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Tag: Larry Page

  • Sundar Pichai Unveils Google’s ChatGPT Answer: Bard

    Sundar Pichai Unveils Google’s ChatGPT Answer: Bard

    Alphabet CEO Sundar Pichai has unveiled Bard, Google’s conversational AI and answer to OpenAI’s ChatGPT.

    Pichai previously signaled a company “code red” in response to ChatGPT’s popularity. Executives were so concerned about ChatGPT that founders Larry Page and Sergey Brin came back to help the company come up with an answer.

    In a blog post, Pichai took the wraps off of the company’s efforts:

    It’s a really exciting time to be working on these technologies as we translate deep research and breakthroughs into products that truly help people. That’s the journey we’ve been on with large language models. Two years ago we unveiled next-generation language and conversation capabilities powered by our Language Model for Dialogue Applications (or LaMDA for short).

    We’ve been working on an experimental conversational AI service, powered by LaMDA, that we’re calling Bard. And today, we’re taking another step forward by opening it up to trusted testers ahead of making it more widely available to the public in the coming weeks.

    Pichai touted the many ways Bard can be used:

    Bard seeks to combine the breadth of the world’s knowledge with the power, intelligence and creativity of our large language models. It draws on information from the web to provide fresh, high-quality responses. Bard can be an outlet for creativity, and a launchpad for curiosity, helping you to explain new discoveries from NASA’s James Webb Space Telescope to a 9-year-old, or learn more about the best strikers in football right now, and then get drills to build your skills.

    Pichai also makes clear the company’s intention to aggressively integrate Bard and similar tech into its core search:

    AI can be helpful in these moments, synthesizing insights for questions where there’s no one right answer. Soon, you’ll see AI-powered features in Search that distill complex information and multiple perspectives into easy-to-digest formats, so you can quickly understand the big picture and learn more from the web: whether that’s seeking out additional perspectives, like blogs from people who play both piano and guitar, or going deeper on a related topic, like steps to get started as a beginner. These new AI features will begin rolling out on Google Search soon.

    With Microsoft planning to unveil ChatGPT-powered Bing search and Google moving forward with Bard, the search industry is on the verge of a major evolution.

  • Sergey Brin Is Coding at Google Again in ‘Code Red’ AI Effort

    Sergey Brin Is Coding at Google Again in ‘Code Red’ AI Effort

    After years of absence, Sergey Brin is once again back at Google and has just submitted his first code request.

    Google is scrambling to come up with an answer to ChatGPT and other conversational AI tech, which many see as an existential threat to the company’s search business. CEO Sundar Pichai issued a “code red,” reorganizing labor in an effort to come up with an answer. The company also called back Larry Page and Sergey Brin to help brainstorm and come up with solutions.

    According to Forbes, it appears Brin may be getting comfortable in his old digs and has submitted his first code request since being back. The request was just a two line change to have his username added to a configuration file.

    It appears employees are eager to work with Brin, with Forbes’ source saying several dozen engineers approved the request, including some from outside the team.

  • Google Turns to Larry Page & Sergey Brin to Help With AI Strategy

    Google Turns to Larry Page & Sergey Brin to Help With AI Strategy

    Google has turned to its founders to help it devise an AI strategy as the company faces its biggest challenge yet to its search dominance.

    OpenAI’s ChatGPT has taken the AI world by storm, with Microsoft working to integrate it with a version of Bing. Google has had to answer some uncomfortable questions about why a startup beat it to market with one of the best conversational AIs to date.

    Evidently, the concerns go more than skin deep, with the company calling in Larry Page and Sergey Brin to help it plot its course forward and come up with a response, according to The New York Times.

    The Times sources say the two founders reviewed the company’s AI strategy, approved ideas for how to integrate AI chat into Google’s search engine, and provided ideas to company leaders on the best way to proceed with AI implementation.

    The fact that Google turned to its founders for help with AI underscores how seriously company execs are viewing the technology in terms of the threat it poses to Google’s core search business.

    “This is a moment of significant vulnerability for Google,” D. Sivakumar, a former Google research director, told the Times. “ChatGPT has put a stake in the ground, saying, ‘Here’s what a compelling new search experience could look like.’”

    Despite the threat, Mr. Sivakumar believes Google could deploy its significant AI tools to counter the threat.

    In the meantime, Microsoft and other rivals have a rare opportunity to use ChatGPT, and similar AI tech, to make headway against Google’s dominance.

  • David Drummond, Alphabet’s Embattled Legal Chief, Announces Retirement

    David Drummond, Alphabet’s Embattled Legal Chief, Announces Retirement

    Following news that Larry Page and Sergey Brin were stepping down from their roles in the company, embattled legal chief David Drummond has announced his own retirement.

    According to Bloomberg News, Drummond announced his plans in a note he sent to colleagues and that sets January 31 as his final day.

    “I believe that it’s also the right time for me to make way for the next generation of leaders,” Drummond wrote in the note, a copy of which Bloomberg News saw.

    Drummond has increasingly been in the spotlight of late, due to accusations of sexual misconduct. Drummond engaged in an extramarital affair with subordinate Jennifer Blakely, fathering a child with her. She has since accused him of abandoning her and the child, as well as repeatedly violating company policies governing workplace relationships.

    As Bloomberg highlights, “Drummond has said the two went through a difficult breakup and that he ‘never started a relationship with anyone else who was working at Google or Alphabet,’” only to turn around and marry another Google employee in September.

    In the wake of this and other scandals, Alphabet launched an investigation into how the company handles sexual misconduct allegations. Company watchers can’t help but wonder if the increasing scrutiny played a part in Drummond’s exit.

  • Sundar Pichai Replacing Larry Page As CEO of Alphabet

    Sundar Pichai Replacing Larry Page As CEO of Alphabet

    In a blog post by Larry Page and Sergey Brin, the two Google co-founders outlined major changes to the structure of Alphabet, Google’s parent company.

    Page previously served as CEO of Google before the search firm reorganized to create its own parent company Alphabet. With the formation of the new company, Page became Alphabet’s CEO, Brin became president and Sundar Pichai took over at Google. With today’s announcement, Pichai will be taking over as CEO of both companies, with the position of president being eliminated.

    “However, since we wrote our first founders’ letter, the company has evolved and matured,” wrote Page and Brin. “Within Google, there are all the popular consumer services that followed Search, such as Maps, Photos, and YouTube; a global ecosystem of devices powered by our Android and Chrome platforms, including our own Made by Google devices; Google Cloud, including GCP and G Suite; and of course a base of fundamental technologies around machine learning, cloud computing, and software engineering. It’s an honor that billions of people have chosen to make these products central to their lives—this is a trust and responsibility that Google will always work to live up to.

    The two then built on an illustration they have used in previous founders’ letters, likening the company to a person.

    “Today, in 2019, if the company was a person, it would be a young adult of 21 and it would be time to leave the roost. While it has been a tremendous privilege to be deeply involved in the day-to-day management of the company for so long, we believe it’s time to assume the role of proud parents—offering advice and love, but not daily nagging!

    “With Alphabet now well-established, and Google and the Other Bets operating effectively as independent companies, it’s the natural time to simplify our management structure. We’ve never been ones to hold on to management roles when we think there’s a better way to run the company. And Alphabet and Google no longer need two CEOs and a President. Going forward, Sundar will be the CEO of both Google and Alphabet. He will be the executive responsible and accountable for leading Google, and managing Alphabet’s investment in our portfolio of Other Bets. We are deeply committed to Google and Alphabet for the long term, and will remain actively involved as Board members, shareholders and co-founders. In addition, we plan to continue talking with Sundar regularly, especially on topics we’re passionate about!”

  • What Will Google’s New Structure Mean For Businesses?

    What Will Google’s New Structure Mean For Businesses?

    As I’m sure you’ve heard, Google is going through some major changes in in structure. Google itself now has a parent company. Even after sleeping on it, it’s still sinking in. Many, many businesses rely on Google for their well-being in part if not almost entirely in some cases. It’s worth considering how the new structural changes might impact everyone else going forward.

    Do you expect businesses to benefit from these changes at Google? Share your thoughts in the comments.

    First things first. In case you missed it for some reason, Google announced Monday afternoon that it has formed a new company called Alphabet, which will be a parent company to Google, among other things. Instead of Google being the parent to all of the company’s endeavors, Google will sit alongside some of those under the bigger umbrella of Alphabet.

    Larry Page will no longer be the CEO of Google. He’ll be the CEO of Alphabet with co-founder Sergey Brin running it alongside him as President. Executive chairman Eric Schmidt will now hold that role for Alphabet instead of Google. CFO Ruth Porat will hold that role for both (Google is after all still the main moneymaker here). Longtime Google exec Sundar Pichai becomes the new CEO of Google.

    Alphabet includes: Google, Calico, Nest, Fiber, Google Ventures, Google Capital, and Google X, which includes things like Glass, self-driving cars, Wing (drones), Robots, and Internet balloons. These are to all be operated separate from one another instead of all being under Google itself. Google as a company still includes the core search and advertising business as well as Android, Chrome, YouTube, Maps, etc. Presumably it will retain Gmail, Drive, Cloud Platform and various other Google-branded web-related products. For most businesses and consumers, it doesn’t sound like much will change on the surface.

    But just because there won’t be any obvious changes on the surface, that doesn’t mean the rest of us won’t feel the effects from the move to Alphabet going forward. Everybody relying on Google products, like search, advertising, YouTube, apps, etc., now get to experience all of these things under new leadership.

    Pichai has been with Google since 2004, and is the obvious choice to take on the new role. He has led efforts from Chrome and Chrome OS, Google Drive, Gmail, Google Maps, and Android. As of this past October, he has been Product Chief at Google. At that point he reportedly took over Google Research, web search, Google Maps, Google+, advertising, commerce, and infrastructure.

    In the announcement, Page had this to say about him:

    This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google. A key part of this is Sundar Pichai. Sundar has been saying the things I would have said (and sometimes better!) for quite some time now, and I’ve been tremendously enjoying our work together. He has really stepped up since October of last year, when he took on product and engineering responsibility for our internet businesses. Sergey and I have been super excited about his progress and dedication to the company. And it is clear to us and our board that it is time for Sundar to be CEO of Google. I feel very fortunate to have someone as talented as he is to run the slightly slimmed down Google and this frees up time for me to continue to scale our aspirations. I have been spending quite a bit of time with Sundar, helping him and the company in any way I can, and I will of course continue to do that. Google itself is also making all sorts of new products, and I know Sundar will always be focused on innovation—continuing to stretch boundaries. I know he deeply cares that we can continue to make big strides on our core mission to organize the world’s information. Recent launches like Google Photos and Google Now using machine learning are amazing progress.

    In other words, Sundar is taking the reins, and Page won’t be as hands on with Google and all the things that have the ability to directly affect your business, though he’ll still be there for guidance as needed. Also, Pichai and crew already have some unspecified new products in the pipeline (When doesn’t Google have new products in the pipeline?). It wouldn’t make a lot of sense to speculate on just exactly how things are going to be different under Pichai’s direct leadership, but change is change, and businesses are likely to feel the effects in one way or another. Probably many ways.

    At the end of the announcement, Page listed the things he’s excited about, and one of these is “making Google even better through greater focus”.

    They’ll likely continue down the path they’ve already started by reducing the presence of Google+ (which wasn’t mentioned a single time in the announcement) among Google’s products.

    Since Pichai took on his role of product chief, Google has announced countless advertising features and improvements, including the AdWords app, local Google forwarding numbers in AdWords, automatic conversion of Flash ads to HTML5, call-only campaigns, upgraded URLs, improvements to accidental click blocking, new dynamic search ads, 360-degree video ads, new shopping features, a slew of Analytics improvements, and new automated bidding tools to name a few. On the organic search side of things, there has been an increased focus on mobile experience in terms of ranking.

    YouTube should continue down its already established path. As Page noted:

    Google also has some services that are run with their own identity, like YouTube. Susan [Wojcicki] is doing a great job as CEO, running a strong brand and driving incredible growth.

    The point is that a lot of features that directly impact businesses like yours have already been coming out under leaders like Pichai and Wojcicki, but with Page shifting his own focus to bigger things, these leaders will have an even greater hand in launching and maintaining these features.

    We’ll have to see how it goes, but my guess is that this greater focus will lead to good things.

    What do you think? Do you expect businesses to benefit from the new structure? Do you expect Pichai to be the right leader for Google? Share your thoughts in the comments.

