Google expects that new options will have an exercise price equal to the closing price per share of its common stock on March 2 of this year.

In the past two quarters, about 85 percent of Google employees have had at least some of their stock options fall "under water," meaning the exercise price is significantly higher than the current market price of the common stock, Schmidt said.

Paid clicks on Google sites and partner sites increased approximately 18 percent compared with 2007's fourth quarter.

Google finished the quarter with 20,222 full-time employees, up from 20,123 full-time employees as of Sept. 30, 2008.

Google ended 2008 with $15.85 billion in cash, cash equivalents and short-term marketable securities.