SAN FRANCISCO (Oct 17): Google Inc's revenue fell short of Wall Street's expectations as growth in Internet advertising slowed in the most-recent quarter, offsetting a modest improvement in ad pricing, sending its shares down about 3%.

The total number of ads, or paid clicks, expanded by 17% in the third quarter, down from the 25% growth rate that Google delivered in the second quarter.

But online advertising rates, which have been mired in a multi-year decline, moderated slightly in the third quarter, declining 2% y-o-y.

That marked an improvement from the 6% decline in "cost-per-click" or CPCs in the second quarter.

Shares of Google fell 2.7% to US$510.11 in extended trading on Thursday.

“The CPC decline abated. That’s a big positive,” argued BGC Partners analyst Colin Gillis. "If CPCs flatline that’s going to help the core meaningfully.”

Google posted US$16.52 billion in revenue for the three months ended Sept 30, compared to US$13.75 billion in the year ago period.

Analysts polled by Thomson Reuters I/B/E/S were looking for revenue of US$16.57 billion in the latest quarter.

Google ramped up its spending during the quarter.

The company increased its headcount by roughly 3,000 employees, contributing to a 46% rise in research and development costs.

On Thursday, Google announced it had appointed Omid Kordestani its new chief business officer, replacing Nikesh Arora, who had departed a quarter ago to join Japan's Softbank Corp.

The chief business officer is considered a key position, overseeing all the company's revenue-generating activities and serving as a liaison to investors and Wall Street.