Function Media, L.L.C. v. Google, Inc. et al

Filing 153

Second MOTION to Expedite Motion to Compel by Function Media, L.L.C.. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Text of Proposed Order)(Nelson, Justin)

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Copyright O1 997-8 Slanford University

2OOB Annual Report

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Furthermore, the presentation formats of our advertisements are not the optimal way to peruse through large numbers of products. ln the next decade, I hope we can more effectively incorporate commercial offerings f rom the tens of millions of businesses worldwide and present them to consumers when and where thev are most useful. Within a couple of years of our founding, a number including functionality such as instant messaging, videoconferencing, and offline access (launched
in Gmail Labs this past January). Today some

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Googlers have more than 25 gigabytes of email going back nearly 10 years that they can search through in seconds. By the time you read this, and read them in English.

you should be able to receive emails written in French

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of colleagues and I were starting to hit the limitations of our traditional email clients. Our mailboxes were too big for them to handle speedily and reliably. lt was challenging or impossible to have email available and synchronized when switching between different

The benefits of web-based services, also known as cloud computing, are clear. There is no installation. All data is stored safely in a data center (no worries if your
hard drive crashes). lt can be accessed anytime, anywhere

there is a working web browser and Internet connection
(and sometimes even if there is not one

computers and platforms. Furthermore, email access required VPN (virtual private networks) so everyone was
always VPN'ing, thereby creating extra security risks. Searching mail was slow, awkward, and cumbersome.
By the end of 2001 we had a prototype of Gmail that

-

see below).

Perhaps even more importantly, new forms of communication and collaboration become possible. I am writing this letter using Google Docs. There are several other people helping me edit it simultaneously. Moments ago
I

was used internally. Like several existing services at the

stepped away and worked on it on a laptop. Without

time, it was web-based. But unlike those services it was designed for power users with high volumes of email. While our initial focus was on internal usage, it soon
became clear we had something of value for the whole world. When Gmail was launched externally, in 2OO4, other top webmail sites offered two- or four-megabyte mailboxes, less than the size of a single attachment I might find in a message today, Gmail offered one gigabyte

having to hit save or manage any synchronization all the changes appeared in seconds on the desktop that I am back to using now. ln fact, today I have worked on this document using three different operating systems and two different web browsers, all without any special sof tware or complex logistics.
ln addition to Gmail and Google Docs, the Google Apps

suite of products now includes Spreadsheets, Calendar,
Sites, and more. lt is also now available to companies,

at launch, included full-text search, and a host of other
features not previously found in webmail. Since then Gmail has continued to push the envelope of email systems,

universities, and other organizations. ln fact, more than
1

million organizations use Googìe Apps today, including

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Genentech, the Washington D.C. city government, the
University of Arizona, and Gothenburg University in Sweden.

of challenges, primarily related to web browsers, which can
be slow, unreliable, and unable to f unction off line. Rather

Because tens of millions of consumers already use our products, it is easy for organizations - from businesses to non-profits - to adopt them. Very little training is required and the passionate Google users already in these

than accept these shortcomings, we have sought to remedy

them in a number of ways. We have contributed code and
generated revenue for several existing web browsers like Mozilla Firefox, enablìng them to invest more in their

organizations are usually excited to help those who need a
hand. ln many ways, Google Apps are even more powerful in a business or group than they are for individuals because Apps can change the way businesses operate and the speed at which they move. For example, with Google Apps Web Forms we innovated by addressing the key problem of dìstributed data collection, making it incredibly simple to collect survey data from within the enterprise

software. We have also developed extensions such as Google Gears, which allows a browser to function offline. ln the past couple of years, however, we decided that
we wanted to make some substantial architectural changes to how web browsers work. For example, we felt

critical feature for collecting internal feedback we use extensively when "dogfooding" all of our products.
There are a number of things we could improve about these web services, For example, since they have arisen from different groups and acquisitions, there is less uniformity across them than there should be. For example, they can have different sharing models and

that different tabs should be segregated into separate sandboxes so that one poorly functioning website does not take down the whole browser. We also felt that for us to continue to build great web services we needed much faster JavaScript performance than current
browsers offered.
To address these issues we have created a new browser,

called Google Chrome. lt has a multiprocess model and
a very fast JavaScript engine we call VB. There are many

chat capabilities. We are working to shift all of our
aoolications to a common infrastructure. I believe we will achieve this soon, creating greater uniformity and capability across all of them.
We have found the web-based service model to have significant

other notable features, so I invite you to try it out for yourself. Chrome is not yet available on Mac and Linux so many of us, myself included, are not able to use it on a regular basis. lf all goes well, this should be addressed
later this year. Of course, this is just the start, and

Chrome will continue to evolve. Furthermore, other web browsers have
been spurred

advantages. But
it also comes

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We first created mobile search for Google back in 2000 and then we started to create progressively more tailored and complex mobile offerings. Today, the phone I carry

forward to seeing how this open platform will spur greater
innovation. Furthermore, Android allows for easy creation

of applications which can be deployed on any Android
device. To date, more than 1,000 apps have been uploaded

in my pocket is more powerful than the desktop computer
I

to the Android Market including Shop Savvy (which reads bar codes and then compares prìces), our own Latitude, and Guitar Hero World Tour. The past decade has seen tremendous changes in computing power amplified by the continued

used in 1998. lt is possible that this year, more lnternet-

capable smartphones will ship than desktop PCs. ln fact, your most "personal" computer, the one that you carry with you in your pocket, is the smartphone.

