Year in review: Google's grand ambitions

Google stretched its wings in 2008, furthering an expansion beyond its core search and search-advertising business. But the economy and the government raised the possibility that those wings could be clipped.

The company began the year overcoming opposition to its $3.1 billion acquisition of DoubleClick, a move that gave Google more clout in the market for graphical "display" ads. But that antitrust fight was a harbinger of things to come.

In April, Google showed its ambitions to house not just its own online applications such as Google Docs, but also others' with a project called Google App Engine. Basic applications are free, but more taxing ones cost money, a pay-as-you-go model that's popular with the cloud-computing concept.

Just not meant to be in 2008...

Google Apps, which combines Docs with Gmail and Calendar, thus far remains a small threat to Microsoft Office and Exchange. But given Microsoft's announcement of its own project for a cloud-based version of Office, the threat is clearly a potent one. Google got more serious with a service level agreement that commits to 99.9 percent availability for Google Apps' paying customers.

In September came a Google bombshell: the open-source Chrome browser. With it, Google wants to make using the Web as fast as possible to spur greater activity. It also hopes to spur better Web applications, such as Google Docs and Gmail. In a surprise, Google released Chrome 1.0 in December.

The same indirect motivation--to profit from more use of the Internet--sits behind Android, the open-source operating system project spearheaded by Google. In October, T-Mobile began selling the first Android-powered phone, the G1. The phone earned much hype but only qualified praise; a raft of newer models are expected in 2009.

During Google's quarterly earnings announcements, Chief Executive Eric Schmidt issued cautiously upbeat statements about not seeing any effects of a slowing economy. But by the end of the year, the accompanying cautionary tone grew more prominent.

Credit: Google

Google, which celebrated its 10th anniversary this year, has
never been accused of lacking ambition.

Google's big profit engine is putting ads next to search results, and because advertisers only pay for them when people click them, it's easier for advertisers to fund campaigns that actually are making money. That accountability is a big benefit when there's belt-tightening going on, and one from which display-ad-oriented rival Yahoo doesn't get as much benefit

With Microsoft breathing down its neck, Yahoo struck an unusual partnership to show Google's search ads as well as its own. Yahoo expected $800 million in new revenue in the deal's first year.

Google justified the deal by saying it prefers a world with Yahoo independent. And Yahoo, with a major layoff in February and a second one cutting 1,520 jobs in December, was showing plenty of weakness despite the introduction of new display-ad technology called Apt and the creation of more social and more active Web properties through its Yahoo Open Strategy. Indeed, by November, Chief Executive Jerry Yang threw in the towel and agreed to step down once a replacement was found.

But Google's lifeline to Yahoo was withdrawn when the U.S. Justice Department's antitrust lawsuit threat killed the Yahoo-Google partnership. Microsoft, which had lobbied hard against the deal, all but cackled with glee.

Yahoo was the obviously wounded party, but Google essentially was given notice that the DOJ is willing to check Google's power. Google's might means the company must now work harder to prove that its aspirations of benevolence are real.