Provide a background on Google, its technology, and its business operations.

1. 1
Google: The One Search
Engine (and Company) to Rule
All Others
Scott A. Moore
Associate Professor
December 7, 2009

2. 2
The plan for today
• Leaders
• Search Business
• Business Model
• Work Culture
• Technology
• Finances
• Current business model

3. 3
Leaders

4. 4
Founders: Larry Page &
Sergey Brin

5. 5
The beginning
• Search program was a PhD project
run out of Stanford (beginning in
1996)
• In Aug 1998 Sun co-founder Andy
Bechtolsheim wrote a check to
Google Inc. for $100K
• In 1998 move to a garage in Menlo
Park

6. 6
The Google Office (late 1998)

7. 7
Endorsement (May 1998)

8. 8
Google’s First Press Release

9. 9
CEO: Eric Schmidt

10. 10
The Googleplex
(Mountain View, CA)

11. 11
Google Offices (2009)

12. 12
Search Business

13. 13
The business in the late 1990s
• Portals were seen as
the future
• Search was seen as
• A dying business
• A commodity product

14. 14
AOL
(Feb 1997)

15. 15
Excite
(Feb 1997)

16. 16
Yahoo
(1999)

17. 17
Google (Dec 1997)

18. 18
Google (Dec 1998)

19. 19
How big is the index?
• Dec 1997: 24 million
• June 2000: 1 billion
• Dec 2001: 3 billion
• Feb 2004: 6 billion (including 880
million images)
• Nov 2004: 8 billion
• July 2008: 1 trillion unique URLs
• Growing by 1 billion per day

20. 20
Business Model

21. 21
Several underlying principles
• Focus on the user
• Advertising is very bad
• Speed, speed, speed
• “Do no evil”
• (Oppose Microsoft)
• Data driven

22. 22
Work Culture

23. 23
It’s a different place to work
• A sense of playfulness
• Logos, “I’m feeling lucky”
• Try to encourage workers to stay at
work
• Very academic
• “20% time”
• Food

24. 24
April Fool’s Day 2000

25. 25
Chef Charlie
Ayers

26. 26
Google Moon

27. 27
Technology

28. 28
A couple major areas
• Cheap, reliable computing
• Power usage is key
• Search engine algorithm
• Advertising program

29. 29
Google’s Original Storage
(1996)

30. 30
Google’s servers (1997)

31. 31
Early
Google
Computer
Rack

32. 32
Google Data Center (2008)

33. 33
Google Datacenter Complex in
Oregon

34. 34
PageRank
• Incoming links
• Importance of linking pages
• Page content

35. 35
Advertising programs
• AdWords
• You (or your company) can place targeted ads in response to queries
• Mostly on Google.com, but also on their partner sites
• You pay Google to be an advertising outlet for your ads
• AdSense
• You make your site available so that other companies can place ads on
your pages that match the content of those pages
• You make money by allowing your site to be an advertising outlet for
the ads of other companies

36. 36
AdWords
• Placing targeted (mostly text) ads
on (mostly) Google.com’s results
page
• You bid on keywords with a PPC
(pay-per-click) value
• Ads are chosen (by Google) based
on the PPC value times its CTR
(click-through rate)
• So you just can’t be out-bid

37. 37
How do companies get traffic?
• Organic
• People type in the URL into the
browser
• Algorithmic
• Your site appears in search
results
• Purchased
• You site appears in the paid
search results (ads)

38. 38
AdSense
• Opening up your own Web site to
ads placed by Google (other
companies)
• How to make money?
• You need traffic!
• Visitors need to click on the ads.
• The higher the CPC value, the more
you make when they are clicked on.

39. 39
Finances

40. 40
Stock price history

41. 41
Quarterly Revenues
Q3’09 Y/Y Growth = 7%
Q3’09 Q/Q Growth = 8% 5,945
$6,000
5,541
5 541 5,701
5,367 5,509 5,523
$5,500
5,186
$5,000
1,801
1,693
$4,500 1,680 1,638 1,684
1,655
1 655
1,686
$4,000
$ in millions
$3,500
$3,000
$3 000
$2,500
$2,000 3,811 3,956
3,672 3,693 3,653
3,400 3,530
$1,500
$1,000
$500
$0
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09
3 Google.com Network Licensing and Other
Google Quarterly Revenues

42. 42
U.S. vs.
U S vs International Revenues
($ in millions)
5,186 5,367 5,541 5,701 5,509 5,523 5,945
100%
90%
80%
70% 51% 52% 51% 50% 52% 53% 53%
60%
50%
40%
49% 48% 49% 50% 48% 47% 47%
30%
20%
10%
0%
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09
US International
4
Google US vs. International

43. 43
Traffic Acquisition Costs
$1,600 40%
$1,500
$1,400
35%
$1,300
$1,200
$1,100
$1 100 29.2%
29 2%
28.4% 30%
27.9%
$1,000 26.9% 26.9% 27.2% 27.1%
$ in millions
$900
$800 1,559 25%
,
1,486 1,474 1,495
, ,
1,483 1,436
1 436 1,453
1 453
n
$700
$600
20%
$500
$400
$300
15%
$200
$100
$0 10%
Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Q2'09 Q3'09
TAC TAC as % of Advertising Revenues
5
Google Traffic Acquisition Costs

44. 44
Current Business Model

45. 45
Third Quarter 2009 Highlights
• Revenue growth of 7% Y/Y and 8% Q/Q
– Google properties revenue growth of 8% Y/Y and Q/Q
G l ti th f d
– Network revenues increased 7% Y/Y and Q/Q
– International revenues were $3.1 billion
• Operational Highlights
– Strong financial metrics: revenue growth, profitability, and cash flow
– Investing in Innovation: 70/20/10
• Innovation in our Core Business
– Creating the Perfect Search Engine and Better Ads
• Innovation in our Emerging Businesses
– Mobile/Android
– Display/YouTube
– Enterprise
2
Google Earnings Highlights

46. 46
These are the questions for you
• Where do they go from here?
• Where are their prospects for
growth?
• What are their biggest threats?