Google 2012 Annual Report Download - page 31

25GOOGLE INC. |Form10-K
PART II
ITEM7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations
ITEM7. Management’s Discussion and Analysis of Financial
Condition and Results ofOperations
The following discussion and analysis of our fi nancial condition and results of operations should be read together with our
consolidated fi nancial 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. We aspire to build products
and provide services that improve the lives of billions of people globally. Ourmission is to organize the world’s information and
make it universally accessible and useful. 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 Motorola business is comprised of two operating segments. TheMobile segment is focused on mobile wireless devices and
related products and services. The Home segment is focused on technologies and devices that provide video entertainment
services to consumers by enabling subscribers to access a variety of interactive digital television services.
We generate revenue primarily by delivering relevant, cost-eff ective online advertising. Businesses use our AdWords program to
promote their products and services with targeted advertising. In addition, the third parties that comprise the Google Network
use our AdSense program to deliver relevant ads that generate revenues and enhance the user experience. We also generate
revenues from Motorola by selling hardware products.
In December2012, we entered into an agreement with Arris and certain other persons providing for the disposition of our
Motorola Home segment. The transaction is expected to close in 2013.
Trends in Our Businesses
Advertising transactions continue to shift from o ine to online as the digital economy evolves. This has contributed to the rapid
growth of our business since inception, resulting in substantially increased revenues, and we expect that our business will continue
to grow. However, our revenue growth rate has generally declined over time, and it could do so in the future as a result of a number
of factors, including increasing competition, our investments in new business strategies, products, services, and technologies,
changes in our product mix, query growth rates and how users make queries, challenges in maintaining our growth rate as our
revenues increase to higher levels, and the evolution of the online advertising market, including the increasing variety of online
platforms for advertising, and other markets in which we participate.
Mobile search queries and mobile commerce are growing dramatically around the world, and consumers are using multiple
devices to access information. Over time these trends have resulted in changes in our product mix, including a signifi cant
increase in mobile search queries and a deceleration in the growth of desktop queries. We expect that our revenue growth rate
will continue to be aff ected by evolving consumer preferences, as well as by advertising trends, the acceptance by mobile users
of our products and services, and our ability to create a seamless experience for both users and advertisers in a multi-screen
environment. In addition, if there is a further general economic downturn, this may result in fewer commercial queries by our
users and may cause advertisers to reduce the amount they spend on online advertising, including the amount they are willing
to pay for each click or impression, which could negatively aff ect the growth rate of our revenues. We plan to continue to invest
aggressively in our core areas of strategic focus.
The main focus of our advertising programs is to provide relevant and useful advertising to our users, refl ecting our commitment
to constantly improve their overall web experience. As a result, we expect to continue to take steps to improve the relevance of the
ads displayed on our websites and our Google Network Members’ websites. These steps include not displaying ads that generate
low click-through rates or that send users to irrelevant or otherwise low quality websites, updating our advertising policies and
ensuring their compliance, and terminating our relationships with those Google Network Members whose websites do not meet
our quality requirements. We may also continue to take steps to reduce the number of accidental clicks by our users. These steps
could negatively aff ect the growth rate of our revenues.
Both seasonal fl uctuations in internet usage and traditional retail seasonality have aff ected, and are likely to continue to aff ect,
our business. Internet usage generally slows during the summer months, and commercial queries typically increase signifi cantly in
the fourth quarter of each year. These seasonal trends have caused, and will likely continue to cause, fl uctuations in our quarterly
results, including fl uctuations in sequential revenues, as well as aggregate paid click and average cost-per-click growth rates.
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