SAN FRANCISCO (Reuters) - Google Inc's revenue fell short of Wall Street's expectations as growth in Internet advertising slowed in the most-recent quarter, offsetting a modest improvement in ad pricing, sending its shares down about 3 per cent.

The total number of ads, or paid clicks, expanded by 17 per cent in the third quarter. That was down from the 25 percent growth rate that Google delivered in the second quarter.

But online advertising rates, which have been mired in a multi-year decline, moderated slightly in the third quarter, declining 2 per cent year-on-year. That marked an improvement from the 6 per cent decline in "cost-per-click" or CPCs in the second quarter.

Google ramped up its spending during the quarter. The company increased its headcount by roughly 3,000 employees, contributing to a 46 per cent rise in research and development costs.

On Thursday, Google announced it had appointed Omid Kordestani its new chief business officer, replacing Nikesh Arora, who had departed a quarter ago to join Japan's Softbank Corp. The chief business officer is considered a key position, overseeing all the company's revenue-generating activities and serving as a liaison to investors and Wall Street.