Fast Start

When the company’s shares pierced $600 for the first time last Monday, Wall Street analysts scrambled to jack up their price targets, most to about $700. Jim Cramer, the high-decibel CNBC talk-show host, told his audience on Wednesday night “never to take financial advice from anyone who doesn’t recommend Google.”

Google closed the week at $637.39, more than 50 times its earnings, giving it a market capitalization that nearly equals the total value of the three largest traditional media companies: Time Warner. Walt Disney and the News Corporation. Even at Google’s current stock price, 34 of the 38 analysts following the company have buy recommendations, according to Thomson Financial.

Fred Hickey, editor of The High-Tech Strategist newsletter in Nashua. N.H. is one of the few willing to call Google’s stock surge “insanity.” But even he isn’t predicting when it might end. He has placed a tiny bet against Google, but no more. “You cannot short a mania,” he said.

What could reset expectations about Google? What are the risk factors — short term and longer range — that could dim the aura of inevitable success that surrounds the company? What could slow the Google juggernaut?

The potential threats, according to industry analysts, fall into three broad categories: those from inside the company, those from rivals, and public policy challenges that could bring regulatory controls and tarnish Google’s reputation and brand.

Any big, fast-growing company confronts the “law of large numbers” — that is, growth rates naturally tend to slow as a company gets bigger. That should not be a real issue for Google, analysts say, until it gets to be about twice its current size.

In 2007, the company’s revenue is projected to reach $11.5 billion, a 58 percent annual increase. Google, they say, is riding a tidal shift in advertising onto the Web that is just getting under way. Today, only 5 to 10 percent of advertising budgets are spent online, even though most Americans now spend as much time on the Web as watching television.

But in the short term, the number to really watch is Google’s spending. Last quarter, expenses that came in higher than anticipated surprised Wall Street and temporarily hit Google’s stock price. “The biggest challenge to Google’s stock is going to be if it gets the rap of being an overspender and not rewarding shareholders fully,” said Scott Cleland, an analyst at the Precursor Group.

Google is hiring at a torrid pace. The company keeps doubling the number of engineers it hires each year, adding 4,000 last year. “You simply can’t maintain the quality at 4,000 hires that you had at 250 or 500 or 1,000,” said Edward Lazowska, a professor of computer science at the University of Washington .

Larry Page, a Google co-founder, said at a conference last week that hiring was a big concern. “We never have enough people to do what we want,” he said. “We always need to hire. But there are limitations to how fast you can recruit people.”

Google is hiring so aggressively to support its ambitious strategy, which now extends well beyond its core business in search and online ads.

It has begun offering Web-based software like word processing and spreadsheets — areas where Microsoft is the dominant supplier. Its coming mobile phone software will put Google in competition with telecommunications companies. With YouTube, which it bought for $1.65 billion last year, Google has become a major distributor of entertainment, which could put it in conflict with cable TV companies.

These moves are assaults on huge businesses that have entrenched competitors. Google’s management style, geared to nurture individual innovation, may not be suited to the task, analysts say.

“Google needs to make sure that its management culture is in sync with the strategy,” said Thomas R. Eisenmann, an associate professor at the Harvard Business School. “I’m not sure the bottom-up approach will do it.”

Competitors

“The great risk to Google is that someday it will face real competition in search,” said Jordan Rohan, an analyst at RBC Capital Markets.

Google looks so strong today in part because of the stumbles of its principal rivals, Yahoo and Microsoft. Both have invested heavily to catch up in search and online ad auctions, but without success so far. In September, Google’s share of Web searches in the United States was 67 percent, up from 54 percent a year earlier, reports Compete.com. a Web analytics firm. The Yahoo share was 19 percent, compared with 29 percent a year earlier. And Microsoft had 9 percent, up slightly from a year ago.

The company’s market lead is so large that advertisers tailor their technology to work best on Google ad networks, and Web publishers design their sites to best pull in more Google users.

Jim Lanzone, chief executive of Ask.com, the fourth-largest search engine with about 4 percent share, sees no “silver bullet” that could greatly shift market share. Ask.com is acknowledged as an innovator in using graphics, audio and video in its results. The search market, he said, is so large that Ask.com can thrive by gradually inching forward.

But Silicon Valley start-ups and venture capitalists are betting that there is room for major innovation in search. Powerset and Hakia are two well-financed start-ups working on natural-language search, where a user types a question instead of keywords.

Miguel Helft contributed reporting.