings miss and said money paid by marketers for its search ads decreased for the first time in two years.

The search giant underperformed on both revenue and earnings, despite record U.S. online commerce during the holiday season, prompting several brokerages to cut their price targets on the stock.

Google shares were down $50.77 at $588.80 in late morning trade on Friday on the Nasdaq. They had touched a low of $584.81. It was the stock’s biggest percentage fall in 9 months.

About 5.2 million shares changes hands by 1120 ET, more than their daily average volume.

The broader Nasdaq composite index was down 0.25 percent.

Google executives blamed the decline in search ad rates on forex fluctuations and ad format changes but analysts wondered whether mobile advertising, which has lower rates,  played a more important role than the company admitted.

The fall in cost per click (CPC) had led to a barrage of questions from analysts during the post-earnings conference call on Thursday.

The market needs to shift expectations to paid click growth and lower its estimates for CPC, Goldman Sachs analysts said in a note.

Google’s heavy investments in mobile and social network initiatives, to stave off competition from rivals Apple Inc and Facebook,  and its planned $12.5 billion acquisition of smartphone maker Motorola Mobility Holdings have also raised investors’ concerns.

Larry Page, who took over as CEO in April, said in July that the company was moving to put “more wood behind fewer arrows.”

Analysts said the company has seen growth in display advertising, its Android mobile platform and Google.

Google, its recently-launched social network,  has 90 million users now, up from 40 million three months ago.

SOLID CORE

Wall Street analysts called the selloff an overreaction; Barclays said it presents a buying opportunity.

“Don’t judge a book by its cover,” Goldman Sachs titled its research note on Google.

The company’s core results were solid as paid click growth accelerated by more than a third, margins improved, and display and mobile businesses performed well, analysts said.

The acceleration in paid clicks suggests that underlying demand for Google ads is quite healthy across devices, JP Morgan said, adding Google is best-positioned for the shift to new media.

Goldman Sachs analysts said, “We expect the growth in mobile to be 146 percent in 2012 and represent 15 percent of gross sales as we exit fourth-quarter of 2012.”

The company still has strong earnings power that will reappear during 2012, Canaccord Genuity said, reiterating its “buy” rating.

Barclays, Baird, Jefferies and JP Morgan also maintained their top ratings on the stock.

Meanwhile, the biggest tech Dow components, IBM (IBM), Microsoft (MSFT), and Intel (INTC) on Friday reported fourth quarter earnings results. Each member of this tech troika reported slight beats on somewhat weak revenue, particularly in the case of Microsoft. The performances could either be described as “vaguely encouraging” or “benignly disappointing,” depending largely on whether or not you personally own the stocks.

Nonetheless, IBM, MSFT and INTC seem cheap on the basis of earnings multiples. The question is whether or not cheap and bland is actually an investment thesis. According to David Garrity of GVA Research, relatively low variability in performance is going to be the theme that pays for investors in technology this year.

Calling relatively expensive Nasdaq names Google (GOOG) and Amazon (AMZN) the “best houses in bad neighborhoods,” Garrity doesn’t think that’s necessarily going to be a “recipe to drive stock prices higher.” Based on the reaction to Google’s earnings report after Garrity and I spoke, Mr. Market says it’s right not to pay up for “fast growth.”

Which brings us back to Intel and Microsoft, two names in my own portfolio. Though Intel “has not succeeded in stealing the field” for smartphone chips from Qualcomm (QCOM), Garrity says “the company is better positioned for a secular trend” than it’s being given credit for. It’s a view strengthened by Intel’s decision to boost spending by 16% to, at the minimum, stanch the bleeding in market-share loss.