  • Google’s Newest Venture Aims To Improve City Life

    Google’s Newest Venture Aims To Improve City Life

    Google just started a new company called Sidewalk Labs with the mission of improving life in cities “for everyone through the application of technology to solve urban problems.”

    The project will be run by Dan Doctoroff, the former CEO of Bloomberg LP and Deputy Mayor of Economic Development and Rebuilding for the City of New York. He will serve as CEO, and will combine his experience in building and managing cities with Google’s funding and support.

    Sidewalk Labs will develop products, platforms, and partnerships to make progress in areas like transportation, lowering the cost of living, reducing energy usage, and helping government operate more efficiently.

    “We are at the beginning of a historic transformation in cities,” said Doctoroff. “At a time when the concerns about urban equity, costs, health and the environment are intensifying, unprecedented technological change is going to enable cities to be more efficient, responsive, flexible and resilient. We hope that Sidewalk will play a major role in developing technology products, platforms and advanced infrastructure that can be implemented at scale in cities around the world.”

    Google CEO Larry Page compared the endeavor to previously launched Google efforts like Google[x] and Calico, the company it started in 2013 to take on aging, in that it’s aim is to improve people’s lives, and will be a relatively moderate investment for the company. He called it a “long-term, 10X bet.”

    “By improving urban technology, it’s possible to significantly improve the lives of billions of people around the world,” said Page. “With Sidewalk, we want to supercharge existing efforts in areas such as housing, energy, transportation and government to solve real problems that city-dwellers face every day. Every time I talk with Dan I feel an amazing sense of opportunity because of his passion for all the ways technology can help transform cities to be more livable, flexible and vibrant. And when you combine that with his experience as an investor, in NYC government, and as CEO of the large information company Bloomberg LP, I can’t imagine a better person to lead these efforts.”

    Page also discussed the efforts further on Google+. Here’s the full post:


    The New York Times has more on Sidewalk Labs from interviewing Doctoroff.

    Image via Sidewalk Labs

  • Google Called Upon To Make Self-Driving Car Accident Reports Public

    Google Called Upon To Make Self-Driving Car Accident Reports Public

    Google’s self-driving cars are coming under fire again as the Associated Press reported that four out of forty-eight of the cars Google has driving around California have gotten into accidents since September.

    As has been the case with previously reported accidents, however, none of these were actually the fault of Google’s cars, at least according to the company. According to the report, two accidents occurred when the cars were in control, and the others while humans were controlling them, but according to Google, none of them were actually at fault. Three of the vehicles were Lexus SUVs, and the fourth was a test vehicle of parts supplier Delphi Automotive, the report says, adding that a source claims all were minor accidents which took place at speed of less than 10 mph.

    Consumer Watchdog, a regular critic of many of Google’s endeavors, released a statement on Monday calling on the company to release reports of accidents involving its cars, and to commit to making any such reports public in the future.

    The organization’s privacy director John Simpson wrote a letter to Google CEO Larry Page and executive chairman Eric Schmidt, in which he said, “It is important that the public know what happened. You are testing driverless vehicles on public highways, quite possibly putting other drivers at risk.”

    You can read the full letter here (PDF).

    “Unbelievably Google is planning to offer its robot cars without a steering wheel, brake pedal or accelerator so there would be no way for a person to take control in an emergency,” said Simpson in the statement. “That plan underscores the need for the public to know the full details of all accidents.”

    Google unveiled its “first real build” of its self-driving vehicle prototype in December.

    Simpson’s letter to Page and Schmidt concluded: “Google has engaged in a highly visible public relations campaign extolling the supposed virtues of driverless cars. It is incumbent upon you to be candid about the cars’ failings and shortcomings as well. Your stated mission is ‘to organize the world’s information and make it universally accessible.’ Sadly, in practice, you’ve modified this to be ‘to organize the world’s information and make it universally accessible – except when it is about Google.’ Please treat yourselves as you would treat everyone else. Release DMV driverless car accident reports and details of your driverless car accidents. Make the autonomous technology disengagement reports public as well.”

    I have to say, I haven’t always agreed with all of Consumer Watchdog’s criticisms of Google, but they make some pretty fair points on this one. This isn’t the only area where Google is criticized over a lack of transparency, but it’s quite possibly one of the most important areas for Google to be transparent in.

    Chris Urmson, the director of Google’s self-driving car program, wrote a post on Medium about how after a million miles, Google hasn’t caused an accident.

    The post is interesting and continues Google’s history of talking about how much safer its cars are than human drivers. It gives various examples of people being stupid drivers, as if anyone needs proof of that. I don’t think anyone is arguing that people aren’t bad at driving.

    The post also talks about the accidents Google’s cars have had. It says:

    Over the 6 years since we started the project, we’ve been involved in 11 minor accidents (light damage, no injuries) during those 1.7 million miles of autonomous and manual driving with our safety drivers behind the wheel, and not once was the self-driving car the cause of the accident.

    Rear-end crashes are the most frequent accidents in America, and often there’s little the driver in front can do to avoid getting hit; we’ve been hit from behind seven times, mainly at traffic lights but also on the freeway. We’ve also been side-swiped a couple of times and hit by a car rolling through a stop sign. And as you might expect, we see more accidents per mile driven on city streets than on freeways; we were hit 8 times in many fewer miles of city driving. All the crazy experiences we’ve had on the road have been really valuable for our project. We have a detailed review process and try to learn something from each incident, even if it hasn’t been our fault.

    Not only are we developing a good understanding of minor accident rates on suburban streets, we’ve also identified patterns of driver behavior (lane-drifting, red-light running) that are leading indicators of significant collisions. Those behaviors don’t ever show up in official statistics, but they create dangerous situations for everyone around them.

    Self-driving cars may very well be much safer than human-driven vehicles. Frankly, I have no doubt about that. I work in a city that was listed in a BBC News top ten list about terrible traffic cities around the world. I see terrible driving every day of my life.

    Elon Musk even thinks human driving could eventually be outlawed.

    Still, I don’t think it’s asking too much for Google to up the transparency level about its accidents. Why shouldn’t we know more about what is happening when these vehicles are involved?

    Image via Google

  • Has Google Lived Up To Its ‘Don’t Be Evil’ Mantra?

    Google’s famous “Don’t be Evil” mantra has been questioned time and time again for many years, but it’s back in the spotlight thanks to comments made recently by co-founder and CEO Larry Page.

    Do you think Google has done a decent job of keeping in line with the “Don’t be evil” mantra? Share your thoughts in the comments.

    Page did an interview with the Financial Times in which he talked about how, as the FT put it, “the search engine’s original mission is not big enough for what he now has in mind.”

    The mission is actually that whole thing about organizing the world’s information and making it universally accessible, but the evil thing did come up. This is the part that deals specifically with that. FT reports:

    It is a decade on from the first flush of idealism that accompanied its stock market listing, and all Google’s talk of “don’t be evil” and “making the world a better place” has come to sound somewhat quaint. Its power and wealth have stirred resentment and brought a backlash, in Europe in particular, where it is under investigation for how it wields its monopoly power in internet search.

    Page, however, is not shrinking an inch from the altruistic principles or the outsized ambitions that he and co-founder Sergey Brin laid down in seemingly more innocent times. “The societal goal is our primary goal,” he says. “We’ve always tried to say that with Google. I think we’ve not succeeded as much as we’d like.”

    After that, the actual mission statement was discussed, and Page said he thought they probably needed a new one, and that they’re “still trying to work that out.”

    The reason they need a new one is basically that Google has grown so much, and has become so much more than the search engine it was when it was founded. I mean, they have robots, self-driving cars, smart glasses, smart contact lenses, and are trying to work on a cure for aging. It’s probably not too unreasonable to be thinking about updating the mission.

    Some took this story, however, and spun it as something along the lines of “Google has outgrown its ‘Don’t be Evil’ mantra”. I think this misses the point.

    Either way, Matt Cutts, who is currently on leave from Google (and it’s unclear whether he’ll actually be back or not), weighed in on the topic on an episode of This Week in Google.

    He said, “They have tried to have a culture of ‘Don’t be Evil,’ and you can argue over individual incidents, and you know, whether this specific thing is evil or that specific thing is evil, but Google as a whole, whenever I look at the DNA, the people try to do the right things. So if you’ve got Larry marching off in one direction, and you’ve got the rest of the company saying, ‘No, we disagree,’ then they drag their heels, and they create friction. That, in my opinion, helps to move things toward a consensus of maybe a middleground, which works pretty well.”

    He added, “And then having that critical mass of smart people lets you say, ‘Oh, now I can do voice recognition better. Now I can do image recognition better, and I can unlock all kinds of good applications to improve the world that way…’ It’s a tough call…It’s a good problem to have, I guess.”

    Here’s the full episode.

    This takes place roughly 28 minutes in, but the discussion about this whole topic lasts for quite a bit. The episode also has a lot of discussion about Cutts’ future with Google.

    Cutts thinks Google tries not to be evil. Do you believe him? What are some specific areas that you think the company needs to improve on in that regard? Share in the comments.

    Image via YouTube

  • Google Makes Some Changes To Its Corporate Structure

    Google Makes Some Changes To Its Corporate Structure

    Google is making changes to the way it functions internally from a corporate structure standpoint. At the end of the week last week, Re/code reported on an internal memo CEO Larry Page sent to staff detailing some of the changes.

    The biggest change is that Sundar Pichai, who has been heading Android and Chrome, is taking over leadership of the company’s core products, reporting to Page. He’s basically becoming Page’s right-hand man from the sound of it, and freeing Page up from having to directly deal with everything himself. Pichai will focus on product, while Page focuses on business.

    On Monday, The Wall Street Journal shared some actual excerpts form the memo. One says:

    “In terms of management meetings, we’re going to simplify things too, taking our current main management meeting and splitting it into more focused parts. Sundar will run… product-centric meetings with real focus on excellence. I will run a more business-centric meeting with our functional leaders and Sundar, drilling into sales, partnerships and deals as well as any important legal, finance, HR, government relations or PR issues.”

    Another:

    “Our previous structure with multiple different product areas all reporting to me is relatively unorthodox. In principle that’s good because we are not a conventional company and do not intend to become one. But it’s hard to scale as many decisions ended up coming through me. Our new approach is a more common corporate structure … scalable, focused and enables fast decision making. That’s what we need right now for Google to stay innovative, maintain our velocity and build truly excellent products.”

    Roles of co-founder Sergey Brin, CFO Patrick Pichette, and Chief Legal Officer David Drummond will reportedly remain unchanged. Executive chairman Eric Schmidt was not even mentioned in the report.

    Page will reportedly work on business issues with Chief Business Officer Omid Kordestani, who recently replaced Nikesh Arora. Page will also focus more of his time on Google’s access and energy initiatives.

    Image via YouTube

  • Stephen Colbert Might Just Sue Larry Page’s Ass Over Knowledge Graph Screwup

    Apparently, Stephen Colbert is 5’11” – a height that puts him on par with the likes of Brad Pitt, Richard Gere, and Orlando Bloom. Colbert’s proud of this.

    But there’s a problem. The jerk-offs over at Google are slandering his good height. According to Google and its knowledge graph, Colbert is only 5’10”.

    Might as well be a Oompa Loompa.

    He took issue with this on last night’s episode of The Colbert Report, addressing Google’s Larry Page specifically.

    “Larry, I demand a retraction, and investigation, an apology, and a substantial cash settlement – or I will see your ass in court,” said Colbert, pointing into the camera.

    Colbert should know that this isn’t isolated to his height. Google has had plenty of issues keeping its Knowledge Graph, well, knowledgable. Seriously. You may as well call it the misinformation graph.

    Image via Colbert Report, Comedy Central screenshot

  • Google Reportedly Readies Ambitious ‘Google Y’ Branch

    People have accused Google of a lot of things, but nobody can accuse the company of not being ambitious or forward-looking.

    Google already has a robot lab, a company that is trying to cure aging, and Google[x], which is behind high-tech initiatives like Google Glass, self-driving cars, Internet balloons, smart contact lenses, and delivery drones.

    Now, they’re reportedly trying to tackle additional long-term issues with another branch: Google Y. This would fall under a Larry Page-led “Google 2.0” initiative, and has already involved over a hundred of the company’s employees.

    Among challenges Google wants to solve with Google Y are new approaches to airports and even to how actual cities work.

