Brent Callinicos, CPA

Vice President and Treasurer Google, Inc. November 2007

Presentation Outline
Google info

Starting with a clean slate

Treasury innovation, Google-style Some insight into what were doing in:

F/X Portfolio Financial Risk Systems

Googles Mission

Organize the world's information and make it universally accessible and useful

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
4

Google Strategy: Search. Ads. Apps.

Search.

Ads.
Apps.
5

Anti-Strategy We Do Not

Think small Build niche solutions Build for the short term Develop vertical solutions

Projects

Content

Create content Discount tail content Focus on the average user Hold user data hostage

Users

Google Evolution

1995

1998

2000

2003

2004

2005

2006

Core Search
7

Ads

Monetization

Communications

Collaboration

Google Is a Data-Driven Company

Search, Sites, My Ads My Sites

Google Trends

Google Website Optimizer

Google Ad Metrics

Google Analytics

Continued Strong Performance

Gross Revenue
(millions)
$12,000

$11,767

GAAP Operating Profit

(millions)
$4,000 $3,600 $3,200 $2,800

$10,605
($7,399 first 9mths)

$10,000

$3,550 ($2,489 first 9mths) $3,644

$8,000

$6,139
$6,000

$2,400 $2,000

$2,017

$4,000

$3,189 $1,466 $86 $440 2002 2003 2004 2005 2006 Q1-Q3 '07

$1,600 $1,200

$2,000

$800 $400 $0

$640 $11
2001

$186
2002
2001 2002

$342

$0

2001

2003
2003

2004
2004 2005

2005
2006

2006
Q1-Q3 '07

Q1-Q3 '07

$11.00 $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00

GAAP EPS (Diluted)$9.94

(millions)
($6.64 first 9mths)

Operating Cash Flow

$9.50
$4,200 $3,800 $3,400 $3,000 $2,600 $2,200 $1,800 $1,400 $977 $395 $31 $155 $2,459 $4,082 $3,581
($2,670 first 9mths)

$5.02

$1.46 $0.45 $0.41

$1,000 $600 $200

2002

2003

2004

2005

2006

Q1-Q3 '07

-$200

2001

2002
2001 2002

2003
2003

2004
2004 2005

2005
2006

2006
Q1-Q3 '07

Q1-Q3 '07

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 (1020% of the web is brand new every time we crawl it) Google has never seen 2025% of its queries before, showing the creativity of our users and proving that small indices arent 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

Starting with a clean slate
very small group few legacy systems no inertia around how weve always done
things

Deep Dive
Googles culture bottoms-up and tops-down Googles objectives ascertain Treasurys involvement Treasurys history (and timeline) how fast do we move? what has focus been? Existing Treasury personnel skills and career goals Listen!!!!

Treasury Areas of Initial Focus

Take a big Bite!
1. Foreign Exchange
2. Portfolio Management 3. Corporate Finance 4. Financial Risk Management 5. Cash Management / Operations 6. Insurance / Business Risk Management 7. Stock Services

8. SYSTEMS!

Directional Themes
Aim high Take a deeply analytical approach to everything
A sophisticated approach doesnt 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

Personnel Focus
Take a long-term focus

Hire for strategy

High level strategy drives hires Personnel drive bottoms-up strategy validation and details

Dont rush hiring

Hire expertise + adaptive intelligence Bar should be to be as good as counterparties

Google Treasury Organization Q1 07

Brent Callinicos VP, Treasurer

Portfolio Manager (1 HC)

Assistant Treasurer (1 HC) Operations & Cash Management (1 HC) Stock Services (4 HC)

Google Treasury Organization Q3 07

Brent Callinicos VP, Treasurer

Assistant Treasurer Portfolio Management

Assistant Treasurer Cash Mgmt, Insurance & Stock Services

Assistant Treasurer F/X

Executive Assistant

Portfolio Manager

Business Risk Mgmt (Insurance) Business Risk Mgmt (Insurance) Operations & Cash Management Operations & Cash Management Operations & Cash Management Stock Services (3 HC)

F/X Manager

Portfolio Analyst

F/X Analyst

Portfolio Manager

Corporate Finance & F/X Mgr

Portfolio Analyst

Corporate Finance Analyst

Blue = Heads at end of Q1 Grey = hired in Q2/Q3 Green = Heads to be hired

Stock Services

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

Portfolio
1. Diversification is key a concentrated risk is not a good risk, even
if it seems safe

2. Asset allocation is key vs. trading 3. A mix of in-house and external management is logical

4. You need robust underlying risk systems, operational controls,

trading and reporting platforms managers)

5. You need industry standard benchmarks (i.e. universe of money

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

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

Implementation example: F/X

STARTING POINT: CURRENT STATUS:

No dedicated personnel
Broad policy Balance Sheet only No specific risk parameters

Team of 2 (going to 3 in 08)

Focused world-class policy Full F/X revenue cycle Statistical risk drives policy

Forwards only
No systems

Full range of economicallyefficient 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

Systems Selection - Methodology

JULY
A F L B I C J D G E M H

RFP DEMOS

Consultant & Google Vendor Landscape

AUG FINALIST VENDORS Process Overview Onsite Vendor Overviews Surveys Detailed RFP Detailed Onsite Demos Demo Score Cards eAuction (SW license, maintenance
fees, hosting) A B C

1. 2. 3. 4. 5. 6.

Final Vendors

SEPT

7. Full Day Deep Dive Demos

FINAL APPROVAL GO-FORWARD DECISION

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