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 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!

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

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 ‘07

Brent 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. 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

5. 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 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)

• Financial Risk Management

• Treasury Workstation

Logic and cost/benefit dictates choice

• Not just cost

22

C

AUG

SEPT

Consultant & Google

Vendor Landscape

Process Overview2. Onsite Vendor Overviews3. Surveys4. Detailed RFP5. Detailed Onsite Demos6. Demo Score Cards7. eAuction (SW license, maintenance

fees, hosting)

8. 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

RFP

A

L B C