Google 2008 Annual Report Download - page 85

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Google Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Google Inc. and Summary of Significant Accounting Policies
Nature of Operations
We were incorporated in California in September 1998. We were re-incorporated in the State of Delaware in
August 2003. We provide highly targeted advertising and global internet search solutions as well as intranet
solutions via an enterprise search appliance.
Basis of Consolidation
The consolidated financial statements include the accounts of Google and our wholly-owned subsidiaries. All
intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally
accepted in the United States requires us to make estimates and assumptions that affect the amounts reported
and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from
these estimates. On an ongoing basis, we evaluate our estimates, including those related to the accounts
receivable and sales allowances, fair values of marketable and non-marketable securities, fair values of prepaid
revenue share, intangible assets and goodwill, property and equipment, fair values of options to purchase our
common stock, and income taxes, among others. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable, the results of which form the basis for making judgments
about the carrying values of assets and liabilities.
Revenue Recognition
The following table presents our revenues (in thousands):
Year Ended December 31,
2006 2007 2008
Advertising revenues:
Google web sites ........................................ $ 6,332,797 $10,624,705 $ 14,413,826
Google Network web sites ................................ 4,159,831 5,787,938 6,714,688
Total advertising revenues ........................... 10,492,628 16,412,643 21,128,514
Licensing and other revenues ................................. 112,289 181,343 667,036
Revenues ................................................... $10,604,917 $16,593,986 $21,795,550
Google AdWords is our automated online program that enables advertisers to place targeted text-based and
display ads on our web sites and our Google Network members’ web sites. Most of our AdWords customers pay us
on a cost-per-click basis, which means that an advertiser pays us only when a user clicks on one of its ads. We also
offer AdWords on a cost-per-impression basis that enables advertisers to pay us based on the number of times
their ads appear on our web sites and our Google Network members’ web sites as specified by the advertiser.
Google AdSense refers to the online programs through which we distribute our advertisers’ AdWords ads for
display on the web sites of our Google Network members as well as programs to deliver ads on television
broadcasts and audio ads on radio broadcasts.
We recognize as revenues the fees charged advertisers each time a user clicks on one of the text-based ads
that are displayed next to the search results pages on our site or on the search results pages or content pages of
our Google Network members’ web sites and, for those advertisers who use our cost-per impression pricing, the
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