Google monster spreads web as rivals struggle for breath

Who knew advertising would be one of the internet's cash cows?

Sergey Brin and Larry Page did.

The co-founders of Google, the undisputed Godzilla of internet search companies, didn't have a crystal ball. Like any successful entrepreneurs, they had a novel idea.

In less than 10 years, the Stanford University students took an academic project and turned it into a billion-dollar business, leaving rivals such as Microsoft and Yahoo scrambling to land a punch in the battle of the net titans.

Through word of mouth, Google's search page became wildly popular because it was faster and smarter than traditional search engines, which bombarded users with results based on how many times a key word appeared on a web page.

Now, 300 million users search more than eight billion pages. The company's name has entered the lexicon and is synonymous with performing an online search.

Google's technology uses software code to rank search results by relevance, and its advertisers foot the bill. For example, "Google" the New Zealand Herald and a link to its web site pops up alongside a sponsored link to a local online dating service. Google takes a cut every time a lonely New Zealander clicks on the sponsored link.

The firm also gets paid when users click on ads or sponsored links on third-party websites that also participate in its proprietary AdSense program.

It's a formula that pays in spades. This year alone, Google gobbled more than US$369 million ($517 million) profit in the first quarter.

The "scrappy" spirit that fuelled Brin and Page in the early days still drives the company, according to Richard Chen, Google's international business product manager.

"It's a very, very entrepreneurial, scrappy company," said Chen, who develops products for the Asia-Pacific region. "There is a strong sense that there are big problems that need to be solved and the only way to solve them is to roll up your sleeves and create great products."

Google manages to keep these products coming. While the company says its 3000-plus workforce and its ballooning bank accounts are devoted mainly to its core business of the search engine and related advertising revenue, the bulk of new products hitting its site are anything but.

Take, for instance, Google's Desktop Search. The utility allows users to search their hard drives for such archived information as email or music, web history and so forth.

A few weeks ago, the company released a business version of the tool called Google Desktop Search for Enterprise. The free product is similar to the consumer version in purpose, but it also offers security enhancements that block Google from collecting information from the data searched.

With desktop search for business ready for prime-time, Google once again beat Microsoft to market. Microsoft said it would have its desktop search for business out by year end.

Another newbie offering that sets Google up for direct competition with Microsoft and the second-most-popular search company, Yahoo, is its personalised web page.

Still in the testing phase and available for free download on Google Labs - the page that offers users the chance to use and assess new products - the personalised version of Google's barren search page can be customised with news, local weather, email and more.

Some would call this a portal, like My Yahoo or Microsoft's MSN, but not Google. The company maintains it wants users to leave its site as quickly as possible when they find what they're looking for.

Chen said the idea for this product came from user feedback, not the urge to offer competing services.

He also played down the intense competition that has developed between the three internet search kings.

"We don't spend a lot of time looking at competitors. Our primary focus is our users."

Marianne Wolk, an analyst with Susquehanna Financial Group in New York, said in the short-term Google will grow faster than Yahoo.

"Google will outpace Yahoo over the next several quarters, simply because they are far more leveraged to search advertising and in particular the advance of search advertising in Europe," she said. Long-term, both companies would successfully bring more advertising dollars online, she said.

According to the Interactive Advertising Bureau, in the United States alone, internet advertising revenue hit US$9.6 billion last year, an increase of 33 per cent from 2003.

From academic outcries over its plan to digitise much of the world's literature, to predictions of an implosion, to its soaring stock price, Google has devoured vats of news ink over the past year.

Since its initial public offering in August, Google's stock price has more than tripled on better than expected earnings and recent rumours of its possible inclusion on the Standard & Poor's 500 Index.

David Edwards, an analyst with American Technology Research, said that based on Google's size and the other types of the companies on the index, he sees no reason why it wouldn't be included.

Edwards added that normally such an action would occur a year after an IPO, or some time in the next few months. Right now, Google has a lower institutional ownership than Yahoo and eBay.

"One would assume that if Google gets included on the S&P, then the institutions that benchmark against the index or track directly to the index would need to buy more shares of Google," said Edwards, who has a 12-month price of US$290 on the shares.

Chen said Google's future growth is heavily dependent upon international expansion.

"Our mission is to organise all of the world's information and make it accessible to all of the world's users," said Chen. "And we really do mean everybody."

While its homepage is available in more than a hundred different languages, many of the features are not. The Google team is working at a feverish pace to access yet-untapped markets - Desktop Search, for example, just became available in both traditional and simplified Chinese characters.

The company recently made international headlines when it won a licence to operate in China. It is also an investor in the country's most-used search engine, Baidu.com. Google executives have been keeping mum on its plans for China, other than to say they are studying the market.