Google 2013 Annual Report Download - page 33


PART II
ITEM7.Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations
OurGooglesegmentrevenuesincreased$9,511millionfrom2012to2013.Thisincreaseresultedprimarilyfromanincrease
in advertising revenues generated by Google websites and an increase in other revenues, and to a lesser extent, an increase in
advertisingrevenuesgeneratedbyGoogleNetworkMembers’websites.Theincreaseinotherrevenueswasmainlydrivenby
highersalesrelatedtodigitalcontentandhardwareproducts.TheincreaseinadvertisingrevenuesforGooglewebsitesandGoogle
Network Members’ websites resulted primarily from an increase in the number of paid clicks through our advertising programs,
aspaidclicksonGooglewebsitesandGoogleNetworkMembers’websitesincreasedapproximately25%from2012to2013.The
increaseinthenumberofpaidclicksgeneratedthroughouradvertisingprogramswasduetocertainmonetizationimprovements
includingnewandricheradformats,anincreaseinaggregatetracacrossallplatforms,thecontinuedglobalexpansionofour
products,advertisers,anduserbase,aswellasanincreaseinthenumberofGoogleNetworkMembers,partiallyosetbycertain
advertisingpolicychanges.Theimpactfromtheincreaseinpaidclicksonourrevenuegrowthwaspartiallyosetbyadecrease
intheaveragecost-per-clickpaidbyouradvertisers.Averagecost-per-clickonGooglewebsitesandGoogleNetworkMembers’
websitesdecreasedapproximately8%from2012to2013.Thedecreaseintheaveragecost-per-clickpaidbyouradvertisers
was driven by various factors, such as the introduction of new products as well as changes in property mix, platform mix and
geographicalmix,andthegeneralstrengtheningoftheU.S.dollarcomparedtocertainforeigncurrencies.
OurGooglesegmentrevenuesincreased$8,134millionfrom2011to2012.Thisincreaseresultedprimarilyfromanincreasein
advertising revenues generated by Google websites and Google Network Members’ websites and, to a lesser extent, an increase
inotherrevenuesdrivenbyhardwareproductsales.TheincreaseinadvertisingrevenuesforGooglewebsitesandGoogle
Network Members’ websites resulted primarily from an increase in the number of paid clicks through our advertising programs,
as aggregate paid clicks on Google websites and Google Network Members’ websites increased approximately 34% from 2011 to
2012.Theincreaseinthenumberofpaidclicksgeneratedthroughouradvertisingprogramswasduetoanincreaseinaggregate
tracacrossallplatforms,certainmonetizationimprovementsincludingnewadformats,thecontinuedglobalexpansionofour
products,advertisers,anduserbase,aswellasanincreaseinthenumberofGoogleNetworkMembers.Theimpactofthisincrease
waspartiallyosetbyadecreaseintheaveragecost-per-clickpaidbyouradvertisers.Averagecost-per-clickonGooglewebsites
andGoogleNetworkMembers’websitesdecreasedapproximately12%from2011to2012.Thedecreaseintheaveragecost-per-
click paid by our advertisers was driven by various factors, such as introduction of new products as well as changes in property
mix,platformmixandgeographicalmix,andthegeneralstrengtheningoftheU.S.dollarcomparedtocertainforeigncurrencies.
Therateofchangeinaggregatepaidclicksandaveragecost-per-click,andtheircorrelationwiththerateofchangeinrevenues,
hasuctuatedandmayuctuateinthefuturebecauseofvariousfactors,includingtherevenuegrowthratesonourwebsites
compared to those of our Google Network Members, advertiser competition for keywords, changes in foreign currency exchange
rates, seasonality, the fees advertisers are willing to pay based on how they manage their advertising costs, changes in advertising
qualityorformats,andgeneraleconomicconditions.Inaddition,tracgrowthinemergingmarketscomparedtomoremature
marketsandacrossvariousadvertisingverticalsandchannelsalsocontributestotheseuctuations.Changesinaggregatepaid
clicksandaveragecost-per-clickmaynotbeindicativeofourperformanceoradvertiserexperiencesinanyspecicgeographic
market,vertical,orindustry.
Improvementsinourabilitytomonetizeincreasedtracprimarilyrelatetoenhancingtheenduserexperience,includingproviding
end users with ads that are more relevant to their search queries or to the content on the Google Network Members’ websites
theyvisit.Forinstance,theseimprovementsincludedisplayingadvertiser-nominatedimagesthatarerelevanttotheuserquery
and creating a more engaging user shopping experience by enhancing search ads to include richer product information, such
asproductimage,price,andmerchantname.WebelievethattheincreaseinthenumberofpaidclicksonGooglewebsitesand
Google Network Members’ websites is substantially the result of our commitment to improving the relevance and quality of both
our search results and the advertisements displayed, which we believe results in a better user experience, which in turn results
inmoresearches,advertisers,GoogleNetworkMembersandotherpartners.
Other revenues in our Google segment increased $2,619 million from 2012 to 2013 and also increased as a percentage of the
segmentrevenues.Theincreasewasprimarilyduetogrowthofourdigitalcontentproducts,suchasapps,musicandmovies.
Additionally,weexperiencedanincreaseinourhardwarerevenuesduetoChromecast,directly-soldNexusproductsandChrome
OSdevices.In2011,otherrevenuewasnotasignicantdriverofoverallGooglesegmentrevenues.
  
OurMotorolaMobilesegmentrevenuesincreased$307millionfrom2012to2013.Theincreasewasduetoapproximatelyseven
months of results being included in 2012 while twelve months of results were included in 2013 and a 14% increase in average
sellingprice(“ASP”)relatedtonewproductlaunchesandchangesinproductmixduringtheyear,partiallyosetbya6%decrease
inunitsshippedduring2013.Wenotethatresultsbetween2012and2013arenotcomparableduetothesignicantrestructuring
eortstosimplifytheproductportfoliocompletedoverthenineteen-monthperiod.
The increase in the Motorola Mobile segment revenues from 2011 to 2012 resulted from the inclusion of revenues from the
MotorolaMobilesegmentof$4,136millionsubsequenttotheacquisitioninMay2012.
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