Inside Google

Google has a stranglehold on search with 65 percent of the U.S. market — and even more in some other countries — but writing in Fortune magazine, Michael C. Copeland, says the Internet giant needs to find new sources of revenue or lose its status as a growth company.

“Google, against its will, and defying its massive cash hoard, is transitioning from a growth company to — and there is no kind way to put it — a cash cow. That ranks right up there with being a former supermodel, but it is a taint Google can’t seem to shake right now, at least not on Wall Street. It’s a big part of the reason that Google shares are down 21% since Jan. 4, underperforming the Nasdaq (up 1%).”

Copeland says that part of the problem is that the management troika, CEO Eric Schmidt and co-founders Larry Page and Sergey Brin have failed to articulate a vision for the future. He writes:

“‘That is what is scaring investors,’ says Sameet Sinha, a senior analyst with JMP Securities in San Francisco. ‘There is no clear path toward what Google is doing, or wants to do’….

“‘Google is not the hot company anymore,’ says Marc Benioff, CEO of Salesforce.com (CRM). ”Their stock has been mostly flat for five or six years now. How can you claim to be a leader with equity performance like that? That’s starting to look like Microsoft or Yahoo (YHOO). They have to get into some other place, and quickly.’”

The article speculates that Google may try to move into the social networking space currently dominated by Facebook. Google may try, but its initial foray into the space with the disastrous launch of Buzz, shows it has a tone-deaf ear when it comes to privacy issues, which do matter to consumers. And, consider Wi-Spy if you still have doubts that Google doesn’t get it when it comes to privacy.

Indeed, I think the biggest threat to Google’s business is the growing backlash as more  and more people become fully aware of how much personal data the Internet giant gathers and how cavalier its attitude is toward consumers’ privacy.