• San Francisco Chronicle, Tuesday, August 12, 2008 10:49 AM

Following Google's announcement last week that its stake in AOL had significantly lost value, analysts were left pondering Google's strategy beyond search. In an SEC filing, Google acknowledged that AOL was probably worth closer to $10 billion than the $20 billion valuation the search giant placed on the Time Warner company when it bought a five percent stake in 2005.

Trip Chowdhry of Global Equities Research said Google has shown a knack for overpaying for its investments, citing the Web giant's AOL stake, its YouTube purchase, and the recent acquisition of DoubleClick. Meanwhile, Chowdhry noted that internal projects like green energy, space exploration, and a new mobile operating system have also failed to bear fruit. "Other than search, what has Google done right? They have 1,001 products in beta, but what's been successful?" Chowdhry asked. "There has been a sequence of missteps and failures, and this is not the end. They miscalculated the valuation of AOL, and this is the first time they're admitting to it."

Analyst Jason Avilio of Kaufman Bros. thinks it's too early to write off Google's strategy. He said in some cases, Google's acquisitions have been defensive moves to keep the likes of Microsoft from catching up. He said it's a luxury Google has with its cash-generating search business, adding that there's plenty of time to turn YouTube and DoubleClick into moneymakers.

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