Today,almostathirdof
a leading indicator

in Japan are coming from mobile devices

growthof Google'sdatacenters.lthas allGooglesearches i+ ijili,l lflti"# .:, - ,i'i,-. )tï.t: : \ i\'/ 1-'r ;-s._rr._,*: enabled the growth and processing of \{,t{ \ 'r iz lrç) ' 'increasingly large data sets such as the of where the rest of the
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web, the world's books, and video. This in *;i: turn has allowed problems once considered , ,i i::ia-ii:i/::t<::;: ttv l"ti1{,:) i1"/"'i1';\i\"1 i: r-1 1"¿ "' '"1 has been challenging. There are different to be in the fantasy realm of artificial mobile platforms, customized differently , ,',",t-ii:-)ii: ?",1*;*ç:tt . intelligence to come closer to reality. to each device and carrier combination. While the earliest Google Voice Search world will soon ..':.,;i:.) i...'e However' mobile sof tware

be.

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development

Furthermore, deploying mobile applications can require separate business arrangements with individual carriers and manufacturers. While the rise of aoo stores f rom Apple, Nokia, RlM, Microsoft, and others as well as the adoption of HTML 5 on mobile platforms have helped, it is still very difficult to provide a service to the largest group of network-connected people in the world.
We acquired the startup Android in 2005 and set about the ambitious goal of creating a new mobile operating

ran as a crude demo in 2001, today our own speech

recognition technology powers GOOG-411, the voice search feature of the Google Mobile App, and Google Voice. lt, too, takes advantage of large training sets and signif icant computing capability. Last year, PicasaWeb, our photo hosting site, released face recognition, bringing a technology that is on the cutting edge of computer scìence to a

system that would allow open interoperation across carriers and manufacturers. Last year, after a lot of hard work, we released Android to the world. As it is open source, anyone is free to use ii and modify it. We look

consumer web service. Just a few months ago we released Google Flu Trends, a service that uses our logs data (without revealing
personally identifiable information) to predict flu incidence weeks ahead of estimates by the Centers for Disease Control (CDC). lt is amazing how an existing data set typically

used for improving search quality can be brought to bear

When I was a child, researching anything involved a long

on a seemingly unrelated issue and can help to save lives. believe this sort of approach can do even more - going beyond monitoring to inferring potential causes and cures
I

trip to the local library and a good deal of luck that one of the books there would be about the subject of interest. I could not have imagined that today anyone would be
able to research any topic in seconds.
The dark clouds currently looming over the world

of disease. This is just one example of how large data sets such as search logs coupled with powerful data mining can improve the world while safeguarding privacy.
Given the tremendous pace of technology, it is impossible

economy are a hardship for us all, but by the time today's children grow up, this recession will be a footnote in history,
Yet the technologies that we create between now and

to predict far into the future. However, I think the past decade tells us some things to expect in the next.
Computers will be 100 times faster still and storage will be 100 times cheaper. Many of the problems that we call artificial intelligence today will become accepted as standard computational capabilities, including image processing, speech recognition, and natural language processing. New and amazing computational capabilities

then will define their way of life.

will be born that we cannot even imagine today. While about half the people in the world are online
today via computers and mobile phones, the lnternet will reach billions more in the coming decade. I expect that by using simple yet powerful models of computing such
as web services, everyone will be more productive. These

Sergey Br¡n
Co- Founder; President, Tech

nology

tools enable individuals, small groups, and small businesses to accomplish tasks that only large corporations
could achieve before, whether it is making and releasing a movie, marketing a product, or reporting on a war.

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Larry Page

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Co- Fou ndeü P resident,

UNITED STATES SECUR¡TIES AND EXCHANGE COMMISSION
Washington, D.C.20549

FORM 1O.K
(Mark One)

X T

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscalyear ended December 31, 2OO8
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: OOO-50726

Delaware
(State or other jurisdiction ¡ncorporation or

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16OO Amphitheatre Parkway

77-0493581
(l.R.S. Employer

ldentification Number)

Mountain View, CA 94043
(Address of princ¡pal executive offices)

(65O) 2s3-OOOO
(Registrant's telephone number, including area code)

Title of Each

Class

Securities registered pursuant to Section 12(b) of the Act;
Name of Exchange on Wh¡ch Registered

Class A Common Stock, SO.OO1 par

value

The Nasdaq Stock Market LLC (Nasdaq Global Select Market)

Securities registered pursuant toSection 12(e) of the Act:

class B

corrn-on $ooo1 par value sto"k,

Act.

Options to purchase Class A Common Stock lndicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities

Yes

E

No

I

lndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No X lndicate by check mark whether the Registrant (1)has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days, Yes E No I lndicate by check mark if disclosure of delinquent filers pursuant to ltem 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part lll of this Form 10-K or any amendment to this Form 10-K. n lndicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in

n

Rulel2b-2 of the Exchange Act, (Check one):
Large accelerated filer

E

Accelerated filer

I

Non-accelerated filer

I

Smaller reporting company

!

lndicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act), Yes No E At June 30, 2008, the aggregate market value of shares held by non-affiliates of the Registrant (based upon the closing sale price of such shares on The Nasdaq Global Select lVarket on June 30, 2008) was 5116,684,274,176. At January 31, 2009, there were 240,289,354 shares of the Registrant's Class A common stock outstanding and

n

75,004,353 shares of the Registrant's Class B common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's Proxy Statement for the 2009 Annual Meeting of Stockholders are incorporated herein by reference in Part lll of this Annual Report on Form 10-K to the extent stated herein, Such proxy statement will be filed with the Securities and Exchange Commission within 120 days of the Registrant's fiscal year ended December 31, 2008.

Form 1O-K For the Fiscal Year Ended December 31, 2OO8
INDEX

TABLE OF CONTENTS
Page

PART

I

Item Item Item Item Item

l. Business 14. Risk Factors 18. Unresolved Staff Comments . . .
Prnnerfiec
Legal Proceedings . . . Submission of lVatters to a Vote of Securitv

I

18

llem )

32 ??

3. 4.
II

Holders

33 33

PART

Item 5, Item Item Item Item Item Item Item Item Item Item Item Item Item

l\/arket for Registrant's Common Equity, Related Stockholder Matters and lssuer Purchases of

EquitySecurities

6. 7. 74. 8. 9, 94. 98.
III

Selected Financial Data . Management's Discussion and Analysis of Financial Condition and Results of Operation ,, Quantitative and Qualitative Disclosures About Market Risk . . . Financial Statements and Supplementary Data .. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . Controls and Procedures . . . . Other lnformation . . Directors, Executive Officers and Corporate Governance

...

