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Google Growth Plan Fuels Skeptics

MOUNTAIN VIEW, Calif. ( TheStreet) -- Google (GOOG) says great things are happening beyond search. Investors and analysts want proof.

Google has mastered the search ad business and holds nearly 70% of the market, but fans are more than anxious to see the Internet giant add more sources of revenue to the mix. Yahoo! (YHOO - Get Report) and Microsoft (MSFT - Get Report) are the distant no. 2 and no. 3 players chasing Google in the search sector.

Display ads, mobile ads and business applications are all prime growth opportunities, yet 97% of Google's revenue still comes from search ads.

The promise of the long-awaited next-leg-of-growth was once again brought up on Google's earnings conference call, but the company's fourth quarter results still show that the company is all too attached to the rise and fall of search-ad spending.

"Google is increasingly becoming a show-me story," wrote Sandeep Aggarwal, an analyst with Collins Stewart, in a research note. Aggarwal cut his rating on Google to hold, saying the company's valuation rides on its unproven prospects of growth outside its core business.

Yet with those reservations noted, Aggarwal still has one of the highest sales growth estimates for Google this year. He projects Google's 2010 revenue will grow 23% over 2009 levels, a percentage that's well above the 18% from analysts' consensus growth rate, according to Yahoo! Finance.

Investors have taken a dim view on Google and many of tech's proven performers so far this year. Google shares are now down 10% from its 52-week high of $629 earlier this month. This slump comes after a strong run hit for Google shares last year, and it sets an ominous tone for the tech sector amid a fragile economic recovery.

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