Google Inc (NASDAQ:GOOG) the search engine giant is expected to announce its earnings today, after market close. All sorts of comments are being heard in the market. Some are selling Google’s shares on its poor investment decisions in non-core businesses. However, others believe Google is one of the cheapest stocks in the Internet paradigm. What to believe?

The investment case

Within the U.S. Internet space, Google Inc (NASDAQ:GOOG) seems to be an attractive buy. The cost-per-click (CPC) trends are expected to improve over time. Google also continues to benefit from very strong paid click growth. In addition, the strength of Google’s Android platform (over 72% global market share according to Gartner) positions the company to capitalize on mobile disruption and to benefit from the increased usage of Google products (Search, YouTube, and Mail). Google Inc (NASDAQ:GOOG)is a very strong player in Display and Video, via the DoubleClick Ad Exchange, Google Display Network, and YouTube. As Google continues to benefit from the structural growth of Internet usage globally and global macro concerns ease, we believe the market will recognize its strong fundamentals and its position as the leader in online advertising.

The business drivers

Google Inc (NASDAQ:GOOG)’s core business remains search, and we expect this business to maintain continued strong growth. We believe CPC trends will improve over time owing to 1) moderating F/X headwinds; 2) emerging market pricing firming; and 3) improvement in the monetization of mobile CPCs aided by increased e-commerce activity on mobile devices. We believe Google Inc (NASDAQ:GOOG) will benefit from continued strong paid click growth (+33% Y/Y in Q312) due to the proliferation of mobile devices and growth in Internet users internationally.

Mobile CPCs

The third point needs some more discussion. It is important to note that the mobile shopping boom has brought increased traffic to many companies. Internet radio player, Pandora Media Inc (NYSE:P) is a super example of this fact. The company’s music-streaming app has witnessed a 47% YoY increase in traffic this year. However, it has to be kept in mind that this growth is not as much beneficial for these companies as understood by the public. Pandora gets hardly 40% of the revenue it derives from a desktop listener.

On a similar note, Google Inc (NASDAQ:GOOG)’s average CPC fell by 15% in the last quarter as the increase in mobile-based searching shifted the revenue mix and pressured gross margin. However, some companies have benefited from this trend as well. Facebook Inc (NASDAQ:FB) , the social media giant, has surpassed 600 million users in the mobile space. No wonder why analysts  were convinced to increase the company’s revenue and EPS estimates. However, the company is only getting 14% of ad revenue from mobile users, which means that there is still massive room for an increase in ad revenue from this channel.