Q4 2010 Earnings Call

Uploaded by GoogleIR on 20.01.2011

Jay: Please stand by.
We are about to begin.
Good day, and welcome, everyone,
to the Google, Incorporated Fourth Quarter
2010 earnings conference call.
This call is being recorded.
At this time, I'd like to turn the conference
over to Jane Penner, Senior IR Manager.
Please go ahead.
Penner: Good afternoon, everyone,
and welcome to today's Fourth Quarter Fiscal Year
2010 Earnings conference call.
With us are Eric Schmidt,
Chief Executive Officer and Chairman of the Board.
Larry Page, cofounder and President, Products.
Sergey Brin, cofounder and President, Technology.
Patrick Pichette, Chief Financial Officer.
Jonathan Rosenberg,
Senior Vice-President, Product Management.
And Nikesh Arora, Senior Vice-President
and Chief Business Officer.
This call is also being webcast
from investor.google.com.
A replay of the call will be available
on our website in a few hours.
Now let me quickly cover the safe harbor.
Some of the statements we make today
may be considered forward-looking,
including statements regarding
our expected level of capital expenditures,
Google's future and investments
in our long-term growth and innovation,
and the expected performance of our business.
These statements involve
a number of risks and uncertainties
that could cause actual results to differ materially.
Please notice--please note
that these forward-looking statements
reflect our opinions
only as of the date of this presentation,
and we undertake no obligation to revise
or publicly release the results
of any revision to these forward-looking statements
in light of new information or future events.
Please refer to our SEC filings
for a more detailed description of the risk factors
that may affect our results.
Please note that certain financial measures
we use on this call,
such as operating income and operating margin,
are also expressed on a non-GAAP basis,
and have been adjusted to exclude charges
related to stock-based compensation.
We have also adjusted our net cash
provided by operating activities
to remove capital expenditures,
which we refer to as free cash flow.
Our GAAP results and reconciliations
of non-GAAP to GAAP measures
can be found in our earnings press release.
With that, I will now turn the call over to Eric.
Schmidt: Thank you very much, Jane.
And, uh, thanks, everybody for getting on--
on our call.
Your time is very valuable.
I'm really glad that you all could join us
for our quarterly call as reasonably scheduled.
We've jumped on the call
to talk about the other announcement of this afternoon,
which I think everybody is getting a chance to read.
Um, we've had a very strong quarter
and a very strong year.
Uh, and I think as our results show today
our outlook is very, very bright.
Larry and Sergey and I spend a lot of time
talking about how to run everything.
The last decade, of course, has been fantastic.
And we anticipate, you know,
this will continue.
How could we run the company even better?
And it just--after a long series of conversations,
we decided to make some changes in the way we are structuring,
the way we actually operate-- operate things.
Historically, we've always been
running the decisions together,
and ultimately it adds delay and so forth
in the way we make decisions.
It's actually better to clarify it.
So the proposal, which we've ultimately now--
the board has completely approved,
is by elevating me
and by having Larry running things day to day,
Sergey focusing on the areas he's gonna talk about.
We think that this will produce
even better success for the corporation.
And of course we're gonna do all of this by April.
So, Larry, you want to introduce
a little bit about your thoughts?
Page: Well, first I want to really, uh, congratulate Eric.
Uh, he's done an outstanding job leading Google
for the last decade.
I don't think, uh, when Sergey and I started the company
we would have imagined--
we could have possibly imagined
we would have a better leader of the company.
And we're all in great debt to Eric.
Um, and I think the results really speak for themselves.
There's no--no debate about that at all.
Um, there's--and there's really no one else in the universe
that could have accomplished what Eric's done.
Uh, and...Eric's really a tremendous leader.
And I've learned a ton from him over the years.
And I think his advice and efforts going forward
as Executive Chairman
will be invaluable to me and to the company.
Uh, as I start this new role.
Uh, Google, and I want to say is just
an incredible opportunity.
Uh, and when we started Google,
people actually thought we were coming in too late,
that there were already a lot of other search engines.
And the Internet, really, uh, people's, uh, computing life
was really still at the very early stages.
And I could not be more excited about, uh,
moving us forward,
and we're really only at the beginning.
I just can't wait to get it started.
Schmidt: Now, thank-- thank you, Larry.
Sergey, do you want to talk a little about
what you would like to get done
in this new structure?
Brin: Um, oh, I'd like to first
at the outset mention, uh,
that I've a great-- I've had a great time
working together with Larry now for about 15 years
and with Eric for about a decade.
And both of them have really inspired me
and moved me, and uh,
I'm looking forward to many more decades
of work together.
Uh, now as we have tried to make--
to clarify our respective roles now,
um, I would like to work more on my personal passions,
which corresponds of several, uh,
significant new products, uh, that, uh,
that I hope to tell you about in the future.
