Google 2010 Annual Report Download - page 66

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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 generate revenue primarily by delivering relevant, cost-effective online advertising.
Basis of Consolidation
The consolidated financial statements include the accounts of Google Inc. 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 U.S. GAAP 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, intangible assets and goodwill, useful lives of intangible assets and property and equipment, fair
values of stock-based awards, income taxes, and contingent liabilities, 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 millions):
Year Ended December 31,
2008 2009 2010
Advertising revenues:
Google websites .................................................... $14,414 $ 15,723 $ 19,444
Google Network websites ............................................ 6,715 7,166 8,792
Total advertising revenues ....................................... 21,129 22,889 28,236
Otherrevenues .......................................................... 667 762 1,085
Revenues ............................................................... $21,796 $ 23,651 $ 29,321
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.
Google AdSense refers to the online programs through which we distribute our advertisers’ AdWords ads for
display on our Google Network members’ websites, as well as programs to deliver ads on television broadcasts.
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