At first, when I heard that Google missed their expected quarterly earnings by a couple of cents, I thought this a refreshing breath of honest accounting.

Many successful companies routinely beat expected earnings by a penny, but only through accounting tricks that artificially smooth out their results.  It wouldn’t be surprising with a slowing economy that an advertising based business might take a hit.  Google’s explanations for why they missed their quarter surprised me, however.

The problem, said Google, was that their experiments with existing social advertising systems didn’t work out well: 

"We have found that social-networking inventory is not monetizing as well as expected," he said.

Under further questioning, co-founder Sergey Brin said the company was disappointed in experiments it had run on some of the approximately 20 social networks it works with, which include MySpace and its own Orkut.

I don’t think we have the killer best way to advertise and monetize social networks yet," Brin said. "It’s a big opportunity because it’s so much inventory."

I’m not saying that Google didn’t actually miss their quarter, but their explanation of why they missed seems to be heavily spun to work to their strategic advantage. 

It casts doubt on the viability of Google’s competitors in social networking and advertising even as Google readies it own offerings.

Notice that Brin says we don’t have the killer way to advertise social networks yet. Google already has OpenSocial, surely Google’s social advertising platform can’t be far behind. 

There’s certainly a healthy dose of truth in what Google’s saying regarding the ineffectiveness of social advertising today.  But Google didn’t have to miss their quarter to figure that out.  It’s been widely reported that Facebook and Myspace advertising is relatively ineffective.  (My own experiences in a past job confirm that.)

Instead, Google seems to using their quarterly results as a powerful FUD message, casting doubt on the viability of Google’s social advertising competitors even as they prepare their own offerings.

Having thus set the stage, I won’t be at all surprised when Google announces in a future quarter that they beat earnings because they’ve cracked the code on social advertising.