So Google's down? That means BUY

NEW YORK (Fortune) -- When any company has been as successful as Google it's tempting to believe it has nowhere to go but down. And many point to potential weak spots: growing internal bureaucracy, insurgent search competitors, and the returning strength of Yahoo. Meanwhile, its much-touted recent initiatives - the Open Handset Alliance for cellphones, OpenSocial for software on social networks, and plans to spend billions buying wireless spectrum space - could easily fizzle.

But for all that, Google shows every sign of remaining one of the healthiest companies in history. It will not likely see any big fall in its fortunes. While amidst recent market turmoil its stock is down 16% from its recent high of $747 to about $629 as of Thursday, I suspect that just means now is a good time to buy.

There are quite a few reasons why Google is likely to remain the dominant company in search and in search advertising, which is the largest chunk of online ads. In September Google garnered 75% of U.S. spending in search ads, according to technology and analysis firm Searchignite. "Google's core business is a profit machine which continues to accelerate," says Bryan Weiner, CEO of search marketing company (and sister firm of Searchignite) 360i of New York. "The search model is the world's perfect business model, because the user is looking for a specific piece of information and the ads are often the most relevant information on the page."

Some articles recently, like a prominent one in Newsweek, have suggested that when a "better" search engine comes along, people will switch "in a heartbeat." But even if a discernibly better search service appeared, Google could thrive for quite some time. One reason is speed. Google has invested hundreds of millions of dollars in data centers scattered all around the world.

Its search service also is programmed with uniquely fast software. As a result, almost anywhere you are, Google's search results appear faster than those of any other company. That means a lot, especially in the developing world, where the best prospects for longterm growth are. There, many users still reach the Web via a dialup line, and Website speed differences matter even more than they do here in the States.

Another is scope. Google (Charts, Fortune 500) crawls and indexes more pages than other search engines. Its results are thus more comprehensive. Then there's scale. By already operating in more places and in so many different languages, Google understands multi-cultural search, which will be of growing importance as more people around the world enter the Internet in coming years.

Finally, Google has a Microsoft-like lock-in that few appreciate. People assume that because Google is an Internet business customers can switch to a competitor with the click of a mouse. But that doesn't take into account the situation for advertisers. Google's AdWords software and its interface for managing search terms and bidding for positioning on search pages is not elementary. It is complicated, because it can do so much. Advertisers work hard to craft the perfect combination of search terms they advertise next to, the message they show as a result, and how much they are willing to pay Google. Those combinations are frequently adjusted.

Once an advertiser or advertising agency's staff learns how to use the AdWords interface, they are often loathe to try an alternative, according to my friends in the ad industry. Yahoo (Charts, Fortune 500) or Microsoft (Charts, Fortune 500) have a hard time getting people to switch for the same reason that Reuters has trouble convincing Wall Street traders to give up their expensive Bloomberg terminals. Once you get used to one way of doing things you don't want to switch.

It's surprisingly similar to the advantages Microsoft has had for years with software programmers - it was always easier to stay with Windows because they knew how to program for it.

With its cash and expertise, Google may well find a way to make money out of new businesses like wireless. But it doesn't really need them. In 2003 Google's revenues totaled about $1.5 billion. Right now its annual run-rate is around $16 billion. One source tells me Google's internal goal is to capture one-sixth of the overall global advertising market. That would be about $100 billion. It's neither a modest goal nor, in this case, an unreasonable one.