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Google's Searching for Mobile Help (Update 1)

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Updated from 9:41 a.m. EST to provide analyst comments regarding fourth quarter in the ninth paragraph.

NEW YORK ( TheStreet) -- Google's (GOOG) set to report fourth-quarter earnings after market close. The search giant will be keen to avoid a repeat of last quarter's gaffe, when it released its earnings early. It will also be hoping to finally deliver mobile success, driving real earnings growth.

As people increasingly turn to smartphones and tablets for their Internet needs, Google has had a difficult time trying to make money from advertising on mobile, so cost-per-click (CPC) is an important metric to watch. If Google's CPC looks like it's bottoming out, or even rising, then the company's mobile initiative is working.

Investors, however, aren't placing much faith in the company, with shares underperforming the NASDAQ in the last three months. Since Oct. 18, when it reported its third-quarter results, Google shares have gained 4.34%, compared to 4.91% for the tech-heavy NASDAQ.

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Last quarter, Google saw CPC fall 15% year over year and 3% quarter over quarter. Thus, earnings missed Wall Street consensus badly.

The Mountain View, Calif.-based company's hoping to turn this around during the fourth quarter, and Deutsche Bank analyst Ross Sandler believes this may be the case. "Reported CPC growth is on the verge of improving, mostly as Google comps the downtick that started back in 4Q11. Some investors use this metric as a proxy for improving mobile monetization, hence any improvement would be a positive catalyst," Sandler wrote in a research note. He rates Google shares "buy" with an $850 price target.

Analysts polled by Thomson Reuters expect Google to earn $10.49 a share on $12.3 billion in revenue this quarter. That's up from a year ago, when Google earned $9.50 a share on $8.13 billion in sales, though those numbers excluded Motorola.

Raymond James analyst Aaron Kessler believes that CPCs improved in the fourth quarter, as year-over-year comparisons got easier, though he expects mobile to continue to weigh on growth. Given concerns about fourth-quarter holiday spending, Google's results will be a key indicator of the health of the economy.

Though Google has a dominant market share in search, competition is heating up, most notably from Facebook (FB) , which recently announced Graph Search , as it looks to enter the lucrative search business. Google's also up against Microsoft (MSFT) and Yahoo! (YHOO) , but neither are serious competitors to the Google crown.

JPMorgan analyst Doug Anmuth noted that search engine marketing (SEM) checks were mixed this quarter, but believes that CPCs and Product Listing Ads (PLAs) are strong this quarter. "4Q SEM checks were generally positive on a Y/Y basis with most agencies showing an acceleration in overall paid search growth driven by strong holiday spending, while others saw modestly softer trends due to a mix shift to int'l markets," Anmuth wrote in a note. He rates Google buy with a $802 price target.