Google 2010 Annual Report Download - page 38

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read
together with our consolidated financial statements and related notes included under Item 8 of this Annual Report
on Form 10-K.
Overview
Google is a global technology leader focused on improving the ways people connect with information. Our
innovations in web search and advertising have made our website a top internet property and our brand one of the
most recognized in the world. Our mission is to organize the world’s information and make it universally accessible
and useful. We serve three primary constituencies:
•Users. We provide users with products and services that enable people to more quickly and easily find,
create, and organize information that is useful to them.
•Advertisers. We provide advertisers with cost-effective ways to deliver online ads, as well as offline ads on
television, to customers across Google-owned websites and through the Google Network, which is the
network of third parties that use our advertising programs to deliver relevant ads with their search results
and content.
•Google Network Members and Other Content Providers. We provide the members of our Google Network
with our Google AdSense programs. These include programs through which we distribute our advertisers’
AdWords ads for display on the websites of our Google Network members, as well as programs to deliver
ads on television broadcasts. We share most of the fees these ads generate with our Google Network
members, thereby creating an important revenue stream for them. In addition, we have entered into
arrangements with other content providers under which we distribute or license their video and other
content, and we may display ads next to or as part of this content on the pages of our websites and our
Google Network members’ websites. We share most of the fees these ads generate with these content
providers and our Google Network members, thereby creating an important revenue stream for these
partners.
How We Generate Revenue
Advertising revenues made up 97% of our revenues in 2008 and 2009, and 96% of our revenues in 2010.
We derive most of our additional revenues from offering display advertising management services to advertisers,
ad agencies, and publishers, as well as licensing our enterprise products, search solutions, and web search
technology.
Google AdWords is our auction-based advertising program that enables advertisers to place text-based and
display ads on our websites and our Google Network members’ websites. Display advertising comprises the videos,
text, images, and other interactive ads that run across the web on computers and mobile devices, including smart
phones and handheld computers such as netbooks and tablets. 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 websites and our Google Network members’ websites as specified by the advertiser. For
advertisers using our AdWords cost-per-click pricing, we recognize as revenue the fees charged to advertisers
each time a user clicks on one of the ads that appears next to the search results or content on our websites or our
Google Network members’ websites. For advertisers using our AdWords cost-per-impression pricing, we recognize
as revenue the fees charged to advertisers each time their ads are displayed on our websites or our Google
Network members’ websites. Our AdWords agreements are generally terminable at any time by our advertisers.
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