Google 2007 Annual Report Download - page 35

Download and view the complete annual report

Please find page 35 of the 2007 Google annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 124

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124

brand and operating results. Our expansion and growth in international markets heightens these risks as a result of the
particular challenges of supporting a rapidly growing business in an environment of multiple languages, cultures, customs,
legal systems, alternative dispute systems, regulatory systems and commercial infrastructures. To effectively manage this
growth, we will need to continue to improve our operational, financial and management controls and our reporting
systems and procedures. These systems enhancements and improvements will require significant capital expenditures and
management resources. Failure to implement these improvements could hurt our ability to manage our growth and our
financial position.
Our business depends on a strong brand, and failing to maintain and enhance our brand would hurt our ability to
expand our base of users, advertisers and Google Network members.
The brand identity that we have developed has significantly contributed to the success of our business. Maintaining
and enhancing the “Google” brand is critical to expanding our base of users, advertisers, Google Network members, and
other partners. We believe that the importance of brand recognition will increase due to the relatively low barriers to entry
in the internet market. If we fail to maintain and enhance the “Google” brand, or if we incur excessive expenses in this
effort, our business, operating results and financial condition will be materially and adversely affected. Maintaining and
enhancing our brand will depend largely on our ability to be a technology leader and continue to provide high-quality
products and services, which we may not do successfully.
Acquisitions could result in operating difficulties, dilution and other harmful consequences.
We do not have a great deal of experience acquiring companies, and the companies we have acquired have typically
been small. We frequently evaluate and enter into discussions regarding a wide array of potential strategic transactions.
Any of these transactions could be material to our financial condition and results of operations. In addition, the process of
integrating an acquired company, business or technology may create unforeseen operating difficulties and expenditures
and is risky. The areas where we may face risks include:
• Implementation or remediation of controls, procedures and policies at the acquired company.
• Diversion of management time and focus from operating our business to acquisition integration challenges.
• Coordination of sales and marketing functions.
• Cultural challenges associated with integrating employees from the acquired company into our organization.
• Retention of employees from the businesses we acquire.
• Integration of each company’s accounting, management information, human resource and other administrative
systems.
Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to
integration of operations across different cultures and languages, currency risks and the particular economic, political and
regulatory risks associated with specific countries.
Future acquisitions or dispositions could also result in dilutive issuances of our equity securities, the incurrence of
debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could harm our financial
condition. Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on
favorable terms or at all. Also, the anticipated benefit of many of our acquisitions may not materialize. For example, we
have yet to realize significant revenue benefits from our acquisitions of dMarc Broadcasting (Audio Ads), YouTube or
Postini.
Our international operations are subject to increased risks which could harm our business, operating results and
financial condition.
International revenues accounted for approximately 48% of our total revenues in 2007, and more than half of our
user traffic came from outside the U.S. during this period. We have limited experience with operations outside the U.S.
21