34 37

38 60 62 97 97 97 98 99
100 100 100

PART

11. 12. 13. 14,

1O.

ExecutiveComoensation ...., Security Ownership of Certain Beneficial Owners and l\rlanagement and Related Stockholder
Matters Certain Relationships and Related Transactions, and Director lndependence Principal Accounting Fees and Services Exhibits and Financial Statement Schedules

PART IV

15.

101

PART ITEM

I

1.

BUSINESS

Overview
the ways people connect with information' our Google is a global technology leader focused on improving site a top internet property and our brand one of the innovations in web search and advertising have made our web sites and other online content' which we make most recognized in the world. We ma¡ntã¡n a large index of web connection' our automated search technology freely available via our search engine to anyone with an internet information from our vast online index' helpé people obtain nearly instant access to relevant
online advertising' Businesses we generate revenue primarily by delivering relevant, cosi-effective of products aniservices with targeted advertising. ln addition, the thousands AdWords program to promote their program to deliver relevant ads that AdSense third-party web sites that comprise the Google Network use our generate revenue and enhance the user experience' in Delaware in August 2003' our we were incorporated in California in September 1998 and reincorporated View, California 94043, and our telephone at 160O Amphitheatre Parkway, Mountain use our

headouarters are located number is [phone].

Our Mission

it universally accessible and useful' We believe Our mission is to organize the world's information and make to accomplish our mission is to pui the needs of that the most effective, and ultimately ihe most profitable, way experience leads to increased traffic and strong our users first. we have found that offering a high-quality user word-of-mouthpromotion'ourdedicationtoputtingusersfirstisreflectedinthreekeycommitments: . We will do our best to provide the most relevant and useful search results possible, independent of

. .

we do not accept payment for search result financial incentives. Our search results will be objective and ranking or inclusion. advertising. Advertisements should not be an We will do our best to provide the most relevant and useful page is influenced by payment to us' we will make annoying interruption. lf any element on a search result
it clear to our users'

our search technology and other important We will never stop working to improve our user experience, areas of information organization'

compromise our user focus for short-term critical for the creation of long-term value. we do not intend to
economic gain'

to date. We also believe that this focus is We believe that our user focus is the foundation of our success

How We Provide Value to Our Users
many people and have the information. We place a premium on products that matter to
lives.

create' organize and share we serve our users by developing products that quickly and easily find' potential to improve their

Some of the key benefits we offer include:

sort through a vast and growing amount of Comprehensiyeness and Relevance. Our search technologies to user queries' This is an area of continual information to deliver relevant and useful search results in response web index contained approximately 30 million our development for us. When we started the company in 1998, provide the most comprehensive search experience We now index billions of web pug"" uná strive to documents.

possible. Our team continually improves our relevance algorithms to objectively determine the best answers to our users' queries and to place these answers at the top of our search results. We are also constantly developing new functionality and enhancing our offerings to allow our users to more quickly and easily find information. Objectivity, We believe it is very important that the results users get f rom Google are produced with only their interests in mind. We do not accept payment for search result ranking or inclusion. We do accept fees for advertising, but the advertising is clearly marked and separated and does not influence how we generate our search results. This is similar to a newspaper, where the articles are independent of the advertising. lnclusion and frequent updating in our index are open to all sites free of charge. We believe it is important for users to have access to the best available inf ormation, not just the information that someone pays for them to see. Global Access. We strive to provide our services to everyone in the world and the Google interface is available in 120 languages, Through Google News, we offer an automated collection of frequently updated news stories in 24 languages in 61 editions. We also offer automatic translation of content between various languages and provide localized versions of Google in many developing countries.

Ease of Use. We have always believed that the most useful and powerful search technology hides its complexity from users and gives them a simple, intuitive way to get the information they want. We have devoted significant efforts to create a streamlined and easy-to-use interface based on a clean search box set prominently on a page free of commercial clutter. We introduce new navigational or informational features when we believe they will be most usef ul to our users, and only after extensive usability testing and experimentation.

Pertinent, Useful CommercÌal lnformation. fhe search for information often involves an interest in commercial information-researching a purchase, comparing products and services or actively shopping. We help people find commercial information through our search services and advertising products, We also present advertisements that are relevant to the information people seek, Our technology automatically rewards ads that users pref er and removes ads that they do not f ind helpf ul.
Multiple Áccess Platforms. The mobile phone is the primary way that many people around the world access the internet. We have continued to invest in improving mobile search and have introduced applications that allow users to access search, email, maps, directions and satellite imagery through their mobile devices.

lmproving the Web. We want to make the web experience as good as possible for users around the world. This includes providing platforms for developers to build, deploy and run increasingly rich applications, For users, we are investing in areas to improve their experience in using web-based applications, including making browsers more
stable and oowerful.

Products and Services for our Users
Our product development philosophy involves rapid and continuous innovation, with frequent releases of early-stage products that we then iterate and improve. We often make products available early in their development stages by posting them on Google Labs, at test locations online or directly on Google.com. lf our users find a product useful, we promote it to "beta" status for additional testing. Once we are satisfied that a product is of high quality and utility, we remove the beta label and make it a core Google product. Our main
products and services are described below.

G

oo gl e.com

-

Sea r c h an d P erson alization

We are focused on building products and services on our web sites that benefit our users and let them find relevant information quickly and easily. These products and services include: Google Web Search. ln addition to providing easy access to billions of web pages, we have integrated special features into Google Web Search to help people find exactly what they are looking for on the web, The Google.com search exoerience also includes items like:

. . . . . . .

