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  • 1. Brent Callinicos, CPA Vice President and Treasurer Google, Inc. November 2007
  • 2. 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
  • 3. G o o g l e ’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 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
  • 5. G o o g l e 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
  • 7. G o o g l e Evolution 1995 1998 2000 2003 2005 2004 2006 ? Core Search Ads Monetization Communications Collaboration ?
  • 8. 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
  • 9. Continued Strong Performance Gross Revenue (millions) GAAP Operating Profit GAAP EPS (Diluted) Operating Cash Flow (millions) (millions)
  • 10. 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
  • 11.
    • 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
  • 12. 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!
  • 13.
    • 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
  • 14.
    • 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
  • 15. 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)
  • 16. 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
  • 17. 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
  • 18.
      • 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
  • 19. 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 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
  • 20. Implementation example: F/X
    • No dedicated personnel
    • Broad policy
    • Balance Sheet only
    • No specific risk parameters
    • Forwards only
    • No systems
    • 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)
  • 21. 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 Overview
    • Onsite Vendor Overviews
    • Surveys
    • Detailed RFP
    • Detailed Onsite Demos
    • Demo Score Cards
    • eAuction (SW license, maintenance fees, hosting)
    • Full Day Deep Dive Demos