Google Comes Out of Beta Phase

Opinion: The company is facing some awkward moments ahead as it enters its adolescence; it also faces more competition and potential pitfalls.

Ever since Google went public on Aug. 18, 2004, at $85 a share, its been all sunshine. But as the company heads into a March 2 meeting with Wall Street analysts, its becoming clear that the company is entering adolescence and facing some awkward moments ahead.

In other words, the first incarnation of Google could be defined as a corporate beta phase—a honeymoon, if you will.

What happens from here will be far more interesting. At the least, Google will face "much greater scrutiny" at its analyst shindig, says Citigroup analyst Mark Mahaney.

Up to this point, Google could experiment, rattle Microsoft with new projects, hire 50 to 60 people a week and essentially do no wrong.

Financially speaking, Google may have had the best beta phase ever.

For 2005, revenue was 92.5 percent to $6.4 billion with net income of $1.46 billion, up from $399 million a year earlier.

Sure there was some Wall Street consternation over the fourth quarter tally since Google only reported fourth quarter net income of $372 million on revenue of $1.92 billion, but who is going to seriously quibble about those figures?

However, there are signs that Google is exiting the love affair stage and may have to worry about all those things other companies have to worry about—managing expectations, balancing growth and profit margins and tackling new markets.

Indeed, Google Chief Financial Officer George Reyes on Feb. 28 just happened to mention at a Merrill Lynch investment conference that maybe the law of large numbers will slow the companys growth. Whoops.

The stock fell 7 percent to $362. Still pretty heady compared to the IPO price, but down a bunch from the high of $475 just a few weeks ago.

Now the fun really begins. How will Google evolve as a company?

Next Page: Key questions.