Advanced Search Functionality-enables users to construct more complex queries, for example by using Boolean logic or restricting results to languages, countries or web sites, Web Page Translation-supports 4i languages and automatically translates between any two of these languages, with a total of 1,640 language translation pairs.

lntegrated Tools-such as a spell checker, a calculator, a dictionary and currency and measurement
converters,

Search by Number-lets users do quick searches by entering shipping tracking numbers, vehicle identification numbers, product codes, telephone area codes, patent numbers, airplane registration
numbers and electronic equipment identification government numbers. Cached Links-provides snapshots of web pages taken when the pages were indexed, letting users view web pages that are no longer available.
Movie, Music and Weather lnformation-enables users to quickly and easily find movie reviews and show times, information about artists, songs and albums and weather conditions and forecasts. News, Finance, Maps, lmage, Video, Book, Blogs, and Groups lnformation-Users are often best served by different types of results. When relevant, we also search display results from other Google products

including Google News, Google Finance, Google Maps, Google lmage Search, Google Video, Google Book Search, Google Blog Search, and Google Groups. Google Image Search. Google lmage Search is our searchable index of images found across the web, To extend the usefulness of Google lmage Search, we offer advanced features, such as searching by image size, format and coloration and restricting searches to specific web sites or domains.
Google Book Search. Google Book Search lets users search the full text of a library-sized collection of books to discover books of interest and to learn where to buy or borrow them. Through this program, publishers can host their content and show their publications at the top of our search results. We also work closely with participating libraries to digitize all or part of their collections to create a full-text searchable online card catalog. Google Book Search links bring users to pages containing bibliographic information and several sentences of the search term in

context, sample book pages, or f ull text, depending on author and publisher permissions and book copyright status. ln October 2008, we reached a settlement agreement with the Authors Guild and the Association of American Publishers over lawsuits in the U,S, over Google Book Search. lf approved by the court, millions more in-copyright books will be accessible to our users. Many books will be available for purchase even if they are out of print, expanding the market for authors and publishers to earn money from their works. Google Scholar. Google Scholar provides a simple way to do a broad search for relevant scholarly literature including peer-reviewed papers, theses, books, abstracts, and articles. Content in Google Scholar is taken from academic publìshers, professional societies, preprint repositories, universities, and other scholarly organizations.
Google Finance. Google Finance provides a simple user interface to navigate complex f inancial information in an intuitive manner, including linking together different data sources, such as correlating stock price movements

to news events.

Google News. Google News gathers information from thousands of news sources worldwide and presents news stories in a searchable format within minutes of their publication on the web. The leading stories are presented as headlines on the user-customizable Google News home page, These headlines are selected for display entirely by a computer algorithm, without regard to political viewpoint or ideology, Google Vrdeo. Google Video lets users upload, f ind, view and share video content worldwide.
Google Blog Search. Google Blog Search enables users to search the blogging universe more ef fectively and

find out users' opinions on a wide variety of subjects. The Google Blog Search index includes every blog that
publishes a site feed.

iGoogle and Personalized Search. iGoogle connects users to the information that is most useful and important to them in an easy-to-use and customizable format. Users add gadgets and themes created by Google and developers to create a powerful and personalized homepage and arrange the content the way they want. iGoogle includes Personalized Search, which gives our users better search results based on what they have searched for in the past, making it easier to quickly find the information that is more relevant to them, Users can also view and manage their history of past searches and the results they have clicked on, and create bookmarks
with labels and notes. Google Product Search. Google Product Search helps users find and compare products from online stores across the web and directs users to where they can buy these products, Users can search for product information that is submitted electronically by sellers or automatically identified by Google software,
Google Custom Search. Google Custom Search allows communities of users familiar with particular topics to build customized search engines, These customized search engines allow the communities to help improve the quality of search results by labeling and annotating relevant web pages or by creating specialized, subscribed links for users to get more detailed information about a particular topic. Google Base. Google Base lets content owners submit content that they want to share on Google web sites. Content owners can describe and assign attributes to the information they submit and Google uses this descriptive content to better target search results to what users are looking for.

Google Webmaster fools. Google Webmaster Tools provides information to webmasters to help them enhance their understanding of how their web sites interact with the Google search engine. Content owners can submit sitemaps and geotargeting information through Google Webmaster Tools to improve search quality.

Applications lnformation created by a single user becomes much more valuable when shared and combined with information from other people or places. Therefore our strategy for products we develop in this space is simple: develop tools for our users to create, share and communicate any information generated by the user, thus making the information more useful and manageable. Examples of products we have developed with this strategy in mind
include:

Google Docs. Google Docs allows our users

to

create, view and edit documents, spreadsheets, and

presentations from anywhere using a browser, These documents are useful to our users as they are accessible anywhere internet access is available, manageable as they are stored within our servers and automatically backed up, and shareable in that they allow real time editing with co-workers and friends over the internet. Google Calendar. Google Calendar is a f ree online shareable calendar service that allows our users to keep track of the important events, appointments and special occasions in their lives and share this information with anyone they choose. ln addition, web sites and groups with an online presence can use Google Calendar to create public calendars, which are automatically indexed and searchable on Google.

Gmail. Gmail is Google's free webmail service that comes with built-in Google search technology to allow searching of emails and over seven gigabytes of storage, allowing users to keep their important messages, files and pictures, We serve small text ads that are relevant to the messages in Gmail, Google Groups. Google Groups is a free service that helps groups of people connect to information and people that have interest in them, Users can discuss topics by posting messages to a group, where other people can then read and respond. Google Groups now contains more than one billion messages from Usenet internet discussion groups dating back to 1981. The discussions in these groups provide a comprehensive look at evolving viewpoinis, debate and advice on môny subjects. Google Reader. Google Reader is a free service that lets users subscribe to f eeds and receive updates from multiple web sites in a single interface. Google Reader also allows users to share content with others, and functions with many types of media and reading-styles.

orkut. orkuT enables users to search and connect to other users through networks of trusted friends. Users can create a prof ile, personal mailboxes, post photos and join or manage online communities,
Blogger. Blogger is a web-based publishing tool that lets people publish to the web instantly using weblogs, or "blogs." Blogs are web pages usually made up of short, informal and frequently updated posts that are arranged chronologically,
Google Slfes. Google Sites allows users to easily create, update and publish content online without technical expertise, with control over who can see and update ihe site. Google Sites supports a variety of information such as videos, calendars, presentations, spreadsheets, discussions and texts, YouTube. YouTube is an online community that lets users worldwide upload, share, watch, rate, and comment on videos, from user generated, niche professional, to premium videos. YouTube is also a video platform providing general purpose video resources to the web community. YouTube videos are embedded in blogs, social networks and web applications, and YouTube programming inierfaces are utilized by many registered developers to create third-party products and services. ln addition, YouTube offers a range of video and interactive formats for advertisers to reach their intended audience.

