Google Presentation

Brent Callinicos, CPA Vice President and Treasurer Google, Inc. November 2007

Presentation Outline
G o o g l e info
Starting with a clean slate
Treasury innovation, G o o g l e -style
Some insight into what we’re doing in:
F/X
Portfolio
Financial Risk
Systems

G o o g l e ’s Mission Organize the world's information and make it universally accessible and useful

Search : At the Core Search is at the heart of everything G o o g l e does More engineers working on search than ever before Search is not a solved problem – offline info, personal info, personalized results, mobile experience

G o o g l e Strategy : Search. Ads. Apps. Search. Ads. Apps.

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

G o o g l e Evolution 1995 1998 2000 2003 2005 2004 2006 ? Core Search Ads Monetization Communications Collaboration ?

G o o g l e Is a Data-Driven Company… Search, Sites, My Ads G o o g l e Analytics G o o g l e Website Optimizer G o o g l e Trends G o o g l e Ad Metrics My Sites

Continued Strong Performance Gross Revenue (millions) GAAP Operating Profit GAAP EPS (Diluted) Operating Cash Flow (millions) (millions)

Some Interesting G o o g l e Data-Points
Searches per day : Every day millions of people search on G o o g l e for information
International traffic : More than half our searches come from outside the U.S.
G o o g l e Network reach/frequency ( G o o g l e Network includes all G o o g l e sites and AdSense for content pages)
The G o o g l e Network reaches more than 80% of worldwide Internet users
The G o o g l e 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)
G o o g l e has never seen 20–25% of its queries before, showing the creativity of our users and proving that small indices aren’t useful
G o o g l e updates its search algorithms on a weekly basis
G o o g l e 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: G o o g l e Toolbar has millions of users worldwide
G o o g l e 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
G o o g l e ’s culture
bottoms-up and tops-down
G o o g l e ’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!
Foreign Exchange
Portfolio Management
Corporate Finance
Financial Risk Management
Cash Management / Operations
Insurance / Business Risk Management
Stock Services
SYSTEMS!

Aim high
Take 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, etc
Diversify your portfolio
All insurance should be strategic
Use 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 focus
Hire 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

G o o g l e Treasury Organization – Q1 ‘07 Brent Callinicos VP, Treasurer Assistant Treasurer (1 HC) Portfolio Manager (1 HC) Operations & Cash Management (1 HC) Stock Services (4 HC)

G o o g l e Treasury Organization – Q3 ‘07
Blue = Heads at end of Q1
Grey = hired in Q2/Q3
Green = Heads to be hired
Brent Callinicos VP, Treasurer Assistant Treasurer Portfolio Management Assistant Treasurer Cash Mgmt, Insurance & Stock Services Assistant Treasurer F/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

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

Diversification is key – a concentrated risk is not a good risk, even if it seems safe
Asset allocation is key vs. trading
A mix of in-house and external management is logical
You need robust underlying risk systems, operational controls, trading and reporting platforms
You need industry standard benchmarks (i.e. universe of money managers)
Having a handful of stellar Capital markets professionals in house is necessary and economically sound (external managers are more expensive)
Although derivatives can obviously be abused, they are ideal risk management tools
Portfolio

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 advantage
Multiple 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)
Treasury Workstation
Logic and cost/benefit dictates choice
Not just cost

C AUG SEPT Consultant & Google Vendor Landscape
Process Overview
Onsite Vendor Overviews
Surveys
Detailed RFP
Detailed Onsite Demos
Demo Score Cards
eAuction (SW license, maintenance fees, hosting)
Full Day Deep Dive Demos
Systems Selection - Methodology JULY DEMOS FINALIST VENDORS Final Vendors FINAL APPROVAL GO-FORWARD DECISION B A F G E J H D M I RFP A L B C

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Google Presentation

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