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Are Facebook-Shaped Clouds Gathering on Google?

"We expect a strong quarter" from Google , explained Youssef Squali, an analyst at Jefferies, in a note. "Checks [are] suggesting that the company continues to gain share of search (on both mobile and desktop) and of display ad budgets."

Search engine rankings released by ComScore this week show that Google led the U.S. core search market in September with 65.3 percent market share, up 0.5 percentage points from the prior month, well ahead of Yahoo and Microsoft's Bing at 15.5 percent and 14.7 percent, respectively.

Jefferies' Squali, however, lauded Google's ability to bring in ad revenue.

"While Google's share of U.S. queries is relatively flat at 65 percent, its share of ad dollars is more than 80 percent, driven by both volume and performance," he explained. "Volume for the third quarter was likely driven by high-teens growth in international clicks and high-single-digit growth in U.S."

Google's real-time bidding technology for advertisers and media buyers is also driving revenue, according to Squali.

"For display revenues, our checks indicate that Google's real-time bidding platform is on a tear," he wrote, adding that Google's display revenue grew an estimated 80 percent year over year in the second quarter.

Analysts surveyed by Thomson Reuters are looking for Google to report revenue of $7.21 billion and earnings of $8.74 a share, compared with revenue of $7.29 billion and earnings of $7.64 in the same period last year.

As always, Google's Traffic Acquisition Costs, better known as TAC, will be a key number for investors. TAC is the amount of money the search giant pays to other sites for their traffic.

Google's TAC came in at $1.81 billion, or 26 percent of advertising revenue, during the third quarter of 2010. Google's TAC was $2 billion, about 29 percent of sales, in the company's second quarter.

But at least one analyst warned clouds could be gathering over the Googleplex, most notably in the shape of social networker Facebook.

"With more than 30 percent of aggregate Internet minutes spent on Facebook, the Internet's center of gravity is shifting from Google to Facebook," explained Jordan Rohan, an analyst at Stifel Nicolaus, in a recent note. "The strategic position of Google is weakening."

Rohan also noted slowing growth in search advertising in some areas, as well as the risks posed by Google's ongoing $12.5 billion acquisition of Motorola Mobility .

"The Motorola Mobility acquisition could distract senior management, fail to protect Android, lead Google into [the] intensely competitive hardware business, and keep Google from returning capital to shareholders," he warned.

Google, however, sees Motorola as a big leg up in the booming smartphone market, where Android is locked in a fierce battle with Apple's iOS.

Motorola's 17,500 Android patents are at the core of Google's bid for the handset maker, marking an attempt to significantly bolster the Internet giant's modest patent portfolio.

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