Client
Google Toolbar. Google Toolbar is a f ree application that adds a Google search box to web browsers (lnternet Explorer and Firefox) and improves user web experience through features such as a pop-up blocker that blocks pop-up advertising, an autofill feature that completes web forms with information saved on a user's computer, and customizable buttons that let users search their favorite web sites and stay updated on their favorite feeds.

Google Chrome. Google Chrome is an open-source browser that combines technologies to make the web faster, safer, and easier to navigate.

a

minimal design with

Google Pack. Google Pack is a free collection of safe, useful software programs from Google and other companies that improve the user experience online and on the desktop. lt includes programs that help users browse the web faster, remove spyware and viruses.
Picasa. Picasa is a f ree service that allows users to view, manage and share their photos. Picasa enables users to import, organize and edit their photos, and upload them to Picasa Web Albums where the photos can be shared with others on the internet.

Google Desktop. Google Desktop leis people perform a full-text search on the contents of their own computer, including email, files, instant messenger chats and web browser history. Users can view web pages ihey have visited even when they are not online. Google Desktop also includes a customizable Sidebar that includes modules for weather, stock tickers and news.

Google GEO-Maps, Earth and Local
Google Earth. Google Earth lets users see and explore the world and beyond from their desktop. Users can fly virtually to a specific location and learn about that area through detailed satellite and aerial images, 3D topography, street maps and millions of data points describing the location of businesses, schools, parks and other points of interest around the globe. Google Earth includes Sky, an astronomical imagery library with images of over 100 million stars and 200 million galaxies, and Ocean, with a detailed bathymetric map of the earth's ocean floors.

Google Maps. Google Maps helps people navigate map information. Users can look up addresses, search for businesses, and get point-io-point driving directions-all plotted on an interactive street map or on satellite imagery. Google Maps includes StreetView, 360-degree street-level imagery available in several regions around the world, and Google Transit, which provides up-to-date information on local transit options in many cities, Google Maps provides a comprehensive search experience by combining yellow-pages listings with ratings and reviews and other business information. ln addition, Google Maps lets users create their own maps and allows developers to put their content on top of our base map data. We display relevant targeted ads for searches done through Google lVaps. Google Sketchup and Sketchup Pro. Google Sketchup is a f ree tool that enables users to model buildings in 3D, and can be used as a tool for populating Google Earth with architectural content. The Pro version of this tool is sold to professional designers and includes additional features.

Google Mobile and Android
Google Mobile. Google Mobile lets people search and view both the "mobile web," consisting of pages created specifically for wireless devices, and ihe eniire Google index. Users can also access online information using Google SMS by typing a query to the Google shortcode and checking their email using Gmail Mobile. Google Mobile is available through many wireless and mobile phone services worldwide. Google Maps for Mobile. Google Maps for Mobile is a f ree Java client application that lets users view maps and satellite imagery, find local businesses and get driving directions on mobile devices, Google Maps for lVobile offers many of the same functions as Google Maps, including draggable maps combined with satellite imagery, ln addition, the My Location feature allows users to view their approximate location on the map.

Blogger for Mobile. With Blogger for mobile devices, users can take pictures with their camera phones and then post their pictures and text comments to their blog using l\/MS or email.
Google Gmail, News and Personalized Home for Mobile. Several of our services, such as Gmail, News and Personalized Home are also available as mobile applications.
GOOG-411. GOOG-411 is a free, speech-enabled application allowing users to call 1-800-GOOG-411 to search

for businesses by name or category.

Android. Android is a free, open-source mobile software platform which allows developers to create applications for mobile devices and for handset manufacturers to install. Android is being developed with the Open Handset Alliance, a group of more than 45 technology and mobile companies, with the goal of providing consumers a less expensive, richer and more powerful mobile experience.
Search by Voice, Search by Voice lets users do a Google web search just by saying what they are looking for. Search results are formatted to fit phone screens, Search by Voice is currently available for the iPhone and Android
Dnones.

Google Checkout
Google Checkout is a service for our users, advertisers and participating merchants that is intended to make online shopping faster, more convenient and more secure by providing a single login for buying online and helping users find convenient and secure places to shop when they search. For merchants, Google Checkout is integrated with AdWords to help advertisers attract more leads, convert more leads to sales and process sales. We believe that Google Checkout's streamlined checkout process lowers shopping cart abandonment and barriers to purchase, which increases conversion of clicks to sales for participating merchants. We charge merchants who use Google Checkout 2o/o of lhe transaction amount plus 50,20 per transaction to the extent these transactions exceed 10 times the amount they spend on AdWords advertising.

Google Labs
Google Labs is our test bed for our engineers and adventurous Google users. On Google Labs, we post product prototypes and solicit feedback on how the technology could be used or improved, Current Google Labs examples include: Picasa for Mac, a software that allows Mac users to organize, edit, create, and share photos, /n Quotes, a feature that allows users to find quotes f rom stories linked to Google News, and Google Audio lndexing, a new technology that allow users to find spoken words inside videos and jump to the right portion of the video where these words are sooken. The Technology Behind Search and Our User Products and Services Our web search technology uses a combination of techniques to determine the importance of a web page independent of a particular search query and to determine the relevance of that page to a particular search query,

Ranking Technology. One element of our technology for ranking web pages is called PageRank. While we developed much of our ranking technology after Google was formed, PageRank was developed at Stanford University with the involvement of our founders and was therefore published as research. PageRank is a queryindependent technique for determining the importance of web pages by looking at the link structure of the web.
PageRank treats a link from web page A to web page B as a "vote" by page A in favor of page B, The PageRank of a page is the sum of the pages that link to it. The PageRank of a web page also depends on the importance (or

PageRank) of the other web pages casting the votes. Votes cast by important web pages with high PageRank weigh more heavily and are more influential in deciding the PageRank of pages on the web.