    The Information has the story (behind its paywall) here.

    Google [x] is for moonshot ideas, as Google likes to say. From the sound of it, Google Y is more Earth-focused with the aim of improving experiences for existing things as opposed to just coming up with cool new things. At least that’s the initial impression I get.

    We’ll no doubt be hearing plenty more about all of this as time goes on. In the meantime, Google is making progress on a lot of its other ambitious projects. Calico (the anti-aging company), for example, recently partnered with AbbVie, and is opening an R&D facility. A couple months ago, Google inked a major deal with drugmaker Novartis to further the contact lens initiative.

    Image via YouTube

  • Jason Hope And Google Founders Seek Cures For Heart Disease, Cancer

    In 2010, Jason Hope joined Peter Thiel’s bold $3.5 million commitment to ending aging by making a $500,000 donation to the SENS foundation at an event Mr, Thiel held for SENS.  The SENS Foundation is the world’s foremost anti-aging lab, working on cutting edge technologies to cure the world’s worst diseases including heart disease, Alzheimer’s, Parkinson’s, cancer, and many others.


    Peter Thiel regularly donates in the general range of $1 million annually to the foundation and has been matched by Jason Hope for the last two years.
     
    Many now consider Mr. Hope and Mr. Thiel visionaries in the anti-aging space as the virgin industry is beginning to explode.  Google founders Sergey Brin and Larry Page recently announced they were investing over $100 million dollars into forming a new Google Company called Calico, with the incredible goal of curing aging.  

    Art Levinson, the famed former CEO and current board chairman of Genentech, has been tapped as CEO.  Genentech is the world’s first biotech company, and its founding in 1976 marked the beginning of the accelerating march of technology’s impact on biology.  Genentech has made the world a better place for hundreds of millions of people and has grown to be valued at more than $100 billion in less than 40 years.  Art Levinson is also the Chairman of Apple, the most valuable company in the world with a market capitalization of over half a trillion (yes, trillion) dollars.
     
    Technology has been experiencing exponentially accelerating growth for some time and we are now at this tipping point where technology is close to allowing us to cure all the diseases of aging within the next few decades. The investment of significant dollars into this endeavor by the world’s foremost tech leaders truly signals the onset of this inevitability.

  • Google Chief Business Officer Nikesh Arora Steps Down, As Company Releases Earnings Report

    Google just released its Q2 earnings report, along with news that its Chief Business Officer Nikesh Arora is leaving the company.

    Arora has been with Google for nearly ten years. He will be joining SoftBank, which happens to be one of Google’s partners. There, he will serve as Vice Chairman of SoftBank Corp. and CEO of SoftBank Internet and Media.

    Google’s Omid Kordestani, who was the company’s business founder and led Google’s sales team for many years, will be taking over Arora’s position at the company “for now”.

    CEO Larry Page had this to say on Google+:

    I remember first meeting him at the British Museum, which for some reason Sergey had decided would be a good interview location. Nikesh has been a tremendous leader, adviser and mentor to many Googlers — including me. We have learned a lot together, and had a lot of fun along the way.

    +Omid Kordestani, who was our business founder and led our sales teams for many years, will be stepping in to lead our business organization for now. When we hired Omid we had no business people so we had all the engineers interview him around a ping pong table. I think he survived because he is actually an engineer! Omid has always been one of my closest advisors, especially since I became CEO again in 2011. He personifies the entrepreneurial spirit that is so important to Google. There is nothing Omid doesn’t know about Google, our customers and partners, and I know that under his leadership the team will excel.

    As far as Googles actual earnings, revenue was up 22% at $16 billion. Revenue from Google sites generated $10.94 billion (69% of total revenues). That’s up 23% from the same period last year.

    Partner sites generated $3.42 billion (21% of total revenues), up 7% from last year. Other revenues were $1.6 billion (10% of total revenues) up 53% from last year. International revenues were $9.33 billion (58% of total revenues).

    Paid clicks increased by 25% year-over-year and 2% quarter-over-quarter. Average cost-per-click decreased 6% year-over-year and remained constant from last quarter.

    Google ended the quarter with 52,000 full-time employees.

    Stats dropped in earnings call: Play Movies is now available in 90 countries. There are over a billion active Android users. Over a million Chromebooks sold into schools. No Chromecast stats, but growth mentioned.

    Google elected to focus questions from the Q&A on business performance from the quarter, specifically requesting that people not ask about the transition in leadership.

    They would not comment on recent outside estimates related to YouTube.

    We can expect an update on Google Fiber between now and the end of the year in terms of expansion. They’re waiting to analyze some of the numbers before evaluating their growth plan.

    Here’s the release in its entirety:

    MOUNTAIN VIEW, Calif. – July 17, 2014 – Google Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended June 30, 2014.

    “Google had a great quarter with revenue up 22% year on year, at $16.0 billion”, said Patrick Pichette, CFO of Google. “We are moving forward with great product momentum and are excited to continue providing amazing user experiences, with a view to the long term.”

    Q2 Financial Summary

    On January 29, 2014, we entered into an agreement with Lenovo Group Limited providing for the disposition of the Motorola Mobile business. Financial results of Motorola Mobile are presented as “Net income (loss) from discontinued operations” on the Consolidated Statements of Income for the quarter ended June 30, 2013 and 2014; and assets and liabilities of Motorola Mobile to be disposed of are presented as “Assets held for sale” and “Liabilities held for sale”, respectively, on the Consolidated Balance Sheet as of June 30, 2014.

    On April 2, 2014, we issued shares of Class C capital stock as a dividend to our stockholders. Except for the number of authorized shares and par value, all references to share and per share amounts have been retroactively restated for all prior periods shown to reflect the stock split, which was effected in the form of a stock dividend.

    Google Inc. reported consolidated revenues of $15.96 billion for the quarter ended June 30, 2014, an increase of 22% compared to the second quarter of 2013. Google Inc. reports advertising revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the second quarter of 2014, TAC totaled $3.29 billion, or 23% of advertising revenues.

    Operating income, operating margin, net income, and earnings per share (EPS) are reported on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures at the end of this release.

    • GAAP operating income in the second quarter of 2014 was $4.26 billion, or 27% of revenues. This compares to GAAP operating income of $3.47 billion, or 26% of revenues, in the second quarter of 2013. Non-GAAP operating income in the second quarter of 2014 was $5.14 billion, or 32% of revenues. This compares to non-GAAP operating income of $4.21 billion, or 32% of revenues, in the second quarter of 2013.
    • GAAP net income (including net income (loss) from discontinued operations) in the second quarter of 2014 was $3.42 billion, compared to $3.23 billion in the second quarter of 2013. Non-GAAP net income in the second quarter of 2014 was $4.18 billion, compared to $3.36 billion in the second quarter of 2013.
    • GAAP EPS (including impact from net income (loss) from discontinued operations) in the second quarter of 2014 was $4.99 on 686 million diluted shares outstanding, compared to $4.77 in the second quarter of 2013 on 677 million diluted shares outstanding. Non-GAAP EPS in the second quarter of 2014 was $6.08, compared to $4.96 in the second quarter of 2013.
    • Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense. Non-GAAP net income and non-GAAP EPS exclude SBC expense, net of the related tax benefit, as well as net income (loss) from discontinued operations. In the second quarter of 2014, the expense related to SBC and the related tax benefits were $880 million and $195 million compared to $743 million and $160 million in the second quarter of 2013. In addition, net loss from discontinued operations in the second quarter of 2014 was $68 million, compared to net income of $454 million in the second quarter of 2013.

    Q2 Financial Highlights

    Revenues and other information – Google Inc. revenues for the quarter ended June 30, 2014 were $15.96 billion, representing a 22% increase over second quarter of 2013 revenues of $13.11 billion.

    • Sites Revenues – Our sites generated revenues of $10.94 billion, or 69% of total revenues, in the second quarter of 2014. This represents a 23% increase over second quarter of 2013 sites revenues of $8.87 billion.
    • Network Revenues – Our partner sites generated revenues of $3.42 billion, or 21% of total revenues, in the second quarter of 2014. This represents a 7% increase over second quarter of 2013 network revenues of $3.19 billion.
    • Other Revenues – Other revenues were $1.60 billion, or 10% of total revenues, in the second quarter of 2014. This represents a 53% increase over second quarter of 2013 other revenues of $1.05 billion.
    • International Revenues – Our revenues from outside of the United States totaled $9.33 billion, representing 58% of total revenues in the second quarter of 2014, compared to 57% in the first quarter of 2014 and 55% in the second quarter of 2013.
      • Our revenues from the United Kingdom totaled $1.62 billion, representing 10% of total revenues in the second quarter of 2014, compared to 10% in the second quarter of 2013.
    • Foreign Exchange Impact on Revenues – Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the first quarter of 2014 through the second quarter of 2014, our revenues in the second quarter of 2014 would have been $77 million lower. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the second quarter of 2013 through the second quarter of 2014, our revenues in the second quarter of 2014 would have been $120 million lower.
      • In the second quarter of 2014, we recognized a benefit of $6 million to revenues through our foreign exchange risk management program, compared to $35 million in the second quarter of 2013.

      Reconciliations of our non-GAAP international revenues excluding the impact of foreign exchange and hedging to GAAP international revenues are included at the end of this release.

    • Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our Network members, increased approximately 25% over the second quarter of 2013 and increased approximately 2% over the first quarter of 2014. Sites paid clicks, which include clicks related to ads we serve on Google owned and operated properties across different geographies and form factors including search, YouTube engagement ads like TrueView, and other owned and operated properties like Maps and Finance, increased approximately 33% over the second quarter of 2013 and increased approximately 6% over the first quarter of 2014. Network paid clicks, which include clicks related to ads served on non-Google properties participating in our AdSense for Search, AdSense for Content, and AdMob businesses, increased approximately 9% over the second quarter of 2013 and decreased approximately 5% over the first quarter of 2014.
    • Cost-Per-Click – Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our Network members, decreased approximately 6% over the second quarter of 2013 and remained constant from the first quarter of 2014. Cost-per-click for Google sites decreased approximately 7% over the second quarter of 2013 and decreased approximately 2% over the first quarter of 2014. Network cost-per-click decreased approximately 13% over the second quarter of 2013 and increased approximately 3% over the first quarter of 2014.
    • TAC – Traffic acquisition costs, the portion of revenues shared with Google’s partners, increased to $3.29 billion in the second quarter of 2014, compared to $3.01 billion in the second quarter of 2013. TAC as a percentage of advertising revenues was 23% in the second quarter of 2014, compared to 25% in the second quarter of 2013.

      The majority of TAC is related to amounts ultimately paid to our Network members, which totaled $2.40 billion in the second quarter of 2014. TAC also includes amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $893 million in the second quarter of 2014.

    Other Cost of Revenues – Other cost of revenues, which is comprised primarily of data centers operational expenses, hardware inventory costs, amortization of acquisition-related intangible assets, and content acquisition costs, increased to $2.82 billion, or 18% of revenues, in the second quarter of 2014, compared to $2.18 billion, or 17% of revenues, in the second quarter of 2013.

    Operating Expenses – Operating expenses, other than cost of revenues, were $5.58 billion in the second quarter of 2014, or 35% of revenues, compared to $4.45 billion in the second quarter of 2013, or 34% of revenues.

    Depreciation and loss on disposal of property and equipment and amortization expenses – Depreciation and loss on disposal of property and equipment and amortization expenses were $1.08 billion for the second quarter of 2014, of which $1.07 billion was related to Google, compared to $1.03 billion in the second quarter of 2013. Of the $1.07 billion, $116 million was related to amortization of Motorola intangibles, which Google will retain subsequent to the disposal of Motorola Mobile.

    Stock-Based Compensation (SBC) – In the second quarter of 2014, the total charge related to SBC was $880 million compared to $743 million in the second quarter of 2013. We currently estimate SBC charges for grants made to employees prior to June 30, 2014 to be approximately $3.42 billion for 2014. This estimate does not include expenses to be recognized related to employee stock awards that are granted after June 30, 2014 or non-employee stock awards that have been or may be granted.

    Operating Income – GAAP operating income in the second quarter of 2014 was $4.26 billion, or 27% of revenues. This compares to GAAP operating income of $3.47 billion, or 26% of revenues, in the second quarter of 2013. Non-GAAP operating income in the second quarter of 2014 was $5.14 billion, or 32% of revenues. This compares to non-GAAP operating income of $4.21 billion, or 32% of revenues, in the second quarter of 2013.

