How Google's Garden Grows

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Google is also moving more aggressively into the online classified-advertising arena with plans to provide click-to-call ads in partnership with eBay (EBAY). Wolk says the total advertising opportunities justify Google's stock price. "The reason why [Google] is so attractive is that the core business is doing exceptionally well and there is even further upside if some of their newer growth areas become meaningful, such as video advertising, mobile advertising, and local advertising," says Wolk.

Check This Out

Google's ambitions don't end with advertising, either. During the third-quarter earnings call, Google executives discussed the company's foray into software with its online spreadsheet software and other competitors to Microsoft's Office suite. Executives also were enthusiastic about Google Checkout, the company's e-payment competitor to eBay's PayPal. The item is a favorite among many merchants who already advertise through Google because it allows them to build up credits for free transactions.

Alex Spektor, CEO of TheFurniture.com, says that although his business uses both Checkout and PayPal, Checkout has become his preferred online payment service. "It used to be before we started to use Google Checkout that 8% to 10% of our payments were through PayPal," says Spektor. "Now 3% to 4% of our customers are using PayPal and 8% to 12% use Google Checkout."

Of course, Spektor's enthusiasm is based primarily on the fact that many of his Checkout transactions are free, thanks to the amount he spends on advertising. That doesn't mean that Google Checkout is anywhere near bringing in the kind of cash for Google that eBay's PayPal generates for its parent company. PayPal continues to grow beyond eBay and even online payments. Meanwhile Google's system is just getting started (see BusinessWeek.com, 6/28/06, "Google's eBay Challenge").

Few Flaws

In fact, one of the problems with Google's growth strategy may be that it has its hands in too many cookie jars. Aside from search, Google has yet to hit a home run with other businesses (see BusinessWeek.com, 7/10/06, "So Much Fanfare, So Few Hits"). Still, analysts and investors see promise that some of Google's products will make inroads in other markets, and that means that Google's stock will not be limited by what any particular market can bear.

"They are crossing into uncharted territory," says Denise Garcia, WR Hambrecht's Internet research analyst. "It is the promise of the future that we are seeing. And until we can see some flaws in their plan, the stock will continue to grow."

Holahan is a writer for BusinessWeek.com in New York.