Text-Matching Techniques. Our technology employs text-matching techniques that compare search queries with the content of web pages to help determine relevance. Our text-based scoring techniques do far more than count the number of times a search term appears on a web page, For example, our technology determines the proximity of individual search terms to each other on a given web page, and prioritizes results that have the search terms near each other, Many other aspects of a page's content are factored into the equation, as is the content of pages that link to the page in question. By combining query independent measures such as PageRank with our text-matching iechniques, we are able to deliver search results that are relevant to what people are trying to find. Infrastructure. We provide our products and services using our homegrown software and hardware infrastructure, which provides substantial computing resources at low cost. We currently use a combination of of f-the-shelf and custom software running on clusters of commodity computers. Our considerable investment in developing this infrastructure has produced several benefits. This infrastructure simplifies the storage and processing of large amounts of data, eases the deployment and operation of large-scale global products and services, and automates much of the administration of large-scale clusters of computers. Although most of this infrastructure is not directly visible to our users, we believe it is importani for providing a high-quality user experience. lt enables significant improvements in the relevance of our search and advertising results by allowing us to apply superior search and retrieval algorithms thai are computationally intensive. We believe the infrastructure also shortens our product development cycle and lets us pursue innovation more cost effectively.

How We Provide Value to Our Advertisers and Content Owners Google AdWords For advertisers seeking to market their products and services to consumers and business users over the internet, we offer Google AdWords, an auction-based advertising program that lets advertisers deliver relevant ads targeted to search queries or web content across Google sites and through the web sites of our Google Network, which is the network of online and offline third parties that use our advertising programs to deliver relevant ads with their search results and content. The Google Network is also increasingly encompassing different forms of online and offline media as well, including content providers who use our advertising programs to deliver ads in online video, television and radio broadcasts, AdWords is accessible to advertisers in 4i different interface
languages.

Advertisers in our AdWords program create text-based or display ads, bid on the keywords that will trigger the display of their ads and set daily spending budgets. AdWords features an automated online signup process that lets advertisers quickly implement ad campaigns on Google properties and the web sites of our Google Network members. Ads are ranked for display in AdWords based on a combination of the maximum cost-per-click pricing set by the advertiser and click-through rates and other factors used to determine the relevance of the ads, This favors the ads that are most relevant to users, improving the experience both for the person looking for information and for the advertiser who is generating relevant ads. The AdWords program offers advertisers the f ollowing additional benefits: Return on Investmeni. lt/any advertising dollars are spent delivering messages in an untargeted fashion, and payment for ihese advertisements is not tied to performance, AdWords shows ads only to people seeking information related to what the advertisers are selling, and advertisers choose how much they pay when a user clicks on their ad, Because we offer a simple ad format, advertisers can also avoid incurring significant costs assoclated with creating ads. As a result, even small advertisers find AdWords cost-effective for connecting with potential customers. ln addition, advertisers can create many different ads, increasing the likelihood that an ad is suited to a user's search. Users can find advertisements for what they are seeking, and advertisers can find users who want what they are offering. Branding. We also offer Site Targeting, a service that lets advertisers target specific web sites wlth text, image and Flash ads, so that they can more effectively reach specif ic sets of customers, ln addition to targeting sites by content, advertisers can choose placements on sites based on user demographic attributes. To protect user privacy, we use only third-party opt-in panel data to map the demographics of sites in our networks. Site Targeting is an auction-based system where bidding is based on a maximum cost per impression, and SiteTargeted ads compete with keyword-targeted ads in the same auction.

Access to the Google Search and Content Network. We serve AdWords ads on Google properties, our syndicated search partners' web sites, and the thousands of third-party web sites that make up the Google Network. As a result, we can offer extensive search and content inventory on which advertisers can advertise. Apart from keyword-based ads targeted to search queries and Site Targeting, we also offer advertisers an effective contextual advertising option-Content Targeting-ihat displays their ads on relevant content pages
across our network of partner sites and products. As a result, AdWords advertisers can target users on Google properties and on search and content sites across the web. This gives advertisers increased exposure to people who are likely to be interested in their offerings. The Google Network significantly enhances our ability to attract interested advertisers.

Campaign Control. Google AdWords gives advertisers hands-on control over most elements of their ad campaigns, Advertisers can specify the relevant search or content topics for each of their ads. Advertisers can also manage expenditures by setting a maximum daily budget and determining how much they are willing to pay whenever a user clicks or views an ad, Other features that make it easy to set up and manage ad campaigns include:

.

Campaign management Advertisers can target multiple ads to individual ad oerformance to see which ads are the most effective.

a given keyword and easily

track

. . . . .

Conversion tracking. Conversion tracking is a free tool integrated into AdWords reports that measures the

conversions

of an advertiser's campaigns, enabling a better understanding of the overall return

on

investment generated for the advertiser by the AdWords program,

Traffic estimator. This tool estimates the number of searches and potential costs related to advertising on
a particular keyword or set of keywords.

Quality-based bidding. Advertisers' keywords are assigned dynamic minimum bids based on their Quality Score-the higher the Quality Score, the.lower the minimum bid. This rewards advertisers with relevant keywords and ads.

Budgeted delivery. Advertisers can set daily budgets for their campaigns and control the timing for
delivery of their ads.

