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Google (NASDAQ:GOOG) is looking to grow through acquisitions. Is this good news for investors? Let me offer up a sports analogy. In baseball, the lifeblood of a franchise is the minor league farm system. Producing your own talent produces a success that is more sure than trying to build a winner through free agency. Once every ten years the Yankees might win a World Series with a team built through free agency but I’ll show you example after example of how a team with a solid farm system outperforms.

Growth through acquisition is akin to a baseball team that abandons their farm system. Google management is sucking the life out of their R&D team each time they purchase a Youtube or an AdMob. Employees who innovate at Google might get used to the new growth through acquisition model and come to expect it. It doesn’t seem like working R&D at Google is as appealing as it once was.

Google might not be getting what they think they’re getting with their $750 million purchase of AdMob. Don’t get me wrong, AdMob is exploding right now with their 80% share of in-app advertising for the iPhone, but is it sustainable? Their success lies at the mercy of Steve Jobs. Mr. Jobs doesn’t seem to mind if you make a little money through Apple (NASDAQ:AAPL), but once you become a major leech off the Apple ecosystem you will be shut out. The only barrier holding Apple back from taking over the ad business of App Store offerings is themselves. It’s one Steve Jobs decision away. Eric Schmidt has already soured the Google relationship with Apple and I don’t anticipate Jobs will allow Google to make a killing off the App Store advertising.

I’m not convinced that anything good is coming from Google’s farm system. The techies want us to believe that Android is a huge opportunity just like Chrome, Checkout, Earth, and Maps but I am not ready to join the hype. Over the weekend I watched as Droid clones showed up to empty Verizon (NYSE:VZ) stores across the country in hopes of finding a true competitor to the iPhone. Hard core techies despise Apple for controlling the App Store and are trying to hype up any alternative. So far, I don’t see any.

Most believe that there is room for more than one winner in the smart phone market but is that really true? In a world where all things are accessible, I believe consumers will flock to the best and shun the rest. At a time when Google should be growing their search business through innovations like those at Twitter and Facebook, they have taken their eye off the ball and they have abandoned their in-house R&D. I don’t like this company nearly as much as I did back in 2006. Google still deserves to be in the group of market leaders but purchases like this AdMob deal make me uneasy. I prefer in-house innovation.

Disclosure: long AAPL

Source: Google: Setting Itself Up for Failure?