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Google starts showing its age

The Internet search giant was unstoppable in its first decade. The next 10 years may not be so easy.

By Yi-Wyn Yen, reporter
Last Updated: September 5, 2008: 8:22 PM EDT

SAN FRANCISCO (Fortune) -- Sergey Brin and Larry Page incorporated Google on Sept. 7, 1998, and set out to organize the world's information on the Internet. Along the way, it turned Web search into an extremely lucrative business and became one of the world's most valuable brands.

A lot of investors - not to mention Brin, Page and a small army of Google employees - cashed in too. Google's August 2004 initial public offering was one of the most closely-watched of the decade. From $85 a share at its debut, the stock reached an all-time high of $741 a share last November before sliding 40% amid a broader market selloff.

"In many ways Google has become the standard bearer for the entire technology sector," said Scott Kessler, an equity analyst at Standard & Poor's.

Now many industry watchers are asking what Google (GOOG, Fortune 500) can pull off a repeat performance before it hits the 20-year mark.

"Now," said Kessler, "you have to start asking a lot of questions like, 'How do they keep things going? How do they maintain their culture of success? How do they continue to deliver results?'"

It won't be easy. Among other things, Google has seen a raft of high-profile departures in recent months, notably AdWords sales chief Sheryl Sandberg, who joined a number of ex-Googlers who have jumped to Facebook, now the up-and-coming startup.

Google is actively looking for its next big act. It's invested heavily in other forms of advertising, including newspaper and radio ads. In March, it acquired ad server DoubleClick to better position itself to sell display advertising. This week the company unveiled a Web browser called Chrome to take on Microsoft's (MSFT, Fortune 500) Internet Explorer. Later this year, Google will launch its Android operating system for mobile phones.

It's too soon to tell if any of these products will turn Google into more than a one-hit wonder. Outside of text-based advertising, the company has struggled to make money from acquisitions like dMarc Broadcasting, whose technology links radio stations and advertisers, and the YouTube video-sharing site.

"Google thinks it can port its auction-based self-service model to other areas of advertising," said Tom Wilde, the CEO of Everyzing, a video search company. "On an intellectual level, it makes sense. But so far that hasn't translated well outside of paid search."

Keeping investors happy is part of the growing pains that any successful, maturing company faces. Just don't expect Google to find a predictable solution. "Google is not a conventional company," cofounder Larry Page wrote in his first letter to shareholders in 2004. "We do not intend to become one." To top of page

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