    Interest and Other Income, Net – Interest and other income, net, was $145 million in the second quarter of 2014, compared to $236 million in the second quarter of 2013.

    Income Taxes – Our effective tax rate was 21% for the second quarter of 2014.

    Net Income (Loss) from Discontinued Operations – Net loss from discontinued operations in the second quarter of 2014 was $68 million, compared to net income of $454 million in the second quarter of 2013. Net loss from discontinued operations in the second quarter of 2014 included a pre-tax adjustment of $72 million related to the release of the deferral of certain revenue for the Motorola Mobile segment. Had we presented Motorola Mobile as an operating segment, the Motorola Mobile segment revenue for the second quarter of 2014 would have been $1.73 billion, $72 million lower than what was included in net loss from discontinued operations.

    Net Income – GAAP consolidated net income in the second quarter of 2014 was $3.42 billion, compared to $3.23 billion in the second quarter of 2013. Non-GAAP consolidated net income was $4.18 billion in the second quarter of 2014, compared to $3.36 billion in the second quarter of 2013. GAAP EPS in the second quarter of 2014 was $4.99 on 686 million diluted shares outstanding, compared to $4.77 in the second quarter of 2013 on 677 million diluted shares outstanding. Non-GAAP EPS in the second quarter of 2014 was $6.08, compared to $4.96 in the second quarter of 2013.

    Cash Flow and Capital Expenditures – Net cash provided by operating activities in the second quarter of 2014 totaled $5.63 billion, compared to $4.71 billion in the second quarter of 2013. In the second quarter of 2014, capital expenditures were $2.65 billion, the majority of which was for data-center construction, real estate purchases, and production equipment. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the second quarter of 2014, free cash flow was $2.98 billion.

    We expect to continue to make significant capital expenditures.

    A reconciliation of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, is included at the end of this release.

    Cash – As of June 30, 2014, cash, cash equivalents, and marketable securities were $61.20 billion, which excludes cash classified as held for sale, compared to $58.72 billion as of December 31, 2013.

    Headcount – On a worldwide basis, we employed 52,069 full-time employees (48,584 in Google and 3,485 in Motorola Mobile) as of June 30, 2014, compared to 49,829 full-time employees (46,170 in Google and 3,659 in Motorola Mobile) as of March 31, 2014.

    Management Change

    Nikesh Arora, our Chief Business Officer, will be leaving Google after almost ten years at the company to join one of our partners, SoftBank, as Vice Chairman of SoftBank Corp. and CEO of SoftBank Internet and Media. He will join this afternoon’s earnings call as usual. Omid Kordestani, who was our business founder and led our sales teams for many years, will be stepping in to lead our business organization for now.

    WEBCAST AND CONFERENCE CALL INFORMATION

    A live audio webcast of Google’s second quarter 2014 earnings release call will be available at http://investor.google.com/webcast.html. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, the financial tables, as well as other supplemental information including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, are also available on that site.

    We also announce investor information, including news and commentary about our business and financial performance, SEC filings, notices of investor events and our press and earnings releases, on our investor relations website (http://investor.google.com) and our investor relations Google+ page (https://plus.google.com/+GoogleInvestorRelations/posts).

    FORWARD-LOOKING STATEMENTS

    This press release contains forward-looking statements that involve risks and uncertainties. These statements include statements regarding our investments in areas of strategic focus, our expected SBC charges, and our plans to make significant capital expenditures. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, unforeseen changes in our hiring patterns and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2013 and our most recent Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 which are on file with the SEC and are available on our investor relations website at investor.google.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.  All information provided in this release and in the attachments is as of July 17, 2014, and we undertake no duty to update this information unless required by law.

    ABOUT NON-GAAP FINANCIAL MEASURES

    To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP EPS, free cash flow, and non-GAAP international revenues. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures,” “Reconciliation from net cash provided by operating activities to free cash flow,” and “Reconciliation from GAAP international revenues to non-GAAP international revenues” included at the end of this release.

    We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results, meaning our operating performance excluding not only non-cash charges, such as SBC, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

    Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income excluding expenses related to SBC, and, as applicable, other special items. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenues. Google considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of SBC, and as applicable, other special items so that Google’s management and investors can compare Google’s recurring core business operating results over multiple periods. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Google’s management believes that providing a non-GAAP financial measure that excludes SBC allows investors to make meaningful comparisons between Google’s recurring core business operating results and those of other companies, as well as providing Google’s management with an important tool for financial and operational decision making and for evaluating Google’s own recurring core business operating results over different periods of time. There are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes some costs, namely, SBC, that are recurring. SBC has been and will continue to be for the foreseeable future a significant recurring expense in Google’s business. Second, SBC is an important part of our employees’ compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that our peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

    Non-GAAP net income and EPS. We define non-GAAP net income as net income excluding expenses related to SBC and, as applicable, other special items less the related tax effects, as well as net income (loss) from discontinued operations. The tax effects of SBC and, as applicable, other special items are calculated using the tax-deductible portion of SBC, and, as applicable, other special items, and applying the entity-specific, U.S. federal and blended state tax rates.  We define non-GAAP EPS as non-GAAP net income divided by the weighted average outstanding shares, on a fully-diluted basis. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that Google uses non-GAAP operating income and non-GAAP operating margin. However, in order to provide a complete picture of our recurring core business operating results, we exclude from non-GAAP net income and non-GAAP EPS the tax effects associated with SBC and, as applicable, other special items. Without excluding these tax effects, investors would only see the gross effect that excluding these expenses had on our operating results. The same limitations described above regarding Google’s use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP EPS. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income and EPS calculated in accordance with GAAP.

    Free cash flow. We define free cash flow as net cash provided by operating activities less capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, including information technology infrastructure and land and buildings, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow also facilitates management’s comparisons of our operating results to competitors’ operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating Google is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period. Our management compensates for this limitation by providing information about our capital expenditures on the face of the statement of cash flows and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Google has computed free cash flow using the same consistent method from quarter to quarter and year to year.

    Non-GAAP international revenues. We define non-GAAP international revenues as international revenues excluding the impact of foreign exchange rate movements and hedging activities. Non-GAAP international revenues are calculated by translating current quarter revenues using prior quarter and prior year exchange rates, as well as excluding any hedging gains realized in the current quarter. We consider non-GAAP international revenues as a useful metric as it facilitates management’s internal comparison to our historical performance.

    The accompanying tables have more details on the non-GAAP financial measures that are most directly comparable to GAAP financial measures and the related reconciliations between these financial measures.

    Image via Google+

  • Here’s The Google Founders’ Recent Fireside Chat Video

    It’s been a while since we’ve seen the original Google boys in a room together talking about the company, so here’s a fireside chat they did with VC Vinod Khosla.

    They spend some time talking about when Google almost got acquired. Here’s a snippet from Sergey Brin (via the transcript):

    Well, we had developed this technology we called PageRank – sadly, not BrinRank. But anyway, it probably would’ve sold better that way. But we had developed this technology that we found was useful for search. By itself, it wasn’t really a complete search engine. What we had just searched titles of webpages and ranked them quite well. But we showed it to a bunch of the existing search companies back then. Some of you might remember them – Infoseek, Excite, Lycos. And probably, the greatest interest came from Excite, and actually came from you, Vinod. You were the investor in Excite. We spent a while talking to them, and talking to you, Vinod. You remember that. In the end, I don’t think the management team there was quite as excited about it – no pun intended. But I remember, there were four of us at the time – four grad students at Stanford. I remember, we fired off this note to Vinod. It was just a little e-mail that said, “We really don’t want to sell, but for $1.6 million, you got a deal.” And a few minutes later, we got a reply that said, “That’s a lot of dough, but ok we’ll do it.” That’s characteristic Vinod there. So then, ten minutes later, Scott – one of the four of us – comes running in, laughing. Huge grin on his face. He had faked the reply and back then, the ethics around faking emails weren’t quite the same. Anyway, so he had that big joke. The deal obviously never came to fruition, and we went our own way to build search.

    Eventually the discussion turns to where Google is headed, the limitations set by governments, etc.

    You can find the full transcript here if you don’t want to sit through the whole thing.

    Image via YouTube

  • Larry Page Gives Something Of A State Of The Google Address

    Google has released its 2013 Founders’ Letter (yes, it is May, 2014) written by co-founder and CEO Larry Page, who hasn’t been present on the company’s last couple earnings calls.

    In it, Page says there are over 100 billion searches a month with 15% of them never seen before. Google updates its index within seconds to ensure it has the freshest results, he says. Here’s the rest of the section on search:

    To make life easier, we’re increasingly able to provide direct answers to your questions. For example, “what’s the deepest lake in the world?” (It’s Lake Baikal in Siberia at 1,741 meters) or, “when does my flight leave?” or, “how many calories in a pancake?” And, I am excited by the progress we have made with Voice Search, which now works in over 38 languages, including, most recently, Thai and Vietnamese. Speaking is often the quickest, easiest way to ask, especially if you’re using a mobile device.

    Yet, in many ways, we’re a million miles away from creating the search engine of my dreams, one that gets you just the right information at the exact moment you need it with almost no effort. That’s partly because understanding information in a deep way is a hard problem to solve. Google Now is starting to tackle this challenge. It provides information without you even having to ask, so no more digging around in your inbox to find the tracking number for a much-needed delivery; it’s already there on your screen. And recommendations on Google+, which are based on your interests, have also become a great source of information. I get things that are highly relevant all the time, like this YouTube video about the history of kitesurfing that appeared in my stream recently.

    While it is still early days, we’ve also made significant progress understanding people’s context, which is crucial if we are to improve human-computer interaction. Think about your commute. You need the traffic information very accessible so you can plan for it, or avoid it altogether. If you’re going to another appointment, you want the directions to start from where you are at that moment (rather than having to type in your location on a small screen). Improved context will also help make search more natural, and not a series of keywords you artificially type into a computer. We’re getting closer: ask how tall the Eiffel Tower is, and then when “it” was built. By understanding what “it” means in different contexts, we can make search conversational.

    He goes on to talk about Chrome (750 million users), photos (Google+ Instant Upload), Android (over a billion devices activated and “growing fast”), Android developers (earning four times more on average in 2013 compared to the year before from user payments), Google Play, Chromecast (no numbers on that), Design (he still likes simplicity), Project Loon, Calico (the health/longevity initiative), Iris (the contact lens initiative), Nest, Google Shopping Express, and self-driving cars.

    You can read the letter in its entirety here. You might also wish to check out this recent TED talk from Page on where Google’s going next.

    Image via YouTube

  • David Besbris To Replace Vic Gundotra On Google+, Says Report

    As previously reported, Vic Gundotra, the top dog at Google+, announced that he is leaving Google. But who will replace him?

    According to a report from Re/code, it will be VP of Engineering Dave Besbris. They cite unnamed sources. No official announcement has been made on Gundotra’s replacement.

    CEO Larry Page had this to say after Gundotra made his announcement:

    Vic — thank you for a tremendous almost eight years at Google. You cut your teeth on our mobile apps and developer relations, turning our disparate efforts into something great. When I first used turn-by-turn navigation, it blew me away. And, walking onto the stage at I/O last year, it was amazing to see developers so excited about Google. These were vintage Vic projects. Then you built Google+ from nothing. There are few people with the courage and ability to start something like that and I am very grateful for all your hard work and passion. I really enjoy using Google+ on a daily basis, especially the auto awesome movies which I really love sharing with my family and friends. Good luck with your next project after Google. In the meantime we’ll continue working hard to build great new experiences for the ever increasing number of Google+ fans.

    Besbris has not made any comments about the situation on Google+ so far, though he is at least an active poster.

    He’s been with Google for about six years, following a stint at AOL. Gundotra has only been at Google for a year longer.

    Image via Google+

  • Google Earnings Released: Revenue Up 19%, But Stock Falls

    Google just released its earnings report for the first quarter. Revenue was up 19% from the same period last year, but it missed Wall Street estimates, and the stock is on the way down at the moment.

    Revenues from Google’s sites were $10.47 billion – 68% of total revenues – up 21% year-over-year. Revenues from partner sites were $3.40 billion – 22% of total revenues – up 4%. “Other revenues” were $1.55 billion, or 10% of total revenues, and up 48%.

    Paid clicks were up 26% year-over-year, but down 1% quarter-over-quarter. Average cost-per-click decreased by 9% year-over-year, but remained consistent quarter-to-quarter.

