Google shares have topped the $500 mark despite analysts scepticism, reports The New York Times.

“I thought the stock was a little expensive,” said Mark Mahaney, an analyst for American Technology Research and now for Citigroup said. “It turns out that was a terrible call.”

With forecasts of a $600 share price within a year, the Google fairy tale continues.

So by the beginning of last year, Mr. Mahaney jumped on the Google bandwagon. And so have most of Wall Street’s analysts, along with the portfolio managers who look after big pension and mutual funds.

Today, Google’s shares gained $14.60, or 3 percent to close at $509.65, passing the $500 mark for the first time. (Mr. Mahaney, whose sell recommendation came at $137, is now among those predicting that it will rise to $600 within a year.)

It has also been reported that Google is now worth half of Microsoft’s share cap, an astonishing rate of growth for an eight-year-old company.

Jeffrey M. O’Brien of Fortune Magazine writes :”The Web, they say, is leaving the era of search and entering one of discovery. What’s the difference? Search is what you do when you’re looking for something. Discovery is when something wonderful that you didn’t know existed, or didn’t know how to ask for, finds you. When it comes to search, there’s a clear winner — a $145 billion company called Google.”

If the Semantic Web (Web 3.0) is about making better sense of data and content, so that real people can use it, it will be an improvement on the dreary Web 2.0 stuff. Google has been at work on this for a while now — person-centric IPTV advertising (pitching adverts to a single person’s interests) is one of its major goals.

The new search engines will seek out connections and intelligent comments that have real meaning and value to the reader. Google is beginning to do this with its sidebars of extra choices within a search topic.

O’Brien says : “But there is no go-to discovery engine — yet. Building a personalized discovery mechanism will mean tapping into all the manners of expression, categorization, and opinions that exist on the Web today. It’s no easy feat, but if a company can pull it off and make the formula portable so it works on your mobile phone — well, such a tool could change not just marketing, but all of commerce. ”

So they did it. Despite the warnings of corporate lawyers and internet icons like Mark Cuban and Jason Calacanis, Google has bought YouTube for more than one billion dollars. Here’s the official announcement :

“Google announced today that it has agreed to acquire YouTube, the consumer media company for people to watch and share original videos through a Web experience, for $1.65 billion in a stock-for-stock transaction. Following the acquisition, YouTube will operate independently to preserve its successful brand and passionate community. […]”

It should be said that Jason has since come round and now applauds Google’s move, largely, he says, because Google is the only bigco that could make it work.

We shall see.

Mike Arrington of TechCrunch is reporting that a rumour is circulating that Google may buy Youtube for around $1.6 billion.

“A quick phone call to a VC confirmed that the rumor is circulating (he also confirmed the price), but that is far from confirmation that this deal is happening. I’m digging for more but the source on this one is very good.”

His counter-intuitive point is that Google won’t be put off by the many irrate copyright holders whose rights have been breached by YouTube — they are now trying to strike deals with the owners.

Of course, Google would have to add the legal costs of these defences to the $1.6bn price of the property. Is that a good idea?

Arrington thinks it’s about 40pc likely. Time will tell.