Internet powerhouse Google bets on lots of small businesses and new applications as it looks for ways to extend its reach
MOUNTAIN VIEW, Calif. -- When Google Inc. snatched up the video-sharing website YouTube for $1.65 billion last fall, it was the most conspicuous move in the company's strategy to find new ways to monetize the Internet.
But behind the curtains at the Googleplex, the company's Silicon Valley headquarters, Google has been placing lower-profile bets on other businesses, from software to retail shopping and payment to brokering ads for other media.
Even more dramatically than video, such businesses have the potential to expand and diversify the Internet search company's base of revenue and profits, more than 95 percent of which today stems from advertising tied to search results.
"They're experimenting with multiple projects to see what works," said Haim Mendelson , professor of electronic business and commerce at the Stanford Graduate School of Business in Palo Alto, Calif., who uses the term "parallel prototyping" to describe the research and development process at Google's usability labs. "Because their prototypes are virtual, there is little development cost. And because of the Internet, they can get statistical feedback very quickly."
This continuous feedback loop, which Google used to seamlessly tie its search results to narrowly focused advertising, is one reason it has become a profit juggernaut. Its first-quarter earnings climbed nearly 70 percent to $1 billion from the previous year.
"You have to take Google seriously because they have so much clout now," said Charlene Li , analyst with Forrester Research in Foster City, Calif. "There are so many places where Google is becoming a competitive threat. And they're too smart not to have a master plan. They want to be in every business where they can make money."
Google wasted little time in moving to integrate YouTube's popular video clips into its search emporium. Last month, it took the wraps off a universal search site that combines video and other features, such as news and maps, on the same search results pages.
Among the company's other recent moves are several that are keeping executives at competing companies, from Microsoft Corp. and IBM Corp. to eBay Inc. and Amazon.com, awake at night:
Google has rolled out a suite of software, called Google Apps, that includes word processing, e-mail, calendar, and spreadsheet programs.
Eric Schmidt , the company's chief executive, recently disclosed plans to add a PowerPoint-style presentation application that, in concert with the other software, could create an online alternative to both Microsoft's dominant Office suite and IBM's Lotus Notes.
Backed by ads, Google Apps is being offered free to consumers and small businesses, even as Google is licensing a more robust package to larger enterprises.
"There'll be opportunities for developers to build applications on our infrastructure," promised Dave Girouard , the Google vice president.
Some industry insiders suspect Google engineers are quietly developing their own "middleware," a layer of computer software tying together Google Apps and other Internet applications, which could undercut Microsoft's ubiquitous Windows operating system.
Google has introduced an online payment service, Google Checkout, that enables Internet shoppers to enter their credit card and personal information once and then use the Google service to pay at retail websites.
Checkout has struck partnerships with retailers like Toys 'R' Us, Sports Authority, and Buy.com. Combined with other Google products, like its comparison shopping site Froogle (rebranded as Google Product Search), it could threaten companies such as eBay, owner of the PayPal payment service, and the online retailing giant Amazon.com.
As more consumers turn to Google to research and make purchases, they'll increase revenue for Google's targeted search ads. "It's all part of a search-and-advertising ecosystem," said Tom Oliveri , the group product marketing manager for Google Checkout.
Google is accelerating its efforts to expand its advertising business beyond its own search pages. The company already drives contextual ads to newspapers and other Web publishers through Google AdSense, and it's working to extend that model to other media like radio and television and to devices like cellphones and game consoles.
Last month, Google agreed to acquire the online advertising firm DoubleClick for $3.1 billion, a move that will further raise its standing in advertising by giving it more access to advertisers and ad agencies.
"We're just at the dawn of what it means to target contextually," said Marissa Mayer , the Google vice president of search products and user experience.
Google executives say the company will remain an intermediary connecting eyeballs with content, but has no plans to become a news -- or a retail -- company.
"The production value of editing and fact checking is really important to people," Mayer said at a Stanford University forum, insisting such activities are best left to news people rather than to engineers.
Google's new universal search site is expected to substantially boost the number of computer users clicking on Internet videos, and give Google the chance to extend its targeted advertising model to a new realm. At the same time, the company is stepping up its push into personalization, letting individuals customize their searches.
Other business initiatives include providing customized maps, with more details and features than Google Earth, to businesses and government agencies, and investing in 23andMe, a genome start-up cofounded by Anne Wojcicki , wife of Google cofounder Sergey Brin , which helps people understand their genetic blueprints.
In public, Google executives talk enthusiastically about their technology and how it creates a better "user experience." But they shy away from discussing their revenue and profit models, which are taking shape behind the scenes. For the consumer, what is visible is Google's disarmingly simple search box, or the new software interfaces that similarly are designed to be uncluttered and user-friendly.
"There's still a lot to be said about that clean white page, which is how people experience Google," said Thomas R. Eisenmann , management professor at Harvard Business School. "On a brand level, it conveys something powerful, which is that Google is about search. Their execution has been brilliant, and they keep improving the product."
But, of course, Google is also about making money, which is causing jitters from Silicon Valley to Madison Avenue.
Robert Weisman can be reached at weisman@globe.com. 
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