Google 2007 Annual Report Download - page 53

Google AdSense is the program through which we distribute our advertisers’ AdWords ads for display on the web
sites of our Google Network members. Our AdSense program includes AdSense for search and AdSense for content.
AdSense for search is our service for distributing relevant ads from our advertisers for display with search results on
our Google Network members’ sites. To use AdSense for search, most of our AdSense for search partners add Google
search functionality to their web pages in the form of customizable Google search boxes. When visitors of these web sites
search either the web site or the internet using these customizable search boxes, we display relevant ads on the search
results pages, targeted to match user search queries. Ads shown through AdSense for search are generally text ads.
AdSense for content is our service for distributing ads from our advertisers that are relevant to content on our
Google Network members’ sites. Under this program, we use automated technology to analyze the meaning of the
content on the web site and serve relevant ads based on the meaning of such content. For example, a web page on an
automotive blog that contains an entry about vintage cars might display ads for vintage car parts or vintage car shows.
These ads are displayed in spaces that our AdSense for content partners have set aside on their web sites for our AdWords
content. AdSense for content allows a variety of ad types to be shown, including text ads, image ads, Google Video Ads,
link units (which are sets of clickable links to topic pages related to page content), themed units (which are regular text
ads with graphic treatments that change seasonally and by geography) and gadget ads (which are customized “mini-sites”
that run as ads on AdSense publisher web sites).
For our AdSense program, our advertisers pay us a fee each time a user clicks on one of our advertisers’ ads displayed
on Google Network members’ web sites or, for those advertisers who choose our cost-per-impression pricing, as their ads
are displayed. To date, we have paid most of these advertiser fees to the members of the Google Network, and we expect
to continue doing so for the foreseeable future. We recognize these advertiser fees as revenue and the portion of the
advertiser fee we pay to our Google Network members as traffic acquisition costs under cost of revenues. In some cases,
we guarantee our Google Network members minimum revenue share payments. Members of the Google Network do not
pay any fees associated with the use of our AdSense program on their web sites.
Our agreements with Google Network members consist largely of uniform online “click-wrap” agreements that
members enter into by interacting with our registration web sites. The standard agreements have no stated term and are
terminable at will. Agreements with our larger members are individually negotiated. Both the standard agreements and the
negotiated agreements contain provisions requiring us to share with the Google Network member most of the advertiser
fees generated by users clicking on ads on the Google Network member’s web site or, for advertisers who choose our
cost-per-impression pricing, as the ads are displayed on the Google Network member’s web site.
We have entered into arrangements with certain content providers under which we distribute or license their video
and other content. In a number of these arrangements we display ads on the pages of our web sites and our Google
Network members’ web sites from which the content is viewed and share most of the fees these ads generate with the
content providers and Google Network members. We recognize these advertiser fees as revenue and the portion of the
advertiser fee we pay to our content providers as content acquisition costs under cost of revenues. In some cases, we
guarantee our content providers minimum revenue share or other payments.
Our agreements with content providers are typically standard agreements with no stated term and are terminable at
will. Agreements with our larger members are individually negotiated. Both the standard agreements and the negotiated
agreements contain provisions requiring us to pay the content providers for the content we license or share, and the
content providers receive most of the advertiser fees generated by ads displayed on our web sites and our Google Network
members’ web sites.
In the third quarter of 2005, we launched our Google Print Ads program through which we distribute our advertisers’
ads for publication in print media. We recognize as revenue the fees charged advertisers when their ads are published in
print media. Also, in the first quarter of 2006, we acquired dMarc Broadcasting, Inc. (dMarc), a digital solutions provider
for the radio broadcast industry and launched our Google Audio Ads program, which distributes our advertisers’ ads for
broadcast in radio programs. We recognize as revenue the fees charged advertisers each time an ad is broadcasted or a
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