Disappointing British results led to higher-than-expected taxes.

The slide, which at one stage wiped out more than $20 billion of Google's market value, illustrated the big risks investors have taken by buying the shares after a meteoric rise since their initial public offering in August 2004.

Earnings, excluding one-time items, were $1.54 per share, below the consensus expectation of $1.77, according to estimates.

Google has had previously exceeded Wall Street quarterly profit expectations by at least 10% since its public offering in August 2004.

Question marks

The big miss is bound to raise questions about what Google executives knew and when, and whether they failed to release important information to the market in a timely fashion.

Google shares fell 12% in after-hours trade to $379.00, knocking roughly $15.3 billion from a market capitalisation that was around $126 billion.

Google had become a Wall Street darling as well as a household word as its internet services have become synonymous with web search.

Bullish analysts had predicted that the stock price could race to levels last seen during the dot-com boom era, with one recently predicting the shares could rise to $600.

The rise and rise of Google

Google was founded by Phd students Larry Page and Sergey Brin as a research project

In 1998 the two set up Google's first offices in a friend's garage in California

The search engine's simple, sleek design proved popular with users as the company outgrew several offices

in 2000 the company began selling adverts associated with keywords which increased revenue dramatically

At its peak in early 2004, the site handled around 85% of all searches on the web

Google's IPO in August 2005 earned the company around $1.2 billion

The company now offers a variety of services including email, and is fiercely competing with Microsoft

The term "to google" is now a standard reference to performing a web search in many languages

Scott Devitt, an analyst with Stifel Nicolaus said: "It would be fair to say that the bloom is off the rose."

Devitt's company issued a rare "sell" recommendation on Google stock this month and he said: "Google remains a great company. But there is a disconnect between the business and the market capitalisation."

Tax woes

Google's chief financial officer, George Reyes, said advertising spending during the month of December had been weak in some sectors of its British business - its second-largest market, due to a fall-off in usage during the Christmas holidays.

Because it pays far lower taxes in Europe through its Irish subsidiary than it does on revenue from its home market, Google paid higher taxes overall, Reyes said.

"I think it is a tax rate story," Reyes said after the report. "We ended up having more of our earnings taxed at the higher US rate."

The stronger US dollar also cut the value of foreign revenue, which would have been 2.1% higher in the fourth quarter if exchange rates had remained in line with 2004.

Virtually all Google's revenue comes from sales of web search-related advertising. Revenue, excluding traffic acquisition costs of $629 million, was $1.29 billion, nearly double the $642 million in revenue net of such costs it reported in the year-earlier fourth quarter.

Traffic acquisition costs refer to revenue that Google passes along to hundreds of affiliates, most importantly Time Warner's AOL, which rely on Google's search system to serve up advertisements on their own sites.