Google 2013 Annual Report Download - page 15

9GOOGLE INC.
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ITEM1A.RiskFactors
on these devices as a result. Some manufacturers may also elect not to include our products on their devices. In addition, search
queriesareincreasinglybeingundertakenvia“apps”tailoredtoparticulardevicesorsocialmediaplatforms,whichcouldaect
ourshareofthesearchmarketovertime.Asnewdevicesandplatformsarecontinuallybeingreleased,itisdiculttopredict
the problems we may encounter in adapting our products and services and developing competitive new products and services.
Weexpecttocontinuetodevotesignicantresourcestothecreation,support,andmaintenanceofproductsandservicesacross
multiple platforms. If we are unable to attract and retain a substantial number of alternative device manufacturers, distributors,
and users to our products and services, or if we are slow to develop products and technologies that are more compatible with
alternative devices and platforms, we will fail to capture the opportunities available as consumers and advertisers transition to a
dynamic, multi-screen environment.

could seriously harm our business.
Wegenerated91%ofGooglerevenuesfromouradvertisersin2013.Ouradvertiserscangenerallyterminatetheircontractswith
us at any time. Advertisers will not continue to do business with us if their investment in advertising with us does not generate
salesleads,andultimatelycustomers,orifwedonotdelivertheiradvertisementsinanappropriateandeectivemanner.Ifwe
are unable to remain competitive and provide value to our advertisers, they may stop placing ads with us, which would adversely
aectourrevenuesandbusiness.
Inaddition,expendituresbyadvertiserstendtobecyclical,reectingoveralleconomicconditionsandbudgetingandbuying
patterns. Adverse macroeconomic conditions can also have a material negative impact on the demand for advertising and cause
ouradvertiserstoreducetheamountstheyspendonadvertising,whichcouldadverselyaectourrevenuesandbusiness.
Our revenue growth rate could decline over time, and we anticipate downward pressure on our operating margin in
the future.
Our revenue growth rate could decline over time as a result of a number of factors, including as a result of:
increasing competition,
changes in property mix, platform mix and geographical mix,
the challenges in maintaining our growth rate as our revenues increase to higher levels,
the evolution of the online advertising market, including the increasing variety of online platforms for advertising, and the
other markets in which we participate and
the success of our investments in new businesses, products, services, and technologies.
The revenue growth rate of our Motorola Mobile segment will also depend on a number of factors, including the success of our
new products, our reliance on several large customers, the absence of long-term exclusivity arrangements with such customers,
ourabilitytogainsignicantmarketshareinthemobiledevicesspace,ourrelianceonthird-partydistributors,representatives
and retailers to sell certain of our products and the successful implementation of our product and operating system strategies.
Furthermore, consolidation in the telecommunications industry could negatively impact our business because there would be
fewernetworkoperatorsanditcouldbemorediculttoreplaceanylostcustomers.Anyofthesefactorscouldhaveanegative
impactonourMotorolaMobilesegmentandhaveanadverseeectonourconsolidatednancialresults.
We believe our operating margin will experience downward pressure as a result of increasing competition and increased expenditures
for many aspects of our business, including Motorola, and new lines of business. For instance, our operating margin will 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. Both the margin on revenues we generate from our
GoogleNetworkMembersandthemarginonrevenuesfromourMotorolabusinessaresignicantlylessthanthemarginon
revenues we generate from advertising on our websites. Also, the margins on advertising revenues from mobile devices and newer
advertising formats are generally 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eldsimplicateavarietyofnewregulatoryissues,andwehave
experienced increased regulatory scrutiny as we have grown. We continue to cooperate with the European Commission (EC), other
international regulatory authorities, and several state attorneys general in investigations they are conducting with respect to our business
and its impact on competition. Legislators and regulators, including those 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, expose us to unanticipated civil or criminal liability, or cause us to change our business practices.
These changes or increased costs could negatively impact our business and results of operations in material ways.
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