IN his letter to shareholders in Google’s last annual report, Sergey Brin, one of the company’s founders, compared the search-engine company to a seven-year-old child. “Google was born in 1998. If it were a person, it would have started elementary school last summer. While it may seem we have come far already, this is just the beginning of a lifetime.”

It was in 2005 that Google grew up. In only its first full year as a public company, it became the world’s most valuable media business, a testament to the explosive growth of pay-per-click advertising. By Friday, its shares valued the business at $124 billion (£72 billion) — five times its value on flotation in August 2004.

As Google’s revenues continue to double year-on-year — sales for 2005 look set to reach $6 billion — it has become increasingly hard to ignore the company’s impact on the wider economy. This is certainly true for traditional media groups. Newspapers are suffering from weak sales of classified advertising, while television broadcasters are struggling with a fragmented audience that is spending more time online.

The seemingly endless ambition of Brin and co-founder Larry Page poses a challenge for other industries, too. Google Talk and the Gmail e-mail service represent a first tentative step into telecoms. Google’s proliferation of web-based services is also perhaps the biggest threat to Microsoft in the software giant’s 30-year history.

While there are some losers from Google’s success, the effectiveness and measurability of pay-per-click advertising is helping many travel, financial and other firms find more customers more quickly.

For these reasons, the 2005 award for Sunday Times Business Person of the Year goes to Brin and Page. The credit should be shared with the third, less famous member of the triumvirate that runs Google — Eric Schmidt, who has been chief executive since July 2001.

While Google’s growth has global ramifications, it has also been a great success in Britain. Britain provides about 15% of Google’s revenues, making it the most mature market for pay-per-click advertising outside America. Online advertising has become a £1 billion-a-year business here. Advertisers in Britain now spend more money online than on radio or poster advertising. Pay-per-click represents just over 40% of online spending.

The strong growth in online advertising — and Google’s increasing share of that business — is the principal reason the company’s share price has soared from $193 a year ago to $415 on Friday. Brin and Page, still only 32, have taken advantage of the rise, both cashing in $1.3 billion of shares.

An aura of invincibility has grown up round the internet company, fostered by the pace of its product innovation. One of the most stunning examples was the June launch of Google Earth, which uses satellite pictures to allow users to “fly” through space to see street-level views of places of interest. You really can see how your back garden looks from space.

The company has also introduced video search; cleverly integrated its mapping and local-search services; launched a desktop search tool; and announced the creation of Google Talk, its response to the fast-expanding area of internet telephony. Nearly every move is accompanied by reams of press coverage and another increase in the targets that Wall Street analysts set for Google’s share price.

Just how much of this euphoria is justified is open to question. Many of the new products have yet to generate much in the way of revenue. Google’s shares already trade on dizzying multiples — 20 times this year’s sales, 95 times its earnings.

Google remains heavily dependent on its original activity, the one where it is the undisputed king — search. Many of the firm’s newer products encourage more online searching, thus creating more opportunities to display its pay-per-click ads.

Critics suggest that Google is more vulnerable than is immediately apparent. Its pre-Christmas agreement to pay $1 billion to Time-Warner for a 5% stake in AOL underlined the importance Google places on securing online traffic from the internet-service provider. With 26m subscribers, AOL is the single biggest source of Google’s search inquiries, and hence its revenues.

The company faces many challenges. They include coping with the sheer pace of its growth, and the inevitable impact on its culture, noted for its lack of hierarchy and its emphasis on employees’ enjoyment and self-fulfilment.

Google began the year with 3,000 employees; by the end of September it had nearly 5,000. It is hiring at breakneck speed in every part of its business. Until recently, it had only a skeleton sales and marketing operation in Europe. Now it has 800 employees, and is looking to recruit 100 software engineers in Zurich.

Despite this rapidly rising payroll, Google openly admits that it lacks experience operating outside America.

The first signs of a Google backlash are already visible. The company’s rapid hiring, bidding up the cost of the best software talent, has raised hackles in Silicon Valley.

The Google Print initiative — a bold attempt to digitise the world’s books — has angered many authors and publishers who fear the company’s plans amount to wholesale copyright infringement.

There are also concerns that Google’s business could facilitate an invasion of privacy. This issue first arose in 2004 when Google launched Gmail, causing outrage when people realised it planned to display ads based on the content of e-mails. More generally, Google’s vast computer network holds details on what millions of people are searching for online — their passions and their problems, their medicines and their temptations. What might happen if such information found its way into the hands of a government agency — or a divorce lawyer?

As Brin could plausibly argue, these are the difficulties of a business growing up in the full glare of global publicity. In last year’s annual report he pointed out that, “if Google were a person, it would graduate from high school in 2016. Today, it would only have seen a glimmer of its full potential.”

Some glimmer. Still, Google has the time, the resources and the talent to build on its early phenomenal success.