    CEO Larry Page said, “We completed another great quarter. Google’s revenue was $15.4 billion, up 19% year on year. We got lots of product improvements done, especially on mobile. I’m also excited with progress on our emerging businesses.”

    On the conference call, the company noted that it will begin disclosing CPC and paid click growth rates by property in Q2.

    Here’s the release in its entirety:

    MOUNTAIN VIEW, Calif. – April 16, 2014 –  Google Inc. (NASDAQ: GOOG, GOOGL) today announced financial results for the quarter ended March 31, 2014.

    “We completed another great quarter. Google’s revenue was $15.4 billion, up 19% year on year”, said Larry Page, CEO of Google.  “We got lots of product improvements done, especially on mobile. I’m also excited with progress on our emerging businesses.”

    Q1 Financial Summary

    On January 29, 2014, we entered into an agreement with Lenovo Group Limited providing for the disposition of the Motorola Mobile business. As such, financial results of Motorola Mobile are presented as “Net loss from discontinued operations” on the Consolidated Statements of Income for the quarter ended March 31, 2013 and 2014; and assets and liabilities of Motorola Mobile to be disposed of are presented as “Assets held for sale” and “Liabilities held for sale”, respectively, on the Consolidated Balance Sheet as of March 31, 2014.

    On April 2, 2014, we issued shares of Class C capital stock as a dividend to our stockholders. Except for the number of authorized shares and par value, all references to share and per share amounts have been retroactively restated for all prior periods shown to reflect the stock split, which was effected in the form of a stock dividend.

    Google Inc. reported consolidated revenues of $15.42 billion for the quarter ended March 31, 2014, an increase of 19% compared to the first quarter of 2013. Google Inc. reports advertising revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the first quarter of 2014, TAC totaled $3.23 billion, or 23% of advertising revenues.

    Operating income, operating margin, net income, and earnings per share (EPS) are reported on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures at the end of this release.

    • GAAP operating income in the first quarter of 2014 was $4.12 billion, or 27% of revenues. This compares to GAAP operating income of $3.75 billion, or 29% of revenues, in the first quarter of 2013. Non-GAAP operating income in the first quarter of 2014 was $4.95 billion, or 32% of revenues. This compares to non-GAAP operating income of $4.40 billion, or 34% of revenues, in the first quarter of 2013.
    • GAAP net income (including net loss from discontinued operations) in the first quarter of 2014 was $3.45 billion, compared to $3.35 billion in the first quarter of 2013. Non-GAAP net income in the first quarter of 2014 was $4.30 billion, compared to $4.04 billion in the first quarter of 2013.
    • GAAP EPS (including impact from net loss from discontinued operations) in the first quarter of 2014 was $5.04 on 685 million diluted shares outstanding, compared to $4.97 in the first quarter of 2013 on 673 million diluted shares outstanding. Non-GAAP EPS in the first quarter of 2014 was $6.27, compared to $6.00 in the first quarter of 2013.
    • Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense. Non-GAAP net income and non-GAAP EPS exclude SBC expense, net of the related tax benefit, as well as net loss from discontinued operations. In the first quarter of 2014, the expense related to SBC and the related tax benefits were $839 million and $190 million compared to $655 million and $141 million in the first quarter of 2013.  In addition, net loss from discontinued operations in the first quarter of 2014 was $198 million, compared to $182 million in the first quarter of 2013.

    Q1 Financial Highlights

    Revenues and other information – Google Inc. revenues for the quarter ended March 31, 2014 were $15.42 billion, representing a 19% increase over first quarter of 2013 revenues of $12.95 billion.

    • Sites Revenues – Our sites generated revenues of $10.47 billion, or 68% of total revenues, in the first quarter of 2014. This represents a 21% increase over first quarter of 2013 sites revenues of $8.64 billion.
    • Network Revenues – Our partner sites generated revenues of $3.40 billion, or 22% of total revenues, in the first quarter of 2014.  This represents a 4% increase over first quarter of 2013 network revenues of $3.26 billion.
    • Other Revenues – Other revenues were $1.55 billion, or 10% of total revenues, in the first quarter of 2014.  This represents a 48% increase over first quarter of 2013 other revenues of $1.05 billion.
    • International Revenues – Our revenues from outside of the United States totaled $8.76 billion, representing 57% of total revenues in the first quarter of 2014, compared to 56% in the fourth quarter of 2013 and 55% in the first quarter of 2013.
      • Our revenues from the United Kingdom totaled $1.58 billion, representing 10% of total revenues in the first quarter of 2014, compared to 11% in the first quarter of 2013.
    • Foreign Exchange Impact on Revenues – Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the fourth quarter of 2013 through the first quarter of 2014, our revenues in the first quarter of 2014 would have been $50 million higher. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the first quarter of 2013 through the first quarter of 2014, our revenues in the first quarter of 2014 would have been $163 million higher.
      • In the first quarter of 2014, we recognized a benefit of $8 million to revenues through our foreign exchange risk management program, compared to $35 million in the first quarter of 2013.

      Reconciliations of our non-GAAP international revenues excluding the impact of foreign exchange and hedging to GAAP international revenues are included at the end of this release.

    • Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our Network members, increased approximately 26% over the first quarter of 2013 and decreased approximately 1% over the fourth quarter of 2013.
    • Cost-Per-Click – Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our Network members, decreased approximately 9% over the first quarter of 2013 and remained constant from the fourth quarter of 2013.
    • TAC – Traffic acquisition costs, the portion of revenues shared with Google’s partners, increased to $3.23 billion in the first quarter of 2014, compared to $2.96 billion in the first quarter of 2013. TAC as a percentage of advertising revenues was 23% in the first quarter of 2014, compared to 25% in the first quarter of 2013.

      The majority of TAC is related to amounts ultimately paid to our Network members, which totaled $2.39 billion in the first quarter of 2014. TAC also includes amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $845 million in the first quarter of 2014.

    Other Cost of Revenues – Other cost of revenues, which is comprised primarily of data centers operational expenses, hardware inventory costs, amortization of acquisition-related intangible assets, and content acquisition costs, increased to $2.73 billion, or 18% of revenues, in the first quarter of 2014, compared to $2.17 billion, or 17% of revenues, in the first quarter of 2013.

    Operating Expenses – Operating expenses, other than cost of revenues, were $5.34 billion in the first quarter of 2014, or 35% of revenues, compared to $4.07 billion in the first quarter of 2013, or 31% of revenues.

    Depreciation and loss on disposal of property and equipment and amortization expenses – Depreciation and loss on disposal of property and equipment and amortization expenses were $1.09 billion for the first quarter of 2014, of which $1.06 billion was related to Google, compared to $899 million in the first quarter of 2013. Of the $1.09 billion, $116 million was related to amortization of Motorola intangibles, which Google will retain subsequent to the disposal of Motorola Mobile.

    Stock-Based Compensation (SBC) – In the first quarter of 2014, the total charge related to SBC was $839 million compared to $655 million in the first quarter of 2013. We currently estimate SBC charges for grants to Google employees prior to March 31, 2014 to be approximately $3.22 billion for 2014. This estimate does not include expenses to be recognized related to employee stock awards that are granted after March 31, 2014 or non-employee stock awards that have been or may be granted.

    Operating Income – GAAP operating income in the first quarter of 2014 was $4.12 billion, or 27% of revenues. This compares to GAAP operating income of $3.75 billion, or 29% of revenues, in the first quarter of 2013. Non-GAAP operating income in the first quarter of 2014 was $4.95 billion, or 32% of revenues. This compares to non-GAAP operating income of $4.40 billion, or 34% of revenues, in the first quarter of 2013.

    Interest and Other Income, Net – Interest and other income, net, was $357 million in the first quarter of 2014, compared to $134 million in the first quarter of 2013.

    Income Taxes – Our effective tax rate was 18% for the first quarter of 2014.

    Net Loss from Discontinued Operations – Net loss from discontinued operations in the first quarter of 2014 was $198 million, compared to a net loss of $182 million in the first quarter of 2013. Net loss from discontinued operations in the first quarter of 2014 included a pre-tax adjustment of $74 million related to the deferral of certain revenue for the Motorola Mobile segment. Had we presented Motorola Mobile as an operating segment, the Motorola Mobile segment revenue for the first quarter of 2014 would have been $1.45 billion, $74 million higher than what was included in net loss from discontinued operations.

    Net Income – GAAP consolidated net income in the first quarter of 2014 was $3.45 billion, compared to $3.35 billion in the first quarter of 2013. Non-GAAP consolidated net income was $4.30 billion in the first quarter of 2014, compared to $4.04 billion in the first quarter of 2013. GAAP EPS in the first quarter of 2014 was $5.04 on 685 million diluted shares outstanding, compared to $4.97 in the first quarter of 2013 on 673 million diluted shares outstanding. Non-GAAP EPS in the first quarter of 2014 was $6.27, compared to $6.00 in the first quarter of 2013.

    Cash Flow and Capital Expenditures – Net cash provided by operating activities in the first quarter of 2014 totaled $4.39 billion, compared to $3.63 billion in the first quarter of 2013. In the first quarter of 2014, capital expenditures were $2.35 billion, the majority of which was for production equipment, data-center construction, and real estate purchases. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the first quarter of 2014, free cash flow was $2.05 billion.

    We expect to continue to make significant capital expenditures.

    A reconciliation of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, is included at the end of this release.

    Cash – As of March 31, 2014, cash, cash equivalents, and marketable securities were $59.38 billion, which excludes cash classified as held for sale, compared to $58.72 billion as of December 31, 2013.

    Headcount – On a worldwide basis, we employed 49,829 full-time employees (46,170 in Google and 3,659 in Motorola Mobile) as of March 31, 2014, compared to 47,756 full-time employees (43,862 in Google and 3,894 in Motorola Mobile) as of December 31, 2013.

    WEBCAST AND CONFERENCE CALL INFORMATION

    A live audio webcast of Google’s first quarter 2014 earnings release call will be available at http://investor.google.com/webcast.html. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, the financial tables, as well as other supplemental information including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, are also available on that site.

    We also announce investor information, including news and commentary about our business and financial performance, SEC filings, notices of investor events and our press and earnings releases, on our investor relations website (http://investor.google.com) and our investor relations Google+ page (https://plus.google.com/+GoogleInvestorRelations/posts).

    FORWARD-LOOKING STATEMENTS

    This press release contains forward-looking statements that involve risks and uncertainties. These statements include statements regarding our investments in areas of strategic focus, our expected SBC charges, and our plans to make significant capital expenditures. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, unforeseen changes in our hiring patterns and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2013,  which is on file with the SEC and is available on our investor relations website at investor.google.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2014.  All information provided in this release and in the attachments is as of April 16, 2014, and we undertake no duty to update this information unless required by law.

    ABOUT NON-GAAP FINANCIAL MEASURES

    To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP EPS, free cash flow, and non-GAAP international revenues. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures,” “Reconciliation from net cash provided by operating activities to free cash flow,” and “Reconciliation from GAAP international revenues to non-GAAP international revenues” included at the end of this release.

    We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results, meaning our operating performance excluding not only non-cash charges, such as SBC, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

    Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income excluding expenses related to SBC, and, as applicable, other special items. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenues. Google considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of SBC, and as applicable, other special items so that Google’s management and investors can compare Google’s recurring core business operating results over multiple periods. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Google’s management believes that providing a non-GAAP financial measure that excludes SBC allows investors to make meaningful comparisons between Google’s recurring core business operating results and those of other companies, as well as providing Google’s management with an important tool for financial and operational decision making and for evaluating Google’s own recurring core business operating results over different periods of time. There are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes some costs, namely, SBC, that are recurring. SBC has been and will continue to be for the foreseeable future a significant recurring expense in Google’s business. Second, SBC is an important part of our employees’ compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that our peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

    Non-GAAP net income and EPS. We define non-GAAP net income as net income excluding expenses related to SBC and, as applicable, other special items less the related tax effects, as well as net income (loss) from discontinued operations. The tax effects of SBC and, as applicable, other special items are calculated using the tax-deductible portion of SBC, and, as applicable, other special items, and applying the entity-specific, U.S. federal and blended state tax rates.  We define non-GAAP EPS as non-GAAP net income divided by the weighted average outstanding shares, on a fully-diluted basis. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that Google uses non-GAAP operating income and non-GAAP operating margin. However, in order to provide a complete picture of our recurring core business operating results, we exclude from non-GAAP net income and non-GAAP EPS the tax effects associated with SBC and, as applicable, other special items. Without excluding these tax effects, investors would only see the gross effect that excluding these expenses had on our operating results. The same limitations described above regarding Google’s use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP EPS. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income and EPS calculated in accordance with GAAP.

