By Jonathan Davies

Google's shares fell by more than 3% in after-hours trading following a surprise drop in its profits for the third quarter.

The internet giant reported profits of $2.8bn (£1.7bn), an unexpected 5% drop on the same period last year.

Despite a 20% increase to $16.52bn, Google also missed analysts expectations on revenues. Google's average cost-per-click, one of its most closely watched figures was down nearly 2%.

"We continue to be excited about the growth in our advertising and emerging businesses," said Google chief financial officer Patrick Pichette.

Rising costs of real estate, like data centres, have largely been to blame for the fall in Google's profits. That, and hardware inventory, grew by 37% to $3.35bn in the quarter.

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