Google surprised the market overnight by reporting better than expected first quarter earnings. The first quarter result saw Google shares up 17% in after hours trading, even though there was a small fall in click-throughs.

Google shares had fallen more than 35% in the March quarter on fears its revenues and earnings would be lower as its share of ad click-throughs fell, but it reported a 30% rise in first-quarter net profit to US$1.31 billion. Sales jumped 42% to US$5.2 billion (or a net US$3.7 billion after deducting advertising sales that Google shares with partners).

Google reported its aggregate paid clicks increased 4% from the fourth quarter of 2007 but up 20% from a year ago. That’s down from sequential growth of 9% in paid clicks in the December quarter and a 30% rise in 2007. Google says the slowdown is due to its new policy of eliminating low quality or false ads on its system and concentrating on genuine paying customers.

At least Google understands the internet, for Rupert Murdoch it’s still a fascination.

News Corp has admitted that its internet strategy is off the rails and won’t make the planned $US1 billion in revenues with MySpace struggling. New Corp shares are down 20% in 2008 and down from just over $32 a year ago to around $19.

It will be interesting to read the take from Murdoch’s organs on the New York Times‘ horrible first quarter result which showed a 9% drop in ad revenues and a small loss of $350,000, compared to the $23.9 million earned in the first quarter of 2007. No doubt they will trumpet it with glee, especially the Wall Street Journal, which Rupert paid top dollar for last year.

New York Times Co. shares have fallen by just over US$5, or around 20%, in the past year.

The Times saw its overall revenue drop 4.9% in the first quarter and News Corp will also be feeling the pain with a heavy concentration of newspaper assets in New York, while his London papers are encountering a slumping economy and Australia is going into a slower period.

Murdoch does have TV and film businesses to offset slower revenues from his papers, but the big interest will be in the way revenues and earnings at the NY Post and WSJ are heading when third quarter results are released next month.