Glare Is on Google

Similarly, the company's plans for YouTube warrant close attention, despite the paltry $10 million in revenue that Mahaney expects the deal has added to Google's coffers. Its YouTube strategy could provide a clue as to how -- among other avenues -- Google plans to muscle into the display-advertising market, where Yahoo! is the leader but could be vulnerable to pressure from Google's increasingly popular set of properties.

Along with new frontiers, Google's fourth-quarter results also revisit old worries. Chief among them is the company's mounting costs, with capital expenditures appearing to grow faster than revenue. Merrill Lynch expects $2.07 billion in capital spending for 2006, a growth of 147% year over year. Of that amount, $536 million comes in the fourth quarter, a growth of 118% year over year and 9% sequentially.

Basking in the glow of Google's stunningly profitable third quarter, CEO Eric Schmidt scoffed at Wall Street's perpetual hand-wringing about out-of-control capital costs, saying that the scrutiny helped the company boost performance instead.

This time around, with significant investments in new endeavors that have yet to pan out, that concern could take center stage.

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