Google is struggling to make an impact in markets outside of its core search business, despite making a huge push to diversify and reduce its dependence on search-linked advertising, it emerged today.

According to a half-year report by web analysts at Hitwise, seen exclusively by Times Online, Google trails arch-rivals Yahoo and Microsoft by massive margins in several key online areas in the UK.

Hitwise's research will be officially released later this week.

Google Finance, Google’s business information service, has fared particularly badly, according to Hitwise. In a market led by Yahoo, which has an 8.3 per cent share in Britain, Google languishes in 201st position, with just 0.4 per cent.

This is despite Google’s dominance in the lucrative search market being even stronger in the UK than in the United States. In the UK, 63 per cent of visits to a search engine in the three months to May went to Google, compared with 47 per cent in the US.

The findings from Hitwise, which monitors 25 million internet users worldwide, will come as a blow to Google, which overnight further signalled its intention to branch out by launching a test version of an online spreadsheet, a rival to Microsoft’s Office suite of software.

Google also recently used part of its $10 billion cash pile to acquire Writely, a word processor that competes with Microsoft Word.

Julie Meyer, chief executive of Ariadne Capital, the technology venture capital firm, recently told Times Online: "Google is undertaking the biggest landgrab the world has ever seen. We are seeing it exercise its market power, its cash and its brand."

Such moves have been deemed necessary if Google is to weather the eventual expected slowdown as search-advertising markets hit maturity.

Google’s profits are still growing strongly, rising 60 per cent to $592m (£333m) in the first quarter. But shares in the company slumped in February after George Reyes, the chief financial officer, warned that growth in the search business was likely to fall-off in the long term.

However, despite the high-profile launch of Google’s Gmail e-mail service in April 2004, it still only has 2.2 per cent of the market in the UK. Microsoft’s Hotmail service leads with 52.4 per cent, while Yahoo has around 24 per cent.

Adam Sohn, Microsoft MSN's global director of public relations, told Times Online that Gmail's impact on Hotmail amounted to "a rounding error".

In news services, Google also trails, with its Google News site taking only 0.4 per cent – leaving it at number 28 in the rankings. In the UK, the BBC leads the field, with a 16 per cent share.

Even Google’s much-admired Google Earth service, which offers aerial photographs, accounts for only 4 per cent of the "Travel – Maps" sector tracked by Hitwise.

The separate Google Maps and Google UK Maps services account for a further 18 per cent – but Google’s combined offering still trails Multimap.com, the leader that accounts for around a third of the market.

Microsoft’s MSN unit recently announced that its "virtual earth" images had been updated in the UK, making it likely that the service would climb the rankings in the coming weeks, Hitwise said.

Google also recently admitted that its Froogle shopping site, which faces competition from other web giants such as Amazon, has failed to capture consumers’ imaginations.

There have been signs that Google recognises it has a problem in exploiting its brand, built in search, in other fields.

Last month, Eric Schmidt, the chief executive, conceded that Google needs to reintegrate its mushrooming family of products back into its original search offering.

"Innovation is best delivered by small teams," Mr Schmidt told delegates at Google’s European Zeitgeist event, held in Hertfordshire. "But there is a penalty for that. We are changing our strategy to ensure that products are not developed in isolation."

However, Mr Schmidt’s view was not endorsed by Larry Page, Google’s co-founder, who has the responsibility for the company’s overall product development. Mr Page said that he would like "five times more products than I’m currently reviewing".

Google was not immediately available to comment.

Should Google focus on search - or does it need to branch out to safeguard find a profitable future? Have your say here.

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