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Editor: Matt Paines

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Social networking hits Google profits

Social networking has been cited as one of the main reasons why Google’s profits have slumped.

The search engine posted a 17% rise in profits for the last quarter, which is down markedly on the 46% rise it achieved the previous quarter.

The company blamed the difficulty of generating ad revenues from social networking sites for the lower than expected profits.

Google’s chief financial officer, George Reyes, said the company has found that social networks are not monetising as well as it was expecting.

Insiders said that the difficulties arose from creating an appropriate look and feel for ads, so they did not appear out of place alongside the content on social networks.

Google could be left out of pocket as it struggles to make money from placing ads on these sites – especially as it has guaranteed to make minimum payments to a number of social networking sites, such as MySpace, Facebook and its own social networking site Orkut.

This, coupled with the slowdown in paid clicks, has led to investors becoming concerned about changing internet behaviour and tougher competition, and news of slump has disappointed analysts and sent share prices down.

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