Google 2007 Annual Report Download - page 34

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economic conditions as well as budgeting and buying patterns. For example, in 1999, advertisers spent heavily on internet
advertising. This was followed by a lengthy downturn in ad spending on the web. Also, user traffic tends to be seasonal.
Our rapid growth has tended to mask the cyclicality and seasonality of our business. As our growth rate has slowed, the
cyclicality and seasonality in our business has become more pronounced and caused our operating results to fluctuate.
If we do not continue to innovate and provide products and services that are useful to users, we may not remain
competitive, and our revenues and operating results could suffer.
Our success depends on providing products and services that make using the internet a more useful and enjoyable
experience for our users. Our competitors are constantly developing innovations in web search, online advertising and
web based products and services. As a result, we must continue to invest significant resources in research and development
in order to enhance our web search technology and our existing products and services and introduce new products and
services that people can easily and effectively use. If we are unable to provide quality products and services, then our users
may become dissatisfied and move to a competitor’s products and services. Our operating results would also suffer if our
innovations are not responsive to the needs of our users, advertisers and Google Network members, are not appropriately
timed with market opportunities or are not effectively brought to market. As search technology continues to develop, our
competitors may be able to offer search results that are, or that are seen to be, substantially similar to or better than ours.
This may force us to compete in different ways and expend significant resources in order to remain competitive.
We generate our revenue almost entirely from advertising, and the reduction in spending by or loss of advertisers
could seriously harm our business.
We generated approximately 99% of our revenues in 2007 from our advertisers. Our advertisers can generally
terminate their contracts with us at any time. Advertisers will not continue to do business with us if their investment in
advertising with us does not generate sales leads, and ultimately customers, or if we do not deliver their advertisements in
an appropriate and effective manner. If we are unable to remain competitive and provide value to our advertisers, they may
stop placing ads with us, which would negatively harm our revenues and business. In addition, expenditures by advertisers
tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. Any decreases in or delays
in advertising spending due to general economic conditions could reduce our revenues or negatively impact our ability to
grow our revenues.
We rely on our Google Network members for a significant portion of our revenues, and we benefit from our association
with them. The loss of these members could adversely affect our business.
We provide advertising, web search and other services to members of our Google Network, which accounted for
35% of our revenues in 2007. Some of the participants in this network may compete with us in one or more areas. They
may decide in the future to terminate their agreements with us. If our Google Network members decide to use a
competitor’s or their own web search or advertising services, our revenues would decline. Our agreements with a few of
the largest Google Network members account for a significant portion of revenues derived from our AdSense program. If
our relationship with one or more large Google Network members were terminated or renegotiated on terms less
favorable to us, our business could be adversely affected.
Also, certain of our key network members operate high-profile web sites, and we derive tangible and intangible
benefits from this affiliation. If one or more of these key relationships is terminated or not renewed, and is not replaced
with a comparable relationship, our business would be adversely affected.
Our business and operations are experiencing rapid growth. If we fail to effectively manage our growth, our business
and operating results could be harmed.
We have experienced, and continue to experience, rapid growth in our headcount and operations, which has placed,
and will continue to place, significant demands on our management, operational and financial infrastructure. If we do not
effectively manage our growth, the quality of our products and services could suffer, which could negatively affect our
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