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Google's seven-year itch

By Juan Carlos Perez, IDG News Service
December 01, 2005 11:29 AM ET

IDG News Service - Google's stock price recently topped $400 per share. Online advertising, its main source of revenue, is expected to continue growing by leaps and bounds for the foreseeable future. Within online advertising, Google is a leader in the market’s largest segment: paid search. Titans like Microsoft and Yahoo have significantly adapted and changed their business and technology strategies based on Google's moves. To boot, Google has the resources to steal Internet luminaries like Vint Cerf from competitors. Clearly, Google is invincible. Right?

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Not really. Despite its success, Google, which celebrated its seventh anniversary in September, faces many challenges. How it deals with those challenges will determine whether the company will still be considered a winner seven years from now.

For starters, it faces white-hot competition in its core search market from Yahoo and Microsoft, as well as from nimble start ups, such as Blinkx. While it fights to protect its territory in search, Google is also venturing into other areas, which could lead it to lose its focus.

Then there is the company’s reliance on one form of online advertising - paid search - for most of its revenue, which some say puts it in a vulnerable position, particularly since this ad model is susceptible to click fraud, a serious industry-wide problem.

A related question is whether Google will succeed in other forms of online advertising it may explore in the future, or in other entirely different businesses, such as enterprise search, where it is a relatively new player.

Another challenge that can’t be ignored is the company’s fast growth, both in terms of size, scope of operations and geographic reach. Finally, there is the increasing number of controversies Google finds itself in as it grows in size and importance in the industry, which can harm its brand and corporate image.

Losing its focus

Google built its reputation and its fortune by providing the best Web search service and generating advertising revenue from it. However, Google has made it clear that it doesn't just want to be a provider of search-engine services.

Google owns one of the most popular blogging services, Blogger, and as such plays in this increasingly popular market of people and organizations that have embraced this online journaling phenomenon.

Google also owns Picasa, an application to organize, edit and share photos. Another nonsearch service in Google's arsenal is Gmail. This year Google launched its own instant-messaging service, Google Talk. The company also has a social-networking service, Orkut .

As if that wasn't enough, it recently submitted a proposal to San Francisco to provide wireless Internet access throughout the city, and got the green light to provide this service in Mountain View, California, where its headquarters are. The company also caters to IT departments with its enterprise-search products and to professionals in industries such as real estate, architecture, engineering and government with its Google Earth mapping products.

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