Brent Callinicos, CPAVice President and Treasurer
Google, Inc.November 2007
Presentation Outline
• Google info• Starting with a clean slate• Treasury innovation, Google-style• Some insight into what we’re doing in:
– F/X– Portfolio– Financial Risk– Systems
3
Google’s Mission
Organize the world's information and make it universally accessible and useful
4
Search: At the Core
Search is at the heart of everything Google does
More engineers working on search than ever before
Search is not a solved problem – offline info, personal info, personalized results, mobile experience
5
Google Strategy: Search. Ads. Apps.
Search.
Ads.Apps.
6
Anti-Strategy – We Do Not…
Projects
Content
Users
• Think small• Build niche solutions• Build for the short term• Develop vertical solutions
• Create content
• Discount tail content
• Focus on the average user• Hold user data hostage
6
7
Google Evolution
1995 1998 2000 2003 20052004 2006
?
Core Search Ads Monetization Communications Collaboration ?
Google Is a Data-Driven Company…Search, Sites,
My Ads
Google Analytics
Google Website
Optimizer
Google Trends
Google Ad Metrics
My Sites
9
$86 $440
$1,466
$3,189
$6,139
$11,767$10,605
($7,399 first 9mths)
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
2001 2002 2003 2004 2005 2006 Q1-Q3 '07
Continued Strong Performance
$11$186
$342$640
$2,017
$3,644$3,550
($2,489 first 9mths)
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
$2,800
$3,200
$3,600
$4,000
2001 2002 2003 2004 2005 2006 Q1-Q3 '07
2001 2002 2003 2004 2005 2006 Q1-Q3 '07
$9.94 ($6.64 first 9mths)
$5.02
$1.46
$0.41 $0.45
$9.50
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
2002 2003 2004 2005 2006 Q1-Q3 '07
Gross Revenue
(mill
ions
)
GAAP Operating Profit
GAAP EPS (Diluted)
$31 $155$395
$977
$2,459
$4,082$3,581
($2,670 first 9mths)
-$200
$200
$600
$1,000
$1,400
$1,800
$2,200
$2,600
$3,000
$3,400
$3,800
$4,200
2001 2002 2003 2004 2005 2006 Q1-Q3 '07
2001 2002 2003 2004 2005 2006 Q1-Q3 '07
Operating Cash Flow
(mill
ions
)(m
illio
ns)
Some Interesting Google Data-Points
Searches per day: Every day millions of people search on Google for information International traffic: More than half our searches come from outside the U.S. Google Network reach/frequency (Google Network includes all Google sites and AdSense for content pages)
• The Google Network reaches more than 80% of worldwide Internet users • The Google Network reaches more Internet users worldwide than any other web property or ad network
PageRank (just one of more than 200 signals we use to determine the rank of a website)• The web changes all the time (10–20% of the web is brand new every time we crawl it)• Google has never seen 20–25% of its queries before, showing the creativity of our users and proving that small indices aren’t
useful• Google updates its search algorithms on a weekly basis
Google News: now includes articles from over 10,000 news sources in more than 18 languages worldwide. Among these, over 4,500 are English language news sources
Advertisers: Hundreds of thousands of advertisers worldwide Client Software: Google Toolbar has millions of users worldwide Google Desktop: has millions of users worldwide Audio Advertising: More than 1,600 radio stations available to U.S. AdWords advertisers Print Advertising: More than 600 newspapers now available to U.S. AdWords advertiser TV Advertising: We are currently in a closed trial to test an auction-based TV advertising system working with
EchoStar and Astound Cable YouTube: People watch hundreds of millions of videos on YouTube every day
• Hundreds of thousands of videos are being uploaded to YouTube daily • Every minute, eight hours of video is uploaded to YouTube
Starting with a clean slate• very small group• few legacy systems• no inertia around “how we’ve always done things”
Deep Dive• Google’s culture
− bottoms-up and tops-down• Google’s objectives
− ascertain Treasury’s involvement• Treasury’s history (and timeline)
− how fast do we move?− what has focus been?
• Existing Treasury personnel• skills and career goals
• Listen!!!!
Starting with a Clean Slate
Treasury Areas of Initial Focus Take a big Bite!
