NEW YORK (AFX) - Late last year, Google Inc. was churning out a steady stream of news: technology upgrades, partnerships, new products. Investors lapped it up, sending the stock price soaring above $400 in November, hitting an all-time intraday high of $475.11 in early January.
Since that peak, though, investors seem a little harder to wow. The stock has yo-yo'd down to trade in the $370 range even in the face of continuing good news. More people in the U.S. use Google's search engine than any other. Its nearest competitor, Yahoo Inc., trails significantly. And Google is the clear leader when it comes to making money from Web search.
Analysts say Google's plight is not unique, that Internet stocks go through cycles and summer is historically slow. This year, Net stocks are down about 22 percent, based on an Internet index compiled by investment research firm Piper Jaffray.
This week, the release of three sets of data showing Google's grip on the biggest share of the U.S. search-query market slipped -- somewhere between 0.2 percent and 1 percent -- hasn't helped matters.
Google hasn't stopped announcing refinements to technology, new products, or partnerships. In fact, the pace seems to have picked up of late, with the launch of the online payment service Google Checkout, renewed attention to the company's video sharing site and media deals with Viacom Inc. and News Corp.
So why aren't investors saying, 'Wow?'
'There's a big difference between today and last year. People are very focused on the core business,' said Benjamin Schachter, an Internet analyst for UBS. Last year, he said, people were willing to pay for the possibility of what will happen. Now, they're much more skeptical about how, and when, a new product will bring in revenue.
But investors who penalize Google for taking so long to hit another home run are misguided, according to Troy Mastin, an analyst for William Blair & Co.
'Google is being overly criticized for not really monetizing newer initiatives,' he said, but noted that it took years from the launch of the search engine for the company to start realizing any significant revenue.
Numbers from Hitwise, a New York-based Internet research firm, show that few of Google's non-search products have gained much traction. Out of all the Google sites, the Google.com domain accounted for 79 percent of visits last week. The next-most visited part of Google was Google Images, which racked up about 8 percent of traffic. Google Video, which got a boost from its new plum spot on the Google home page, still accounted for only 1.5 percent of visits.
Where do Google-watchers think the company will find its next winner?
Bill Tancer, the general manager of global research for Hitwise, said his bet is on a combination of Google Base -- a site where users can post all sorts of content, including ads, recipes and blogs -- and Google Checkout. As a place to sell just about anything, now with a payment service built in, the site could become a grass-roots competitor to eBay. And, incentives for Google advertisers who accept the Checkout payment service could help Google continue to grow its advertiser base.
Mastin, the William Blair analyst, said he thought the company's recent deal with Valpak to provide printable local coupons was one of the more interesting moves of late. 'Local remains a huge opportunity. The challenge is how you sell to millions of local businesses (without putting) feet on the street to make those sales calls,' he said.
Analysts also said investors might be jolted into action if Google extended its dominance in text-based search ads into display, video, radio or newspaper advertising, or if the deal that added Google search to MySpace.com made real money.
Until Google knocks it out of the park again, how closely should investors be watching those monthly market share numbers?
'It's a little too early to just call this a plateau,' said Hitwise's Tancer. 'I would wait a couple of weeks.'
Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.