    Free cash flow. We define free cash flow as net cash provided by operating activities less capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, including information technology infrastructure and land and buildings, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow also facilitates management’s comparisons of our operating results to competitors’ operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating Google is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period. Our management compensates for this limitation by providing information about our capital expenditures on the face of the statement of cash flows and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Google has computed free cash flow using the same consistent method from quarter to quarter and year to year.

    Non-GAAP international revenues. We define non-GAAP international revenues as international revenues excluding the impact of foreign exchange rate movements and hedging activities. Non-GAAP international revenues are calculated by translating current quarter revenues using prior quarter and prior year exchange rates, as well as excluding any hedging gains realized in the current quarter. We consider non-GAAP international revenues as a useful metric as it facilitates management’s internal comparison to our historical performance.

    The accompanying tables have more details on the non-GAAP financial measures that are most directly comparable to GAAP financial measures and the related reconciliations between these financial measures.

    Image via YouTube

  • Here’s Larry Page’s TED Talk

    Here’s Larry Page’s TED Talk

    Google CEO and co-founder Larry Page participated in a TED talk by way of interview by Charlie Rose last week at TED2014. He discusses his vision for the company, which includes things like Internet balloons (which it already has) and aerial bikeways. He talks about the company’s acquisition of artificial intelligence company DeepMind, and why he’d consider giving his money to Elon Musk.

    “He wants to go to Mars,” Page says. “That’s a worthy goal. We have a lot of employees at Google who’ve become pretty wealthy. You’re working because you want to change the world and make it better; if the company you work for is worthy of your time, why not your money as well? We just don’t think about that. I’d like for us to help out more than we are.”

    The video page has the transcript if you’d rather consume it that way.

    Image via YouTube

  • Google Earnings Released, Revenue Up 22%

    Google Earnings Released, Revenue Up 22%

    Google has released its Q4 and full year 2013 earnings a day after the company announced that it is selling Motorola Mobility to Lenovo for close to $3 billion.

    The company beat Wall Street estimates on quarterly revenue. Motorola revenues continued to decrease.

    CEO Larry Page said, “We ended 2013 with another great quarter of momentum and growth. Google’s standalone revenue was up 22% year on year, at $15.7 billion. We made great progress across a wide range of product improvements and business goals. I’m also very excited about improving people’s lives even more with continued hard work on our user experiences.”

    Revenue from Google-owned sites was $10.55 billion. Revenue from Google partner sites was $3.52 billion, and other revenues were $1.65 billion.

    Google revenue

    Paid clicks were up 31% year-over-year, but decreased 2% quarter-over-quarter. Average cost-per-click decreased 11% year-over-year, and 2% quarter-over-quarter.

    Google says it is continuing to invest in three major areas of focus: core ads (search/display), businesses demonstrating high consumer success (YouTube, Android/Play, Chrome) and new businesses where it’s investing to drive adoption and innovation (social, commerce, enterprise). Google says its infrastructure continues to be a “key strategic area of investment.”

    The company took the opportunity to announce that its board has approved a distribution of shares of the Class C capital stock as a dividend to stockholders. This will be paid on April 2nd.

    Page said on the last quarter’s call that it would be his last one for a while (likely due to his publicized voice issues). Indeed, he stayed out of todays. CFO Patrick Pichette led the call this time. He jumped right into the hard financials as seen below.

    SVP/Chief Business Officer then talked up enhanced campaigns and estimated total conversions, and Google Shopping.

    He’s pleased with the feedback on Google Shopping Express.

    Working closely with brand advertisers is a big priority.

    YouTube, he says, saw a 50% increase in daily watch time last year.

    App Engine is not seeing a ton of growth, according to Patrick. Not that it’s not successful, he says, but not growing as much as other areas like search.

    The goal for Nest is to help them scale, he says.

    Nexus 5 and Chromecast were big for hardware revenue in Q4. The increase in marketing spend in Q4 was due to the holidays – marketing these devices and Chromebooks.

    Here’s the release in its entirety:

    MOUNTAIN VIEW, Calif. – January 30, 2014 – Google Inc. (NASDAQ: GOOG) today announced financial results for the quarter and fiscal year ended December 31, 2013.

    “We ended 2013 with another great quarter of momentum and growth.  Google’s standalone revenue was up 22% year on year, at $15.7 billion”, said Larry Page, CEO of Google.  “We made great progress across a wide range of product improvements and business goals.  I’m also very excited about improving people’s lives even more with continued hard work on our user experiences.”

    Google Inc. announced today that its Board of Directors has approved a distribution of shares of the Class C capital stock as a dividend to our stockholders with a dividend record date of March 27, 2014 and a dividend payment date of April 2, 2014.

    Q4 Financial Summary

    Google Inc. reported consolidated revenues of $16.86 billion for the quarter ended December 31, 2013, an increase of 17% compared to the fourth quarter of 2012. Google Inc. reports advertising revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the fourth quarter of 2013, TAC totaled $3.31 billion, or 24% of advertising revenues.

    Operating income, operating margin, net income, and earnings per share (EPS) are reported on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures at the end of this release.

    • GAAP operating income in the fourth quarter of 2013 was $3.92 billion, or 23% of revenues. This compares to GAAP operating income of $3.39 billion, or 24% of revenues, in the fourth quarter of 2012. Non-GAAP operating income in the fourth quarter of 2013 was $4.84 billion, or 29% of revenues. This compares to non-GAAP operating income of $4.27 billion, or 30% of revenues, in the fourth quarter of 2012.
    • GAAP net income, including net loss from discontinued operations, in the fourth quarter of 2013 was $3.38 billion, compared to $2.89 billion in the fourth quarter of 2012. Non-GAAP net income in the fourth quarter of 2013 was $4.10 billion, compared to $3.57 billion in the fourth quarter of 2012.
    • GAAP EPS, including impact from net loss from discontinued operations, in the fourth quarter of 2013 was $9.90 on 341 million diluted shares outstanding, compared to $8.62 in the fourth quarter of 2012 on 335 million diluted shares outstanding. Non-GAAP EPS in the fourth quarter of 2013 was $12.01, compared to $10.65 in the fourth quarter of 2012.
    • Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense, as well as restructuring and related charges.  Non-GAAP net income and non-GAAP EPS exclude the expenses noted above, net of the related tax benefits, as well as net loss from discontinued operations. In the fourth quarter of 2013, the expense related to SBC and the related tax benefits were $902 million and $191 million compared to $700 million and $152 million in the fourth quarter of 2012. In the fourth quarter of 2013, restructuring and related charges and the related tax benefits were $15 million and $11 million, compared to $178 million and $65 million in the fourth quarter of 2012. In addition, net loss from discontinued operations in the fourth quarter of 2013 was $5 million, compared to $21 million in the fourth quarter of 2012.

    Q4 Financial Highlights

    Revenues and other information – On a consolidated basis, Google Inc. revenues for the quarter ended December 31, 2013 were $16.86 billion, an increase of 17% compared to the fourth quarter of 2012.

    Google Segment Revenues – Google segment revenues were $15.72 billion, or 93% of consolidated revenues, in the fourth quarter of 2013, representing a 22% increase over fourth quarter 2012 Google segment revenues of $12.91 billion.

    • Google Sites Revenues – Google-owned sites generated segment revenues of $10.55 billion, or 67% of total Google segment revenues, in the fourth quarter of 2013. This represents a 22% increase over fourth quarter 2012 Google sites segment revenues of $8.64 billion.
    • Google Network Revenues – Google’s partner sites generated segment revenues of $3.52 billion, or 23% of total Google segment revenues, in the fourth quarter of 2013. This represents a 3% increase over fourth quarter 2012 Google network segment revenues of $3.44 billion.
    • Other Google Revenues – Other revenues from the Google segment were $1.65 billion, or 10% of total Google segment revenues, in the fourth quarter of 2013. This represents a 99% increase over fourth quarter 2012 other Google segment revenues of $829 million.

    Google Segment International Revenues – Google segment revenues from outside of the United States totaled $8.77 billion, representing 56% of total Google segment revenues in the fourth quarter of 2013, compared to 56% in the third quarter of 2013 and 54% in the fourth quarter of 2012.

    • Google segment revenues from the United Kingdom totaled $1.50 billion, representing 10% of total Google segment revenues in the fourth quarter of 2013, compared to 10% in the fourth quarter of 2012.

    Foreign Exchange Impact on Google Segment Revenues – Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the third quarter of 2013 through the fourth quarter of 2013, our Google segment revenues in the fourth quarter of 2013 would have been $156 million lower. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the fourth quarter of 2012 through the fourth quarter of 2013, our Google segment revenues in the fourth quarter of 2013 would have been $141 million higher.

    • In the fourth quarter of 2013, we recognized a benefit of $3 million to Google segment revenues through our foreign exchange risk management program, compared to $37 million in the fourth quarter of 2012.

    Reconciliations of our non-GAAP international revenues excluding the impact of foreign exchange and hedging to GAAP international revenues are included at the end of this release.

    Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our Network members, increased approximately 31% over the fourth quarter of 2012 and increased approximately 13% over the third quarter of 2013.

    Cost-Per-Click – Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our Network members, decreased approximately 11% over the fourth quarter of 2012 and decreased approximately 2% over the third quarter of 2013.

    TAC – Traffic acquisition costs, the portion of revenues shared with Google’s partners, increased to $3.31 billion in the fourth quarter of 2013, compared to $3.08 billion in the fourth quarter of 2012. TAC as a percentage of advertising revenues was 24% in the fourth quarter of 2013, compared to 25% in the fourth quarter of 2012.

    The majority of TAC is related to amounts ultimately paid to our Network members, which totaled $2.49 billion in the fourth quarter of 2013. TAC also includes amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $824 million in the fourth quarter of 2013.

    Motorola Mobile Segment Revenues – Motorola Mobile segment revenues were $1.24 billion, or 7% of consolidated revenues in the fourth quarter of 2013, compared to $1.51 billion, or 11% of consolidated revenues in the fourth quarter of 2012.

    Elimination and Other – Beginning in Q3 2013, Google and Motorola segment revenues have been impacted by intersegment transactions that are eliminated in consolidation. Additionally, segment revenues associated with certain products are recognized in the segment results, but deferred to future periods in our consolidated financial statements. Such intersegment revenues and deferred revenues were $105 million in the fourth quarter 2013.

    Other Cost of Revenues – Other cost of revenues, which is comprised primarily of manufacturing and inventory-related costs, data center operational expenses, amortization of intangible assets, and content acquisition costs, increased to $4.13 billion, or 24% of revenues, in the fourth quarter of 2013, compared to $3.14 billion, or 22% of revenues, in the fourth quarter of 2012.

    Operating Expenses – Operating expenses, other than cost of revenues, were $5.50 billion in the fourth quarter of 2013, or 33% of revenues, compared to $4.81 billion in the fourth quarter of 2012, or 33% of revenues.

    Amortization Expenses – Amortization expenses of acquisition-related intangible assets were $279 million for the fourth quarter of 2013, compared to $289 million in the fourth quarter of 2012. Of the $279 million, $153 million was as a result of the acquisition of Motorola, of which $116 million was included in Google segment results and $37 million was included in Motorola Mobile segment results.

    Stock-Based Compensation (SBC) – In the fourth quarter of 2013, the total charge related to SBC was $902 million, compared to $708 million in the fourth quarter of 2012. We currently estimate SBC charges for grants to employees prior to December 31, 2013 to be approximately $3.13 billion for 2014. This estimate does not include expenses to be recognized related to employee stock awards that are granted after December 31, 2013 or non-employee stock awards that have been or may be granted.

    Operating Income – On a consolidated basis, GAAP operating income in the fourth quarter of 2013 was $3.92 billion, or 23% of revenues. This compares to GAAP operating income of $3.39 billion, or 24% of revenues, in the fourth quarter of 2012. Non-GAAP operating income in the fourth quarter of 2013 was $4.84 billion, or 29% of revenues. This compares to non-GAAP operating income of $4.27 billion, or 30% of revenues, in the fourth quarter of 2012.

