Web search giant Google reported disappointing earnings for the second quarter due to the costs of a recent hiring spree and a jump in operating expenses.

Google failed to beat Wall Street expectations for only the second time in its three years as a public company. Net profit rose 28 per cent and Google gained market share against Yahoo and other rivals in online advertising.

The gains were partially offset by a rise in expenses for adding staff - something Google said would brace it for accelerating growth. Google employs about 1,400 staff at an operations centre in Dublin which serves Europe, the Middle East and Africa, where it continues to hire particularly for technical roles.

Google's shares fell 7 per cent after the announcement. The stock, which was trading just off of recent record levels heading into the report, had jumped 15 per cent since mid-May.

Google said second-quarter net income rose to $925 million (€669 million) compared with the year-ago quarter's $721.1 million. Excluding one-time items and stock option expenses, Google posted a profit of $1.12 billion or $3.56 per share. That was three US cents per share short of Wall Street targets.

Gross revenue rose 58 per cent to $3.87 billion, which included $1.15 billion in payments to affiliated websites that run Google Web search advertising, known as traffic acquisition costs.

"I am really struck by our ability to operate and move forward at this scale," said Google chief executive Eric Schmidt.

Separately, Google said yesterday it would participate in an upcoming wireless spectrum auction if the US Federal Communications Commission added a key condition. Google said it would meet FCC chairman's minimum bid requirement of $4.6 billion if the spectrum winner of the auction were also required to offer services on a wholesale basis to third parties. - (Reuters)