Shares of Google (NASDAQ:GOOG) (NASDAQ:GOOGL) have slipped 7% to 9% over the past 12 months, and many investors are likely wondering if the search giant's days of growth are over. To decide, let's do a basic SWOT (strengths, weakness, opportunities, and threats) analysis of Google's business.

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Source: Pixabay

Strengths
Google has two core strengths. Its search engine processes nearly 70% of the world's queries, and Android powers nearly 80% of smartphones worldwide. Therefore, it isn't surprising that Google is the largest Internet advertising company in the world by annual revenues.

Google leverages its strengths in search and mobile by corralling users into its ecosystem with useful apps like Maps, Drive, Gmail, YouTube, and Google Now. These apps gather information on users, enabling Google to craft better targeted ads across its network. In addition to selling ads, Google generates additional mobile revenue by taking a 30% cut of Play Store purchases. Those growth engines pumped out robust top and bottom line growth over the past five years.

GOOG Revenue (TTM) Chart

Source: YCharts

Google's ad-dependent business model enables it to launch free operating systems and productivity software, giving it an advantage against Microsoft (NASDAQ:MSFT), which relies on revenue from paid software. Google pulled all those free apps together with Chromebooks, which are aimed at students, young professionals, and small to medium-sized businesses. Chromebooks only accounted for 1% of the PC market last year, but Gartner estimates that their share might rise to 4% by 2017.

Weaknesses
Google's greatest strength is also its biggest weakness. With over 90% of its revenues coming from advertising, Google is vulnerable to fluctuating demand for its ads. One of Google's most closely watched figures is the "cost-per-click" (CPC) of ads, which measures how much advertisers are willing to pay for traffic. In the first quarter, Google's CPC fell 7% annually, compared to a 3% decline in the fourth quarter of 2014.

As the value of Google's ads declined, the value of Facebook (NASDAQ:FB) ads climbed, due to its strategy of throttling the number of displayed ads to inflate demand. Last quarter, the average price of a Facebook ad soared 285% annually even though total ad views dropped 62%. Facebook also generated more than triple the amount of mobile display ad revenue of Google last year, according to eMarketer.

Google's ad network, which sprawls across websites and apps, is also vulnerable to Facebook's in-app Audience Network ads and single sign-on buttons. The more time users spend in these Facebook-connected apps, the less data Google can mine.

Google also has an alarmingly high turnover rate, among both top execs and regular employees. Google employees only have a median tenure of 1.1 years, according to PayScale, giving it the fourth-highest turnover rate of any major U.S. company. That brain drain could cause Google to lose its competitive edge against rivals like Facebook.

Opportunities
Despite those weaknesses, Google is shoring up its defenses against Facebook's mobile advance. With Android M (6.0), which will arrive later this year, Google will add context-based searches of apps and replacements of app-based browsers with Chrome overlays. Both moves could help Google mine data from apps, even if they're tethered to Facebook's ecosystem.

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Android M. Source: Google

Google is also expanding into the enterprise market with Android for Work and Chrome for Work, two efforts aimed at pulling small and medium-sized businesses away from Microsoft and Apple (NASDAQ:AAPL). Google's expansion into streaming music with Google Play Music could also generate fresh revenue from ads and subscriptions.

Looking further ahead, Google has plenty of opportunities for long-term growth, including driverless cars, smart home efforts, robotics projects, artificial intelligence, medical equipment, and even medicine. Although many of these efforts are "moonshots" that might never generate meaningful revenue, the success of just one could diversify Google's top line away from advertising.

Threats
Three key rivals -- Facebook, Amazon, and Apple -- could derail Google's plans.

Facebook's 1.44 billion monthly active users make it the first stop for any company looking to advertise on social media. Its streamlined app and ability to rapidly grow a "hidden" network of third-party apps and sites through single sign-ons should continue to be a thorn in Google's side.

Meanwhile, the more people who go directly to Amazon to shop, the fewer product search queries Google can process. Last year, Google Chairman Eric Schmidt admitted that "almost a third of people looking to buy something started on Amazon ... more than twice the number who went straight to Google."

Lastly, Apple is slowly carving Google out of its ecosystem. Last year, it replaced Google with Bing as the default search engine for Siri and Spotlight. It's also blocking Google Maps on CarPlay and will enable ad-blockers for mobile Safari in iOS 9. That's bad news for Google, which relied on iOS for 75% of its mobile ad revenues last year, according to Goldman Sachs.

The road ahead
In my opinion, Google faces too many disruptive challengers to be considered a safe long-term investment. Its core search and ad revenues are strong, but its inability to expand into social networking or shopping is worrisome. Unless Google can shore up its defenses against Facebook, Amazon, and Apple, the value of Google's ads could continue sliding.

 

Leo Sun owns shares of Apple and Facebook. The Motley Fool recommends Amazon.com, Apple, Facebook, Gartner, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, Facebook, Google (A shares), and Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.