    • Google Segment Operating Income – Google segment operating income in the fourth quarter of 2013 was $5.32 billion, or 34% of Google segment revenues. This compares to segment operating income of $4.42 billion in the fourth quarter of 2012, or 34% of Google segment revenues.
    • Motorola Mobile Segment Operating Loss – Motorola Mobile segment operating loss in the fourth quarter of 2013 was $384 million, or -31% of Motorola Mobile segment revenues. This compares to segment operating loss of $152 million, or -10% of Motorola Mobile segment revenues in the fourth quarter of 2012.

    Interest and Other Income, Net – Interest and other income, net, was $125 million in the fourth quarter of 2013, compared to $152 million in the fourth quarter of 2012.

    Income Taxes – Our effective tax rate was 16% for the fourth quarter of 2013.

    Net Income – GAAP consolidated net income in the fourth quarter of 2013 was $3.38 billion, compared to $2.89 billion in the fourth quarter of 2012. Non-GAAP consolidated net income was $4.10 billion in the fourth quarter of 2013, compared to $3.57 billion in the fourth quarter of 2012. GAAP EPS in the fourth quarter of 2013 was $9.90 on 341 million diluted shares outstanding, compared to $8.62 in the fourth quarter of 2012 on 335 million diluted shares outstanding. Non-GAAP EPS in the fourth quarter of 2013 was $12.01, compared to $10.65 in the fourth quarter of 2012.

    Cash Flow and Capital Expenditures – Net cash provided by operating activities in the fourth quarter of 2013 totaled $5.24 billion, compared to $4.67 billion in the fourth quarter of 2012. In the fourth quarter of 2013, capital expenditures were $2.26 billion, the majority of which was for production equipment, data-center construction, and real estate purchases. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the fourth quarter of 2013, free cash flow was $2.98 billion.

    We expect to continue to make significant capital expenditures.

    A reconciliation of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, is included at the end of this release.

    Cash – As of December 31, 2013, cash, cash equivalents, and marketable securities were $58.72 billion.

    Headcount – On a worldwide basis, we employed 47,756 full-time employees (43,862 in Google and 3,894 in Motorola Mobile) as of December 31, 2013, compared to 46,421 full-time employees (42,162 in Google and 4,259 in Motorola Mobile) as of September 30, 2013.

    WEBCAST AND CONFERENCE CALL INFORMATION

    A live audio webcast of Google’s fourth quarter and fiscal year 2013 earnings release call will be available athttp://investor.google.com/webcast.html. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, the financial tables, as well as other supplemental information including segment results and the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, are also available on that site.

    We also announce investor information, including news and commentary about our business and financial performance, SEC filings, notices of investor events and our press and earnings releases, on our investor relations website (http://investor.google.com) and our investor relations Google+ page (https://plus.google.com/+GoogleInvestorRelations/posts).

    FORWARD-LOOKING STATEMENTS

    This press release contains forward-looking statements that involve risks and uncertainties. These statements include statements regarding our investments in areas of strategic focus, our expected SBC charges, and our plans to make significant capital expenditures. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, unforeseen changes in our hiring patterns and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2012 and our most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, which are on file with the SEC and are available on our investor relations website at investor.google.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Annual Report on Form 10-K for the year ended December 31, 2013.  All information provided in this release and in the attachments is as of January 30, 2014, and we undertake no duty to update this information unless required by law.

    SEGMENT RESULTS

    In addition to consolidated results, management reviews financial information for the Google and Motorola operating segments. The presentation of segment results is a required disclosure in accordance with GAAP as part of our consolidated financial statements, and in accordance with GAAP, segment results are consistent with what is provided to the chief operating decision maker (CODM) for purposes of making decisions about allocating resources to the segment and assessing its performance. Certain items, including stock-based compensation expense and restructuring and other related charges, are not reflected in our segment results because this information is not reviewed by the CODM when assessing the performance of our operating segments. Similarly, revenues resulting from intersegment transactions that would be eliminated on consolidation, and revenues from certain product sales whose recognition would be deferred in our consolidated financial statements, are included in our segment results because this information is reviewed by the CODM when assessing the performance of the operating segments. Because of the eliminations, the sum of the two segment results will not equal the consolidated results unless the eliminations are taken into account. For more information on segment results, please see the table captioned “Reconciliations of selected non-GAAP financial measures and segment results to the nearest comparable GAAP financial measures,” which shows the adjustments to our consolidated results for the quarter ended December 31, 2013 that we have made in presenting our segment results, included at the end of this release.

    ABOUT NON-GAAP FINANCIAL MEASURES

    To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP EPS, free cash flow, and non-GAAP international revenues. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of selected non-GAAP financial measures and segments results to the nearest comparable GAAP financial measures,” “Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures,” “Reconciliation from net cash provided by operating activities to free cash flow,” and “Reconciliation from GAAP international revenues to non-GAAP international revenues” included at the end of this release.

    We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results, meaning our operating performance excluding not only non-cash charges, such as SBC, but also discrete cash charges that are infrequent in nature or relate to restructuring activities. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

    Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income excluding expenses related to SBC, and, as applicable, other special items. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenues. Google considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of SBC, and as applicable, other special items so that Google’s management and investors can compare Google’s recurring core business operating results over multiple periods. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Google’s management believes that providing a non-GAAP financial measure that excludes SBC allows investors to make meaningful comparisons between Google’s recurring core business operating results and those of other companies, as well as providing Google’s management with an important tool for financial and operational decision making and for evaluating Google’s own recurring core business operating results over different periods of time. There are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes some costs, namely, SBC, that are recurring. SBC has been and will continue to be for the foreseeable future a significant recurring expense in Google’s business. Second, SBC is an important part of our employees’ compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that our peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

    Non-GAAP net income and EPS. We define non-GAAP net income as net income excluding expenses related to SBC and, as applicable, other special items less the related tax effects, as well as net income (loss) from discontinued operations. The tax effects of SBC and, as applicable, other special items are calculated using the tax-deductible portion of SBC, and, as applicable, other special items, and applying the entity-specific, U.S. federal and blended state tax rates.  We define non-GAAP EPS as non-GAAP net income divided by the weighted average outstanding shares, on a fully-diluted basis. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that Google uses non-GAAP operating income and non-GAAP operating margin. However, in order to provide a complete picture of our recurring core business operating results, we exclude from non-GAAP net income and non-GAAP EPS the tax effects associated with SBC and, as applicable, other special items. Without excluding these tax effects, investors would only see the gross effect that excluding these expenses had on our operating results. The same limitations described above regarding Google’s use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP EPS. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income and EPS calculated in accordance with GAAP.

    Free cash flow. We define free cash flow as net cash provided by operating activities less capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, including information technology infrastructure and land and buildings, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow also facilitates management’s comparisons of our operating results to competitors’ operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating Google is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period. Our management compensates for this limitation by providing information about our capital expenditures on the face of the statement of cash flows and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Google has computed free cash flow using the same consistent method from quarter to quarter and year to year.

    Non-GAAP international revenues. We define non-GAAP international revenues as international revenues excluding the impact of foreign exchange rate movements and hedging activities. Non-GAAP international revenues are calculated by translating current quarter revenues using prior quarter and prior year exchange rates, as well as excluding any hedging gains realized in the current quarter. We consider non-GAAP international revenues as a useful metric as it facilitates management’s internal comparison to our historical performance.

    The accompanying tables have more details on the non-GAAP financial measures that are most directly comparable to GAAP financial measures and the related reconciliations between these financial measures.

    Image via Google

  • Google Earnings Are Out, Revenue Up 12% To $14.98 Billion

    Google has released its earnings report for the third quarter with revenues of $14.98 billion, an increase of 12% year over year. GAAP operating income was $3.44 billion.

    The company has once again managed to beat Wall Street expectations.

    CEO Larry Page said, “Google had another strong quarter with $14.9 billion in revenue and great product progress. We are closing in on our goal of a beautiful, simple, and intuitive experience regardless of your device.”

    Page said he won’t be doing any more of these conference calls for a while. His voice has continued to sound weak as it has since last year, as the result of vocal cord issues.

    Google segment revenues were $13.77 billion. Google-owned sites revenues were $9.39 billion. Network revenues were $3.15 billion. “Other” revenues were $1.23 billion.

    You can check out the earnings call live below. It’s scheduled to begin at 4:30 (Eastern).

    During the call, Page said noted that over a billion Android devices have been activated. He said he’s excited about Chromebooks, and talked up the new HP Chromebook 11, Chromecast and the Moto X.

    He said almost 40% of YouTube traffic comes from mobile, up from 6% two years ago.

    “Our momentum in voice search is tremendous,” he said, noting the additional language support Google has been adding.

    In the last six months, the accuracy has caught up quite a bit, Page said of voice recognition. “I think we’ve made tremendous strides, and we’ll continue…but I think they’re already super useful.”

    He also said to “prepare to be amazed” by Google+ photo search if you haven’t tried it yet.

    CFO Patrick Pichette said that advertising policies implemented earlier this year have had a short-term negative impact, but they think they’re the right move for the long-term.

    Google’s employee head count by the end of the quarter was roughly 46 thousand full-time employees.

    “On the ecommerce side, i think google’s been used for ecommerceo for forever, and we’re really excited about doing a better job of that. we want to remove friction when people are buying on line or the real world,” said Page. This was in response to a question about structured data and the Knowledge Graph, so not much of an answer there.

    The investment in things like Calico (Google’s “anti-death” company) is significant, Page said, but not significant for Google. In other words, it’s a lot of money, but not a lot of money for Google. This is a subject that always comes up during investor calls with concern from investors that Google is not focused enough on its real money makers.

    It sounded like Page implied that he wishes he could invest more in stuff like Calico.

    Here’s the release in its entirely:

    MOUNTAIN VIEW, Calif. – October 17, 2013 – Google Inc. (NASDAQ: GOOG) today announced financial results for the quarter ended September 30, 2013.

    “Google had another strong quarter with $14.9 billion in revenue and great product progress,” said Larry Page, CEO of Google.  “We are closing in on our goal of a beautiful, simple, and intuitive experience regardless of your device.”

    Q3 Financial Summary

    Google Inc. reported consolidated revenues of $14.89 billion for the quarter ended September 30, 2013, an increase of 12% compared to the third quarter of 2012. Google Inc. reports advertising revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the third quarter of 2013, TAC totaled $2.97 billion, or 24% of advertising revenues.

    Operating income, operating margin, net income, and earnings per share (EPS) are reported on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures at the end of this release.

    • GAAP operating income in the third quarter of 2013 was $3.44 billion, or 23% of revenues. This compares to GAAP operating income of $2.74 billion, or 21% of revenues, in the third quarter of 2012. Non-GAAP operating income in the third quarter of 2013 was $4.34 billion, or 29% of revenues. This compares to non-GAAP operating income of $3.76 billion, or 28% of revenues, in the third quarter of 2012.
    • GAAP net income including net income from discontinued operations in the third quarter of 2013 was $2.97 billion, compared to $2.18 billion in the third quarter of 2012. Non-GAAP net income in the third quarter of 2013 was $3.64 billion, compared to $2.96 billion in the third quarter of 2012.
    • GAAP EPS including impact from net income from discontinued operations in the third quarter of 2013 was $8.75 on 339 million diluted shares outstanding, compared to $6.53 in the third quarter of 2012 on 333 million diluted shares outstanding. Non-GAAP EPS in the third quarter of 2013 was $10.74, compared to $8.87 in the third quarter of 2012.
    • Non-GAAP operating income and non-GAAP operating margin exclude stock-based compensation (SBC) expense, as well as restructuring and related charges. Non-GAAP net income and non-GAAP EPS exclude the expenses noted above, net of the related tax benefits, as well as net income or loss from discontinued operations. In the third quarter of 2013, the expense related to SBC and the related tax benefits were $886 million and $207 million compared to $706 million and $155 million in the third quarter of 2012. In the third quarter of 2013, restructuring and related charges and the related tax benefits were $12 million and $3 million, compared to $313 million and $67 million in the third quarter of 2012. In addition, net income from discontinued operations in the third quarter of 2013 was $15 million, compared to net income from discontinued operations of $18 million in the third quarter of 2012.

    Q3 Financial Highlights

    Revenues and other information – On a consolidated basis, Google Inc. revenues for the quarter ended September 30, 2013 were $14.89 billion, an increase of 12% compared to the third quarter of 2012.

