There's little doubt that Google (Nasdaq: GOOG) is one of the world's most innovative and admired companies. Founded in 1998, it's by far the youngest company of its size with a market cap near $200 billion. Its 2004 IPO was, along with Facebook's (Nasdaq: FB), the most eagerly anticipated in recent memory, and the company has amassed such a dominant position in search that its name is synonymous with the act.

But Google shareholders have been singing a different tune. Shares are down about 25% since their all-time high of $747 in November 2007 and have bounced around aimlessly with the broad market more recently. Profits have grown at a strong pace, though, so much of the stall in share price can be explained by multiple compression:

GOOG Net Income TTM Chart

GOOG Net Income TTM data by YCharts

With the search king's forward P/E at just 17, now might seem like a good time to buy, but there are plenty of reasons to be wary of Google's continued growth. Let's take a look at three of them.

Cost-per-click rate
For a company like Google, its cost-per-click (CPC) rate, the price that it charges for every click on its paid ads, is like the price of oil for Exxon Mobil. Google's ad revenue makes up the bulk of total revenue and is mainly determined by the number of clicks and the CPC. That price has dropped in the past two quarters, diving more than 10% in Q1 2012 from a year ago. Google has explained away the decline as the result of a number of complicated factors, including foreign exchange rates, as well as increasing mobile usage and adoption in developing countries, both of which have lower CPC rates. Considering that growth in mobile and emerging markets should continue at a strong pace, investors have to wonder whether CPC will decline even further.

One study showed that mobile clicks will grow by 25% this year, and as those clicks cannibalize the higher-priced ones from PCs, Google's revenue could take more of a hit. More clicks also tend to mean a lower CPC rate.

The Facebook threat
Web-watchers have long believed that Facebook represents the biggest threat to Google, and with $16 billion in crisp bills from its May IPO, that threat becomes all the more real. The social network competes for the same ad dollars as Google and acts as an alternative conduit for information, though in a different way from the search engine. Google's desire to get its hands on the user information available from Facebook can be seen in its multiple attempts to launch its own social network, including iterations such as Orkut and, more recently Google+, none of which has posed a serious threat to Facebook's dominance.

As a younger, faster-growing company, Facebook seems the more likely of the two to improve with additions such as targeted ads and payment systems, while Google has struggled to diversify its revenue away from ads. The two companies also compete for Silicon Valley talent, luring away top performers from each other's vaunted campuses.

But the way in which Facebook most threatens Google is in its attempt to redefine the Web as a place where users get information through friends or a social network rather than search. Facebook has also succeeded in partnering with other Internet companies such as Yelp, Pandora, and Zynga, increasing its network effects. Without the intimate relationship that Facebook's established with its users, Google may be left watching from the sidelines, and by missing out on all the information inside Facebook's domain, Google's search algorithms become less accurate.

Too much distraction
Despite Google's dominance in everything on the Web from email (Gmail) to browsing (Chrome), the company's financials are almost entirely derived from advertising revenue. Even its Android platform for smartphones, which has become more popular than the iPhone, still brings in little revenue. Apple (Nasdaq: AAPL), on the other hand, makes more money off its iPhone alone than Google does off its entire operations. A full 96% of Google's revenue comes from advertising through its AdWords program, which sells paid clicks on its site, or AdSense, which embeds ads on other sites.

With projects that seem totally unrelated to its core business, such as a self-driving car, Google is often criticized for being too distracted. When he was returning to run the company last year, Google CEO Larry Page asked Steve Jobs for advice, and Jobs told him to focus on fewer things and do them really well. According to Walter Isaacson's autobiography, Jobs said:

"Figure out what Google wants to be when it grows up. It's now all over the map. What are the five products you want to focus on? Get rid of the rest because they're dragging you down. They're turning you into Microsoft (Nasdaq: MSFT)."

Jobs' crack about Microsoft seems ever more apt as time goes by. Like Microsoft, Google relies on a core product in an area it dominates, search, to subsidize the rest of its ventures. The same can be said about Microsoft with Windows and its Office suite. The two companies have also heavily relied on acquisitions over the years, but even Microsoft seems to be chipping away at Google's fortress. Big G's market share in search has actually been losing to Bing in recent months. According to an Experian Hitwise report, while Google once had close to 70% of online domestic searches, that figure has fallen to under 65% as of April 2012. Even Yahoo! (Nasdaq: YHOO) has made gains in search. If Google is losing ground in search and unable to find another moneymaker, its future suddenly seems much gloomier than it did at first glance.

Foolish takeaway
With products like Google Wallet and Google Glasses on the way, the search king certainly has other tricks up its sleeve and could shortly see a revenue bump from those two projects. Shareholders have come to know that there is always something futuristic in the Mountain View pipeline.

But there are other reasons to be concerned about Google's future. The health of CEO Larry Page has come into question in the past week, as he was unable to attend his company's shareholder meeting because of voice problems. Page was also absent from Google's developer conference this week, and the company has said he won't be available for the Q2 conference call in a few weeks. Without more detailed information on his health, that announcement puzzled many analysts and has sparked rumors that Page could have serious health problems.

Finally, about a third of Google's revenue comes from Europe, and that continent's debt crisis could further suppress a valuable revenue stream. Investors will want to keep an ear out for these issues, which are sure to arise in Google's upcoming earnings call.

While Google may be one of the tech giants working to define the future, I recommend taking a look at one of our analysts' latest picks. It's a company with a history in PCs that is moving hard and fast into the mobile market. In fact, its mobile sales grew by 144% last year, but it still looks undervalued with a P/E of just 16. Get the name of this hot stock in our special free report: "The Next Trillion-Dollar Revolution." You can get your free copy.

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Fool contributor Jeremy Bowman owns shares of Google and Apple. The Motley Fool owns shares of Facebook, Microsoft, Google, and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, Google, and Apple and creating bull call spread positions in Microsoft and Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.