Google 2009 Annual Report Download - page 83

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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 hosted
applications.
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 financial instruments, fair values of prepaid revenue share,
intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair values of stock-
based awards, 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 by revenue source (in thousands):
Year Ended December 31,
2007 2008 2009
Advertising revenues:
Google web sites ....................................... $10,624,705 $ 14,413,826 $ 15,722,486
Google Network web sites ............................... 5,787,938 6,714,688 7,166,318
Total advertising revenues .......................... 16,412,643 21,128,514 22,888,804
Licensing and other revenues ................................ 181,343 667,036 761,759
Revenues .................................................. $16,593,986 $21,795,550 $23,650,563
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. Display advertising includes static or
animated images as well as interactive audio or video media, such as the banner ads on the tops or sides of many
popular 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.
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