    Google Segment Revenues – Google segment revenues were $13.77 billion, or 92% of consolidated revenues, in the third quarter of 2013, representing a 19% increase over third quarter 2012 Google segment revenues of $11.53 billion.

    • Google Sites Revenues – Google-owned sites generated segment revenues of $9.39 billion, or 68% of total Google segment revenues, in the third quarter of 2013. This represents a 22% increase over third quarter 2012 Google sites segment revenues of $7.73 billion.
    • Google Network Revenues – Google’s partner sites generated segment revenues of $3.15 billion, or 23% of total Google segment revenues, in the third quarter of 2013, compared to $3.13 billion of Google network segment revenues in the third quarter of 2012.
    • Other Google Revenues – Other revenues from the Google segment were $1.23 billion, or 9% of total Google segment revenues, in the third quarter of 2013. This represents an 85% increase over third quarter 2012 other Google segment revenues of $666 million.

    Google Segment International Revenues – Google segment revenues from outside of the United States totaled $7.67 billion, representing 56% of total Google segment revenues in the third quarter of 2013, compared to 55% in the second quarter of 2013 and 53% in the third quarter of 2012.

    • Google segment revenues from the United Kingdom totaled $1.39 billion, representing 10% of total Google segment revenues in the third quarter of 2013, compared to 11% in the third quarter of 2012.

    Foreign Exchange Impact on Google Segment Revenues – Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the second quarter of 2013 through the third quarter of 2013, our Google segment revenues in the third quarter of 2013 would have been $41 million higher. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the third quarter of 2012 through the third quarter of 2013, our Google segment revenues in the third quarter of 2013 would have been $135 million higher.

    • In the third quarter of 2013, we recognized a benefit of $22 million to Google segment revenues through our foreign exchange risk management program, compared to $62 million in the third quarter of 2012.

    Reconciliations of our non-GAAP international revenues excluding the impact of foreign exchange and hedging to GAAP international revenues are included at the end of this release.

    Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our Network members, increased approximately 26% over the third quarter of 2012 and increased approximately 8% over the second quarter of 2013.

    Cost-Per-Click – Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our Network members, decreased approximately 8% over the third quarter of 2012 and decreased approximately 4% over the second quarter of 2013.

    TAC – Traffic acquisition costs, the portion of revenues shared with Google’s partners, increased to $2.97 billion in the third quarter of 2013, compared to $2.77 billion in the third quarter of 2012. TAC as a percentage of advertising revenues was 24% in the third quarter of 2013, compared to 26% in the third quarter of 2012.

    The majority of TAC is related to amounts ultimately paid to our Network members, which totaled $2.22 billion in the third quarter of 2013. TAC also includes amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $755 million in the third quarter of 2013.

    Motorola Mobile Segment Revenues – Motorola Mobile segment revenues were $1.18 billion, or 8% of consolidated revenues in the third quarter of 2013, compared to $1.78 billion, or 13% of consolidated revenues in the third quarter of 2012.

    Elimination and Other – Beginning in Q3 2013, Google and Motorola segment revenues are impacted by intersegment transactions that are eliminated in consolidation. Additionally, segment revenues associated with certain products were recognized this quarter in the segment results, but deferred to future periods in our consolidated financial statements. Such intersegment revenues and deferred revenues were $63 million in the third quarter of 2013.

    Other Cost of Revenues – Other cost of revenues, which is comprised primarily of manufacturing and inventory-related costs, data center operational expenses, amortization of intangible assets, and content acquisition costs, increased to $3.44 billion, or 23% of revenues, in the third quarter of 2013, compared to $3.19 billion, or 24% of revenues, in the third quarter of 2012.

    Operating Expenses – Operating expenses, other than cost of revenues, were $5.04 billion in the third quarter of 2013, or 34% of revenues, compared to $4.61 billion in the third quarter of 2012, or 35% of revenues.

    Amortization Expenses – Amortization expenses of acquisition-related intangible assets were $281 million for the third quarter of 2013, compared to $287 million in the third quarter of 2012. Of the $281 million, $153 million was as a result of the acquisition of Motorola, of which $116 million is included in Google segment results and $37 million is included in Motorola Mobile segment results.

    Stock-Based Compensation (SBC) – In the third quarter of 2013, the total charge related to SBC was $886 million, compared to $750 million in the third quarter of 2012. We currently estimate SBC charges for grants to employees prior to September 30, 2013 to be approximately $3.29 billion for 2013. This estimate does not include expenses to be recognized related to employee stock awards that are granted after September 30, 2013 or non-employee stock awards that have been or may be granted.

    Operating Income – On a consolidated basis, GAAP operating income in the third quarter of 2013 was $3.44 billion, or 23% of revenues. This compares to GAAP operating income of $2.74 billion, or 21% of revenues, in the third quarter of 2012. Non-GAAP operating income in the third quarter of 2013 was $4.34 billion, or 29% of revenues. This compares to non-GAAP operating income of $3.76 billion, or 28% of revenues, in the third quarter of 2012.

    • Google Segment Operating Income – Google segment operating income in the third quarter of 2013 was $4.64 billion, or 34% of Google segment revenues. This compares to segment operating income of $3.95 billion in the third quarter of 2012, or 34% of Google segment revenues.
    • Motorola Mobile Segment Operating Loss – Motorola Mobile segment operating loss in the third quarter of 2013 was $248 million, or -21% of Motorola Mobile segment revenues. This compares to segment operating loss of $192 million, or -11% of Motorola Mobile segment revenues in the third quarter of 2012.

    Interest and Other Income, Net – Interest and other income, net, was $24 million in the third quarter of 2013, compared to $65 million in the third quarter of 2012.

    Income Taxes – Our effective tax rate was 15% for the third quarter of 2013.

    Net Income – Consolidated GAAP net income in the third quarter of 2013 was $2.97 billion, compared to $2.18 billion in the third quarter of 2012. Non-GAAP consolidated net income was $3.64 billion in the third quarter of 2013, compared to $2.96 billion in the third quarter of 2012. GAAP EPS in the third quarter of 2013 was $8.75 on 339 million diluted shares outstanding, compared to $6.53 in the third quarter of 2012 on 333 million diluted shares outstanding. Non-GAAP EPS in the third quarter of 2013 was $10.74, compared to $8.87 in the third quarter of 2012.

    Cash Flow and Capital Expenditures – Net cash provided by operating activities in the third quarter of 2013 totaled $5.08 billion, compared to $4.0 billion in the third quarter of 2012. In the third quarter of 2013, capital expenditures were $2.29 billion, the majority of which was for production equipment, data-center construction, and real estate purchases. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the third quarter of 2013, free cash flow was $2.79 billion.

    We expect to continue to make significant capital expenditures.

    A reconciliation of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, is included at the end of this release.

    Cash – As of September 30, 2013, cash, cash equivalents, and marketable securities were $56.52 billion.

    Headcount – On a worldwide basis, we employed 46,421 full-time employees (42,162 in Google and 4,259 in Motorola Mobile) as of September 30, 2013, compared to 44,777 full-time employees (40,178 in Google and 4,599 Motorola Mobile) as of June 30, 2013.

    WEBCAST AND CONFERENCE CALL INFORMATION

    A live audio webcast of Google’s third quarter 2013 earnings release call will be available at http://investor.google.com/webcast.html. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, the financial tables, as well as other supplemental information including segment results and the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, are also available on that site.

    We also announce investor information, including news and commentary about our business and financial performance, SEC filings, notices of investor events and our press and earnings releases, on our investor relations website (http://investor.google.com) and our investor relations Google+ page (https://plus.google.com/+GoogleInvestorRelations/posts).

    FORWARD-LOOKING STATEMENTS

    This press release contains forward-looking statements that involve risks and uncertainties. These statements include statements regarding our investments in areas of strategic focus, our expected SBC charges, and our plans to make significant capital expenditures. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, unforeseen changes in our hiring patterns and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2012 and our most recent Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 which are on file with the SEC and are available on our investor relations website at investor.google.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2013. All information provided in this release and in the attachments is as of October 17, 2013, and we undertake no duty to update this information unless required by law.

    SEGMENT RESULTS

    In addition to consolidated results, management reviews financial information for the Google and Motorola operating segments. The presentation of segment results is a required disclosure in accordance with GAAP as part of our consolidated financial statements, and in accordance with GAAP, segment results are consistent with what is provided to the chief operating decision maker (CODM) for purposes of making decisions about allocating resources to the segment and assessing its performance. Certain items, including stock-based compensation expense and restructuring and other related charges, are not reflected in our segment results because this information is not reviewed by the CODM when assessing the performance of our operating segments. Similarly, revenues resulting from intersegment transactions that would be eliminated on consolidation, and revenues from certain product sales whose recognition would be deferred in our consolidated financial statements, are included in our segment results because this information is reviewed by the CODM when assessing the performance of the operating segments. Because of the eliminations, the sum of the two segment results will not equal the consolidated results unless the eliminations are taken into account. For more information on segment results, please see the table captioned “Reconciliations of selected non-GAAP financial measures and segment results to the nearest comparable GAAP financial measures,” which shows the adjustments to our consolidated results for the quarter ended September 30, 2013 that we have made in presenting our segment results, included at the end of this release.

    ABOUT NON-GAAP FINANCIAL MEASURES

    To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP EPS, free cash flow, and non-GAAP international revenues. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of selected non-GAAP financial measures and segments results to the nearest comparable GAAP financial measures,” “Reconciliations of non-GAAP results of operations to the nearest comparable GAAP measures,” “Reconciliation from net cash provided by operating activities to free cash flow,” and “Reconciliation from GAAP international revenues to non-GAAP international revenues” included at the end of this release.

    We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results, meaning our operating performance excluding not only non-cash charges, such as SBC, but also discrete cash charges that are infrequent in nature or relate to restructuring activities. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

    Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income excluding expenses related to SBC, and, as applicable, other special items. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenues. Google considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of SBC, and as applicable, other special items so that Google’s management and investors can compare Google’s recurring core business operating results over multiple periods. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Google’s management believes that providing a non-GAAP financial measure that excludes SBC allows investors to make meaningful comparisons between Google’s recurring core business operating results and those of other companies, as well as providing Google’s management with an important tool for financial and operational decision making and for evaluating Google’s own recurring core business operating results over different periods of time. There are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes some costs, namely, SBC, that are recurring. SBC has been and will continue to be for the foreseeable future a significant recurring expense in Google’s business. Second, SBC is an important part of our employees’ compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that our peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

    Non-GAAP net income and EPS. We define non-GAAP net income as net income excluding expenses related to SBC and, as applicable, other special items less the related tax effects, as well as net income (loss) from discontinued operations. The tax effects of SBC and, as applicable, other special items are calculated using the tax-deductible portion of SBC, and, as applicable, other special items, and applying the entity-specific, U.S. federal and blended state tax rates. We define non-GAAP EPS as non-GAAP net income divided by the weighted average outstanding shares, on a fully-diluted basis. We consider these non-GAAP financial measures to be useful metrics for management and investors for the same reasons that Google uses non-GAAP operating income and non-GAAP operating margin. However, in order to provide a complete picture of our recurring core business operating results, we exclude from non-GAAP net income and non-GAAP EPS the tax effects associated with SBC and, as applicable, other special items. Without excluding these tax effects, investors would only see the gross effect that excluding these expenses had on our operating results. The same limitations described above regarding Google’s use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP EPS. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income and EPS calculated in accordance with GAAP.

    Free cash flow. We define free cash flow as net cash provided by operating activities less capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, including information technology infrastructure and land and buildings, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow also facilitates management’s comparisons of our operating results to competitors’ operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating Google is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period. Our management compensates for this limitation by providing information about our capital expenditures on the face of the statement of cash flows and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Google has computed free cash flow using the same consistent method from quarter to quarter and year to year.

    Non-GAAP international revenues. We define non-GAAP international revenues as international revenues excluding the impact of foreign exchange rate movements and hedging activities. Non-GAAP international revenues are calculated by translating current quarter revenues using prior quarter and prior year exchange rates, as well as excluding any hedging gains realized in the current quarter. We consider non-GAAP international revenues as a useful metric as it facilitates management’s internal comparison to our historical performance.

    The accompanying tables have more details on the non-GAAP financial measures that are most directly comparable to GAAP financial measures and the related reconciliations between these financial measures.

    Image: ZeitgeistMinds (YouTube)