Google 2008 Annual Report Download - page 35

services of the access provider or manufacturer. Also, because the access provider gathers information from the
user in connection with the establishment of a billing relationship, the access provider may be more effective than
we are in tailoring services and advertisements to the specific tastes of the user.
In certain markets outside the U.S., other web search, advertising services, and internet companies have
greater brand recognition, more users, and more search traffic than we have. Even in countries where we have a
significant user following, we may not be as successful in generating advertising revenue due to slower market
development, our inability to provide attractive local advertising services or other factors. In order to compete, we
need to better understand our international users and their preferences, improve our brand recognition, our selling
efforts internationally, and build stronger relationships with advertisers. If we fail to do so, our global expansion
efforts may be more costly and less profitable than we expect.
In addition to internet companies, internet advertising companies such as Google face competition from
companies that offer traditional media advertising opportunities. Most large advertisers have fixed advertising
budgets, a small portion of which is allocated to internet advertising. We expect that large advertisers will continue
to focus most of their advertising efforts on traditional media. If we fail to convince these companies to spend a
portion of their advertising budgets with us, or if our existing advertisers reduce the amount they spend on our
programs, our operating results would be harmed.
We expect our revenue growth rate to decline and anticipate downward pressure on our operating
margin in the future.
We believe our revenue growth rate will generally decline as a result of a number of factors including
increasing competition, the inevitable decline in growth rates as our revenues increase to higher levels and the
increasing maturity of the online advertising market. We believe our operating margin will experience downward
pressure as a result of increasing competition and increased expenditures for many aspects of our business. Our
operating margin will also experience downward pressure if a greater percentage of our revenues comes from ads
placed on our Google Network members’ web sites compared to revenues generated through ads placed on our
own web sites or if we spend a proportionately larger amount to promote the distribution of certain products,
including Google Toolbar. The margin on revenue we generate from our Google Network members is significantly
less than the margin on revenue we generate from advertising on our web sites. Additionally, the margin we earn
on revenue generated from our Google Network members could decrease in the future if we pay an even larger
percentage of advertising fees to our Google Network members.
Our operating results may fluctuate, which makes our results difficult to predict and could cause our
results to fall short of expectations.
Our operating results may fluctuate as a result of a number of factors, many outside of our control. As a
result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely
on our past results as an indication of our future performance. Our quarterly, year-to-date, and annual expenses as
a percentage of our revenues may differ significantly from our historical or projected rates. Our operating results in
future quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the
risk factors listed in this Item 1A and the following factors may affect our operating results:
• Our ability to continue to attract users to our web sites and satisfy existing users on our web sites.
• Our ability to monetize (or generate revenue from) traffic on our web sites and our Google Network
members’ web sites.
• Our ability to attract advertisers to our AdWords program.
• Our ability to attract web sites to our AdSense program.
• The mix in our revenues between those generated on our web sites and those generated through our
Google Network.
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