Google 2013 Annual Report Download - page 37

31
PART II
ITEM7.Management’sDiscussionandAnalysisofFinancialConditionandResultsofOperations
  
Research and development expenses for the Motorola Mobile segment were not comparable between 2012 and 2013 because
approximatelysevenmonthsofresultswereincludedin2012whiletwelvemonthsofresultswereincludedin2013.Additionally,
we conducted various restructuring activities to simplify the Motorola Mobile product portfolio subsequent to the acquisition in
May2012.
 
Unallocateditems,includingstock-basedcompensationexpense,aswellasrestructuringandrelatedcharges,arenotallocated
toeachsegmentbecausewedonotincludethisinformationinourmeasurementoftheperformanceofouroperatingsegments.
We expect that research and development expenses will increase in dollar amount in 2014 and future periods because we expect
to continue to invest in building the necessary employee and system infrastructure required to support the development of new,
andtoimproveexisting,productsandservices.
Sales and Marketing
The following table presents our sales and marketing expenses by operating segment for the periods presented (dollars in millions):
Year Ended December31,
2011 2012 2013
Google $4,228 $5,017 $6,002
Motorola Mobile [phone]
Elimination and unallocated items 361 602 573
Total $4,589 $6,143 $7,253
Sales and marketing expenses consist primarily of compensation and related costs for personnel engaged in customer service,
sales,andsalessupportfunctions,aswellasadvertisingandpromotionalexpenditures.
 
SalesandmarketingexpensesfortheGooglesegmentincreased$985millionfrom2012to2013andasapercentageofGoogle
segmentrevenuesremainedatfrom2012to2013.Theincreaseinexpenseswasprimarilyduetoanincreaseinadvertising
andpromotionalexpensesof$674million,aswellasanincreaseinlaborandfacilities-relatedcostsof$233million,largelyasa
resultofa13%increaseinsalesandmarketingheadcount.
Sales and marketing expenses for the Google segment increased $789 million from 2011 to 2012 and as a percentage of Google
segmentrevenuesremainedatfrom2011to2012.Theincreaseinexpenseswasprimarilyduetoanincreaseinlaborand
facilities-relatedcostsof$390million,largelyasaresultofa14%increaseinsalesandmarketingheadcount,aswellasanincrease
inadvertisingandpromotionalexpensesof$288million.
  
Sales and marketing expenses for the Motorola Mobile segment were not comparable between 2012 and 2013 because approximately
sevenmonthsofresultswereincludedin2012whiletwelvemonthsofresultswereincludedin2013.Additionally,weconducted
variousrestructuringactivitiestosimplifytheMotorolaMobileproductportfoliosubsequenttotheacquisitioninMay2012.
   
Eliminationitemsrepresentintersegmenttransactionsthatareeliminatedinconsolidation.Unallocateditems,includingstock-
based compensation expense, as well as restructuring and related charges, are not allocated to each segment because we do
notincludethisinformationinourmeasurementoftheperformanceofouroperatingsegments.
We expect that sales and marketing expenses will increase in dollar amount and may increase as a percentage of total revenues
in 2014 and future periods, as we expand our business globally, increase advertising and promotional expenditures in connection
with new and existing products, and increase the level of service we provide to our advertisers, Google Network Members, and
otherpartners.
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