Google 2010 Annual Report Download - page 23

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advertising with us does not generate sales leads, and ultimately customers, or if we do not deliver their
advertisements in an appropriate and effective manner. In addition, expenditures by advertisers tend to be cyclical,
reflecting overall economic conditions and budgeting and buying patterns. If we are unable to remain competitive
and provide value to our advertisers, they may stop placing ads with us, which would negatively harm our revenues
and business.
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’ websites compared to revenues generated through ads placed on our
own websites or if we spend a proportionately larger amount to promote the distribution of certain products,
including Google Chrome. The margin on revenues we generate from our Google Network members is significantly
less than the margin on revenues we generate from advertising on our websites. Additionally, the margin we earn
on revenues 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.
We are subject to increased regulatory scrutiny that may negatively impact our business.
The growth of our company and our expansion into a variety of new fields implicate a variety of new
regulatory issues and may subject us to increased regulatory scrutiny, particularly in the U.S. and Europe.
Legislators and regulators, including those currently conducting investigations in the U.S. and Europe, may make
legal and regulatory changes, or interpret and apply existing laws, in ways that make our products and services less
useful to our users, require us to incur substantial costs, or change our business practices. These changes or
increased costs could negatively impact our business.
We are involved in legal proceedings that may result in adverse outcomes.
From time to time, we are involved in claims, suits, government investigations, and proceedings arising from
the ordinary course of our business, including actions with respect to intellectual property claims, competition and
antitrust matters, privacy matters, tax matters, labor and employment claims, commercial claims, and other
matters. Such claims, suits, government investigations, and proceedings are inherently uncertain and their results
cannot be predicted with certainty. Regardless of the outcome, such legal proceedings can have an adverse
impact on us because of legal costs, diversion of management resources, and other factors. In addition, it is
possible that a resolution of one or more such proceedings could result in substantial fines and penalties, criminal
sanctions, consent decrees, or orders preventing us from offering certain features, functionalities, products, or
services, requiring a change in our business practices, or requiring development of non-infringing products or
technologies, which could in the future materially and adversely affect our financial position, results of operations,
or cash flows in a particular period.
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, Google Network members, and other partners.
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. Our brand may be negatively impacted by a number of
factors, including data privacy and security issues, service outages, and product malfunctions. If we fail to maintain
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