AdWords Discounter. This feature gives advertisers
next highest bid.

the freedom to increase their maximum

cost-per-click because it automatically adjusts pricing so that they never pay more than one cent over the

We offer larger advertisers additional services that help maximize returns on their internet marketing investments and improve their ability to run large, dynamic campaigns. These include dedicated client service
representatives as well as:

. . . .

CreatÌve max¡m¡zat¡on Our AdWords specialists help advertisers select relevant keywords and create more effective ads. Vertical market experts. Specialists with experience in particular industries offer guidance on how to target potential customers.

Bulk posting. We help businesses launch and manage large ad campaigns with hundreds or even
thousands of targeted keywords. The AdWords API and Commercial Developer Program. For large advertisers as well as third parties, Google's free AdWords API service lets developers engineer computer programs that interact directly with the AdWords system, With such applications, advertisers and third parties can more efficiently and creatively manôge their large AdWords accounts and campaigns. The AdWords Commercial Developer Program also enables our third-party developer ecosystem to contìnue designing and delivering innovative business applications based on the AdWords platform and distribution channel.

Global Support. We provide customer service to our advertiser base through our global support organ¡zôtion as well as through over 60 offices in over 20 countries. AdWords is available on a self-service basis with email and real-time chat support, At certain spending levels and through certain signup channels, phone support is also available. Advertisers with more extensive needs and advertising budgets can request strategic support services, which include an account team, io help them set up and manage their campaigns. Depending on geography, we accept bank and wire transfers, direct debit, and local debit cards carrying the Visa and MasterCard logos. We also

accept payment through international credit cards. For selected advertisers, we offer several options for credit terms and monthly invoicing. We accept payments in over 40 currencies.

Google AdSense
We are enthusiastic about helping content owners monetize their content, which facilitates the creation of better content to search. lf there is better content on the web, people are likely to do more seôrches, and we expect that will be good for our business and for users. Our Google AdSense program enables web sites that are part of the Google Network to deliver AdWords ads that are relevant to the search results or content on their pages. lt also allows offline media companies, such as television and radio stations, to deliver ads and audio ads to the content they provide. We share most of the revenue generated from ads shown by a Google Network member with that member, The key benefits we offer to Google Network members include:

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.Access to Advertisers. Many small web site companies and content producers do not have the time or resources to develop effective programs for generating revenue from online advertising. Even larger sites,

with dedicated sales teams, may find it difficult to generate revenue from pages with specialized content. Google AdSense promotes effective revenue generation by providing Google Network members access to Google's base of advertisers and their broad collection of ads, Our technology automatically starts delivering ads on a web site as soon as the member joins the Google Network. Because the ads are related to what the web site's visitors are looking for on the site, AdSense provides the Google Network member with a way to both monetize and enhance their web sites. The Google Network member
determines the placement of the ads on its web site, and controls and directs the nature of ad content.

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Improved User Satisfactlon. Many web sites are cluttered with intrusive or untargeted advertising that may distract or confuse users and may undermine users' ability to find the information they want. Some web sites have adopted practices we consider to be abusive, including pop-up ads or ads that take over web pages, We believe these tactics can cause dissatisfaction with internet advertising and reduce use of the internet overall, Our AdSense program extends our commitment to improving the overall web experience by enabling web sites to display AdWords ads in a fashion that we believe people find useful
rather than disruotive.

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Better Storage, Management, Access and Visibility. We have developed new storage, management and access technologies to allow content owners and producers to distribute and, if they wish, monetize more types of online and offline content. We believe that only a small fraction of the world's information and content is easily and effectively stored and searchable, and that bringing non-traditional, online or offline content into Google's index will encourage the preservation and continued creation of this content. Google Scholar, Google Book Search, and Google Video enable more print and video content to be made easily accessible (and monetizable) online, while Google Base allows owners and creators to put online even non-traditional forms of structured information. Syndicated Search. We provide our search technology to partners of all sizes, allowing Google search service to be offered through these partners' properties. For commercial partners, we provide an
extensive range of customization options.

.

Our Google AdSense program includes:

Google AdSense for Search. For internet companies that want to target search audiences, we offer Google AdSense for search. To use AdSense for search, most of our AdSense for search partners add Google search functionality to their web pages in the form of customizable Google seôrch boxes. We offer this service free to these partners. When visitors to these web sites search either the web site or the internet using these customizable search boxes, we display relevant ads (generally text ads) on the search results pages, targeted to match user search queries. These web sites can then generate additional revenue when visitors click on or view these ads. Because we also offer to license our web search technology along with Google AdSense for search, companies without their own search service can offer Google Web Search to improve the usefulness of their web sites for their users while increasing their revenue. We generally charge a f ee related to these license agreements. We also off er a more customizable premium offering to web sites with significant traffic.
Google AdSense for Content. Google AdSense for content lets web sites generate revenue from advertising by serving relevant AdWords ads targeted to web content. Web sites can use our automated sign-up process to quickly display AdWords ads on their sites. Under this program, we use automated technology to analyze the meaning of the content on the web site and serve relevant ads based on the meaning of such content, For example, a web page on an automotive blog that contains an entry about vintage cars might display ads for v¡ntage car parts or vintage car shows. These ads are displayed in spaces that our AdSense for content partners have set aside on their web sites for our AdWords content. AdSense for content allows a variety of ad types to be shown, including text ads, image ads, video ads, link units (which are sets of clickable links to topic pages related to page content) and themed units (which are regular text ad units with graphic treatments that change seasonally and by geography). We share the majority of the revenues generated from these ads with the Google Network members that display the ads, lmportant AdSense for content features include:

.

Competitive ad f ilters. Web sites can block competitive ads, or other ads they want to keep off their site, simply by telling us which URLs to block.

io

Reports. Publishers can view customizable reports about their AdSense perf ormance.