1. Foreign Exchange2. Portfolio Management3. Corporate Finance4. Financial Risk Management5. Cash Management / Operations6. Insurance / Business Risk Management7. Stock Services8. SYSTEMS!
Aim highTake a deeply analytical approach to everything
• A sophisticated approach doesn’t have to be scary• Risk management as a foundation for forecasting, strategies etc.• Strive for as-close-to-as-possible visibility into exposures, market
values of positions, risk metrics, etcDiversify your portfolioAll insurance should be strategicUse systems wherever possible
• Straight-through processing is critical Look at entire transactions and processes from start to
finish and to use real-time numbers
Directional Themes
Take a long-term focusHire for strategy
− High level strategy drives hires− Personnel drive bottoms-up strategy validation and details− Don’t rush hiring− Hire expertise + adaptive intelligence− Bar should be to be as good as counterparties
Personnel Focus
Google Treasury Organization – Q1 ‘07
Brent CallinicosVP, Treasurer
Assistant Treasurer(1 HC)
Portfolio Manager(1 HC)
Operations& Cash Management
(1 HC)
Stock Services(4 HC)
Google Treasury Organization – Q3 ‘07Brent CallinicosVP, Treasurer
Assistant TreasurerPortfolio Management
Assistant TreasurerCash Mgmt, Insurance
& Stock Services
Assistant TreasurerF/X
Portfolio Manager
Portfolio Analyst
Portfolio Manager
Portfolio Analyst
Business Risk Mgmt(Insurance)
Business Risk Mgmt (Insurance)
Operations& Cash Management
F/X Manager
F/X Analyst
Corporate Finance & F/X Mgr
Executive Assistant
Operations& Cash Management
Operations& Cash Management
Stock Services(3 HC)
Stock Services
Corporate Finance Analyst
•Blue = Heads at end of Q1
•Grey = hired in Q2/Q3
•Green = Heads to be hired
Foreign Exchange Net Revenue must be hedged F/X risks should be managed in-house You need robust underlying risk systems, operational
controls, trading and reporting platforms You need industry standard benchmarks
• Not measuring performance is a mistake Having a handful of professionals in house is necessary Options are more flexible, have better accounting
treatment and are better risk management tools than forwards
1. Diversification is key – a concentrated risk is not a good risk, even if it seems safe
2. Asset allocation is key vs. trading3. A mix of in-house and external management is logical4. You need robust underlying risk systems, operational
controls, trading and reporting platforms5. You need industry standard benchmarks (i.e. universe of
money managers)6. Having a handful of stellar Capital markets professionals
in house is necessary and economically sound (external managers are more expensive)
7. Although derivatives can obviously be abused, they are ideal risk management tools
Portfolio
Financial Risk Management
Without underlying Operation and Risk systems, it is impossible to innovate or truly understand/model the risks being taken or quantify the risks that need to be mitigated
Robust systems can also provide a competitive advantageMultiple risk measurement methodologies is important
• VaR• Sensitivity analysis• Scenario analysis
F/X and Portfolio policies should incorporate statistical risk measures• Risk limits• Risk-adjusted returns relative to benchmarks
Implementation example: F/X
STARTING POINT:• No dedicated personnel• Broad policy• Balance Sheet only• No specific risk parameters• Forwards only
• No systems
CURRENT STATUS: Team of 2 (going to 3 in ’08) Focused world-class policy Full F/X revenue cycle Statistical risk drives policy Full range of economically-
efficient instruments Full range of systems
imminent− trading platform (F/X all)− exposure measurement− trade management− Robust accounting
(FAS133)
Systems
Simultaneous search• Portfolio• F/X (whole lifecycle including FASB133 acctg module)• Financial Risk Management• Treasury Workstation
Logic and cost/benefit dictates choice• Not just cost
22
C
AUG
SEPT
Consultant & Google
Vendor Landscape
Process Overview1. Onsite Vendor Overviews2. Surveys3. Detailed RFP4. Detailed Onsite Demos5. Demo Score Cards6. eAuction (SW license,
maintenance fees, hosting)7. Full Day Deep Dive
Demos
Systems Selection - Methodology
JULY
DEMOS
FINALIST VENDORS
Final Vendors
BA
FINAL APPROVALGO-FORWARD DECISION
F G
EJ HD
M
I
RFPA
L B C