Google's Q3 Earnings Miss Might Be Trouble for These ETFs - ETF News And Commentary

Internet search king Google, Inc. (

) has yet again disappointed the Street with its dismal third quarter results. Though the company has managed to deliver on the revenue front, earnings have now missed expectations in each of the last 4 quarters, causing Google's stock prices to slip by 2% to $525.90 in extended trading on Thursday.

The company reported earnings per share

of $4.91 (accounting for traffic acquisition costs

), roughly 8% below the Zacks Consensus Estimate of $5.34 per share.  However, revenues were pretty solid, up 20% from a year ago to $16.52 billion, easily crushing our estimates of $13.2 billion.

Google's paid clicks rose 17% year over year during the reported quarter, far below the roughly 30% growth seen in the recent quarters,

. However, the revenue Google collects from each click (i.e. cost per click) fell just 2% from the same period a year ago – an improvement from the 6% decline during the second quarter.

The main culprit for the company's slumping earnings seems to be its soaring expenses. Operating expenses not related to the cost of revenues, touched $6.1 billion in the September quarter – up 33% year over year and accounting for 37% of revenues (read:

).

The company is spending heavily on its new businesses to ramp up growth. Google has built additional data centers to deliver more Internet content, while at the same time it has increased its headcount by roughly 3,000 employees.

Thus slower advertising growth and heavy spending were some of the factors that disappointed investors and sparked a sell-off in after-market trading. The sluggish trading could also hit the ETF world, particularly funds that have a higher allocation to this leading online advertising company, in the next few days.

Hence, we have highlighted three of the biggest holders of Google stock in ETF form. Investors who believe Google's troubles are just beginning should stay away from these tech products while those who are cautiously optimistic might rather cycle into these funds.

(

)

This fund tracks the PowerShares NASDAQ Internet Portfolio to provide exposure to the largest and most liquid U.S.-listed companies engaged in Internet-related businesses.

In total, the fund holds 97 stocks, with Google taking the second and the third spot (Class A and Class C shares), having a combined allocation of roughly 16%. In terms of industry exposure, Internet software & services makes up for a little less than three-fourths share in the basket, followed by Internet & catalog retail.

The fund manages an asset base of $314.2 million and trades with moderate volumes of roughly 40,000 shares a day. PNQI is down roughly 7% so far this year (read:

).

(

This is one of the most popular and active ETFs in the broad tech space with an AUM of over $1.6 billion and average daily volume of more than 300,000 shares. The fund holds a small basket of 42 stocks charging investors 57 basis points annually.

Google scores among the top 10 holdings having a total allocation of 10% (Class A and Class C). From a sector look, information technology accounts for about 70% of the portfolio while consumer discretionary makes up 24% (read:

).

The product charges 54 basis points as expenses and has lost 5% in the year-to-date frame.

IYW is also quite popular in the tech space with AUM of $3.9 billion while charging 43 bps in fees and expense. Moreover, the fund trades with good volumes of a little under 500,000 shares a day (see:

).

The product tracks the Dow Jones US Technology Index, giving investors exposure to a basket of 145 stocks. Google scores among the top 10 holdings having a little less than 10% allocation (Class A and Class C). IYM has gained 7.2% so far this year.

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