Google has become famous for staging the best corporate shindigs. Last week it hosted an especially glitzy bash, replete with fine wines and crates of vintage champagne, for the great and good assembled at the World Economic Forum in Davos.

Today, the belle of the ball fell to earth. Google shares plummeted after fourth-quarter numbers disappointed investors. The stock opened down 10 per cent in New York.

The shares, which recently tested $460, having made their debut at $85 in 2004, sank $39.83, to $392.83 in opening deals. They had dropped as much as 19 per cent in after-hours trades.

The internet search and advertising giant posted revenues of $1.9 billion for the last three months of 2005. That was a 23 per cent increase on the third quarter, and for most companies it would have counted as a stellar performance. But Wall Street wanted – and expected – more from its hitherto most bankable darling. Quarter-on-quarter increases north of 30 per cent were being whispered of on trading floors across New York.

Now Wall Street is asking: is it the Brits who have spoilt the Google party?

One of the most obvious flies in the Google ointment came in the UK, the company’s largest market outside the United States. Google’s British operations accounted for 14 per cent of Google’s revenues in the fourth quarter, compared with 15 per cent in the three months to September.

The slip has kindled concern that Google's mature markets might be faltering. For investors, that is worrying: Google's shares are expensive because Wall Street has bought into a growth story that is supposed to have a way to run yet.

The reasons given by Google for the decline were twofold. First, the dollar has strengthened against the pound. Google said that if exchange rates had remained constant from 2004 to 2005, revenue in the fourth quarter would have been $40 million, or 2.1 per cent higher.

Secondly, Google has been putting around the idea that this year’s long Christmas holidays, with Christmas Day falling on a Sunday, worked against it in the UK.

The Google theory says that British consumers don’t like logging on when they are at home. Unlike our American cousins, we prefer to do our internet surfing on somebody else’s time. We like to browse the web while we should be working in the office, Google says.

The analysts, however, are not convinced. Theresa Wise, media partner at Accenture, the management consultants, told Times Online that while Google’s line was "not totally implausible," it "failed to stack up" and did not explain convincingly Google’s slowing growth rates.

"It’s not a good enough reason to explain the figures we saw yesterday," she said. "It seems likely that Google is actually seeking to avoid people reaching the conclusion that its mature markets are toping out."

Those remarks seem to tap into the sentiment that quickly emerged on Wall Street in the minutes after Google’s fourth-quarter numbers were announced. Brokerage Bear Sterns was not alone in pointing out that "international growth is one of the main drivers for Google near term" and lamented a lack of "clarity" on the issue.

Moreover, there were concerns that Google is simply becoming less relevant to how we use the internet.

At the request of Times Online, Heather Hopkins, the director of research at the internet market research firm Hitwise, crunched the numbers and found that retailers relied on search engines to deliver 11 per cent fewer of their visitors in 2005 than in 2004. The drop was even more pronounced for department stores, at 16 per cent, as shoppers became less reliant on sites such as Google to navigate the web.

The suspicion is that markets for Google’s bread-and-butter paid-search advertising products – the paid-for links that appear at the head of the list when you carry out a Google search – are approaching saturation in territories such as the UK. That means the company now has to show it can leverage its brand in different fields and countries. People still wondering why Google was prepared to risk losing goodwill from libertarian-minded Westerners by piling into China should take note.

So, will Google find itself in trouble as its mature markets come off-line and stop contributing to growth? "Probably not" appears to be the call on Wall Street, where analysts are already hyping the next generation of Google services.

Analysts have warmed to the news that Google recently announced a partnership with Research in Motion to offer Google Talk, the company’s internet telephony service, for Blackberry hand-held devices. Google has also signed deals with Motorola and T-Mobile to provide search services for mobile phone users.

But while mobile services will be important in mature markets (it can be no coincidence that Nikesh Aurora, the British-based head of Google’s European arm came from T-Mobile), it is video that has the Street pumped. UBS, for example, said overnight that it is "particularly excited about the potential of video ads and other rich media possibilities".

Morgan Stanley’s West Coast team joined the throng, announcing "the thing we were most excited about was the launch of Google Video."

Never mind the teething problems that have beset the service, the broker said. "In spite of the glitches, the product is fun, and history has proven that fun can be monetised."

And, if there is one thing Google showed in Davos, it was that it knows how to have fun. The company's party might not be over, after all.

To have your own say on Google, visit the Times Online technology blog.

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