Sensifive content filters. Al times, certain ads may be inappropriate for some pages. For example, Google automatically filters out ads that would be inappropriate on a news page about a catastrophic event. Choose default ads. ln the unlikely event that Google is unable to serve targeted ads on a page, we web sites the option of displaying a default ad of their choice.
of

fer

Google ,AdSense for DomaÌns and Feeds. Google AdSense for domains allows owners of undeveloped domains that receive traffic from users typing generic terms into browsers or search to generate revenue from relevant advertising, AdSense for feeds is a free program that allows publishers to monetize their feeds-usersubscribable content streams containing structured data such as stock and financial information, web blog posts, and weather reports-through text ads targeted to the content of the feed, Like AdSense for search or content, Google shares the majority of the advertising revenue from AdSense for domains and AdSense for feeds with the domain owner or feed oublisher.

Google Television Ads. Google Television Ads is a product that allows advertisers to use their AdWords account to create television campaigns, Advertisers can use our online advertising platform to place and monitor
the effectiveness of their television ads, enhancing relevance and accountability. Google AdSense for Audio and Audio Ads. Google AdSense for Audio is an early-stage product for radio broadcasters that automatically schedules and places advertising into radio programs, with the objective of increasing revenue for broadcasters by making their ad inventory available to new advertisers and decreasing the costs associated with processing advertisements. Google Audio Ads makes radio advertising easier for small and
large businesses by providing an online interface for creating and launching radio advertising campaigns.

Display Advertising Display advertising is internet advertising that typically includes static or animated images as well as interactive audio or video media, such as the banner ads you see on the tops or sides of many popular web sites. Our goal is to make it easy for anyone to use display advertising. We want advertisers to realize a better return on their display advertising campaigns and publishers to maximize the value of the content on their web
sites by providìng tools, platforms and channels for ad management and delivery.

We completed our acquisition of DoubleClick in lVarch 2008 and are in the process of integrating DoubleClick's online ad serving and management services into Google's advertising solutions. DoubleClick provides Google with a platform for delivering display advertising. DoubleClick also provides services related to the delivery of display advertising, including media planning, buying, implementation and measurement tools for advertisers and agencies and forecasting and reporting tools for publishers, Through these tools we also provide publishers with access to agencies and advertisers to help them sell their advertising inventory and ways to
streamline the ad sales process,
We also offer advertising solutions on YouTube in a range of video, static or animated images, and interactive

formats. The Technology Behind Google's Advertising Programs
Our AdWords and AdSense programs serve millions of relevant, targeted ads each day based on search terms people enter or content they view on the web. The key elements of our advertising technology include; Google AdWords Auction System, The Google AdWords auct¡on system lets advertisers automatically deliver relevant, targeted advertising, Every search query we process involves the automated execution of an auction, resulting in our advertising system often processing hundreds of millions of auctions per day. To determine

wheiher an ad is relevant to a particular query, this system weighs an advertiser's willingness to pay for
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prominence in the ad listings (the cost-per-click or cost-per-impression bid) and interest from users in the ad as measured by the click-through rate and other factors. Our Quality-based bidding system also assigns minimum bids to advertiser keywords based on the Quality scores of those keywords-the higher the Quality score, the lower the minimum bid. The Quality score is determined by an advertiser's keyword click-through rate, the relevance of the ad text, historical keyword performance, the quality of the ad's landing page and other relevancy factors. This prevents advertisers with irrelevant ads from "squatting" in top positions to gain exposure, and rewards more relevant, well-targeted ads that are clicked on frequently. Because we are paid only when users click on ads, the AdWords ranking system aligns our interests with those of our advertisers and our users. The more relevant and useful the ad, the better for our users, for our advertisers and for us.

The AdWords auction system also incorporates the AdWords Discounter, which automatically lowers the amount advertisers actually pay to the minimum needed to maintain their ad position. Consider a situation where there are three advertisers-Pat, Betty and Joe-each bidding on the same keyword for ads that will be displayed on Google.com. These advertisers have ads with equal click-through rates and bid S1.0O per click, 50.60 per click and SO,50 per click, respectively. With our AdWords discounter, Pat would occupy the first ad position and pay only
$0.61 per click, Betty would occupy the second ad position and pay only S0,S1 per click, and Joe would occupy the third ad position and pay the minimum bid of 50,01 per click. The AdWords discounter saves money for advertisers by minimizing the price they pay per click, while relieving them of the need to constantly monitor and adjust their cost-per-click. Advertisers can also experience greater discounts through the application of our smart pricing technology, which can reduce the price of clicks for ads served across the Google Network based on the expected value of the click to the advertiser. AdSense Contextual Advertising Technology. Our AdSense technology employs techniques that consider factors such as keyword analysis, word frequency and the overall link structure of the web to analyze the content of individual web pages and to match ads to them almost instantaneously. With this ad targeting technology, we can automatically serve contextually relevant ads. To do this, Google Network members embed a small amount of custom HTML code on web pages that generates a request to Google's AdSense service whenever a user views

the web page, Upon receiving a request, our software examines the content of web pages and performs a matching process that identifies advertisements that we believe are relevant to the content of the specific web page. The relevant ads are then returned to the web pages in response to the request. We employ similar techniques for matching advertisements to other forms of textual content, such as email messages and Google
Groups postings. For example, our technology can serve ads offering tickets to fans of a specific sports team on a news story about that team.

Our display advertising programs provide advertisers and publishers services related
branded display advertising. The key elements of our display advertising technology include:

to the delivery

of

DoubleClick Advertiser Platform. The DoubleClick Advertiser Platform provides tools for media planning, buying, selling, ad delivery, measurement, and optimization, The key technologies included in this platform are:

. . .

Google Ad Planner and MediaVisor. This research and media planning tool allows agencies and
advertisers to identify the web sites their target customers are likely to visit. MediaVisor improves media buying by replacing formerly manual tasks in the media buying process.
DART for Advertisers. DART for advertisers is an ad management and serving solution that can manage, traffic, serve and report on an advertiser's online campaign.

DoubleClick Rich Media and Video. This tool covers the process of creating, managing and reporting on rich media and video advertisins.

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DoubleClick Publisher Platform. Th