I'm not going to-- I know we've been accused of--
of vaporware just recently in the press and whatnot,
so I don't want to repeat that error.
And I hope to tell you about the future,
when, uh, I'm ready to show you something.
Uh, but nonetheless,
uh, it's really a privilege
to work with these two gentlemen,
to continue to work with them.
Uh, and this company that I've been really proud
to be a part of all this time.
Schmidt: Um, thank you very much.
Um, and as for myself,
I'm going to get a chance to work on the things
that I'm most interested in,
taking a more strategic view of things.
Uh, and I'm gonna focus on customers, partners,
various government communications,
external issues more than the internal issues
that I've historically been focusing on.
So that's a significant, I think, improvement,
in the--in the kind of things that I can do with my time.
Uh, and I want to say very clearly
that I believe Larry is ready.
You know, he's been working on this area for a long time.
His ideas are very interesting and clever.
And it's time for him to--to have a shot
at running this and doing it,
and I'm sure he'll do a fantastic job.
It's interesting that a decade goes by very fast
when you work in a partnership as wonderful as this has been,
and I'm quite sure that this partnership
will continue.
We're friends, we're coworkers,
we're computer scientists.
We have a common vision.
I don't anticipate any material change
in any of our strategies or anything.
We tend to agree on pretty much everything.
But I do believe that, as a result of this,
we'll operate and execute the business even better.
Um, so with that, I thought, uh,
maybe--maybe what we should do is have a few questions,
uh, before we rush off.
And then, Patrick, thank you so much
for accommodating us onto your call.
Pichette: It's our pleasure.
Uh, Jay, if you don't mind,
just what we'll do is we'll set up
two sets of questions for this afternoon.
We'll just take a few questions now,
because we have Larry, Sergey, and Eric,
and so we'll take a few questions.
And then after that,
we'll close that section of the call,
uh, let them run back-- go back to work, guys.
And, then, uh, and then we'll take the regular call
as we usually proceed.
So, Jay, if I can ask you to give us the instructions
to take a couple questions for Eric, Larry, and Sergey.
Jay: And if you'd like to ask them a question at this time,
it is *1 on your telephone keypad.
If you're using a speakerphone,
please pick up your handset
before pressing the corresponding digits
or depress a mute function that you might have.
Once again, that is *1 if you'd like to ask a question.
We'll go first to James Mitchell of Goldman Sachs.
Mitchell: Great, thank you very much.
Congratulations on, uh, the movements
and congratulations on the results.
I guess one question I had, just stemming from the results
rather than from the movements, perhaps,
is when I look at the investments
in 111 8th Avenue in New York City,
do you feel that Google is now at point where,
in order to continue facilitating
the growth of the Internet,
that there'll be a land grab
for desirable physical locations?
Page: Yeah, I think-- I think, uh, you know,
our primary reason for purchasing the building there
was not the Internet structure there,
but rather the office space that we really enjoy using.
Uh, the Internet tenants are great, well-paying tenants,
and we appreciate-- appreciate having them there.
But that's not the primary reason
why we purchased the building.
Schmidt: Let's have our next question.
Jay: Our next question comes from Spencer Wang,
with Credit Suisse.
Wang: Thanks. Uh, good afternoon.
Um, just a big picture question for Eric.
You mentioned that one of your areas of focus
will be on, uh, government outreach.
And it seems like Google's maybe come under
a little bit more regulatory scrutiny
over the past several years.
So I was wondering if you could just talk a little bit
about your strategy with, um, regulators,
to just ensure that Google
can continue to expand as necessary.
Thank you.
Schmidt: Um, the simple answer is
that we're talking to them.
An awful lot of the problems that we've been having
are people don't actually understand what we really do
and what we don't do.
And some of our competitors are assisting
in that misinformation.
And so part of our core strategy
is literally to communicate. This is what we're doing.
We're trying to be as transparent
and collaborative as possible.
I would tell you very clearly
that the regulators have a proper job to do.
You know, they're there for a reason,
and we respect that.
And so far, we've been quite successful
by just taking the time to get people to understand.
And we're sensitive to the, um, the close lines,
as where--where we get too close to something,
and we try to stay away from that.
So we try to stay well within the safety zone
of the way we're operating
with respect to the legal issues
and the competitive issues.
Uh, we also argue very strongly
that the things that we're doing
are very pro-competitive.
And I genuinely believe that,
and I'll be telling people a lot of that
for a long time, I suspect.
Wang: Great. Thank you very much.
Jay: Our next question will come from Imran Khan
with J.P. Morgan.
Khan: Yes, hi.
Thank you so much for taking my questions.
And congratulations to everybody.
Uh, you know, quick question.
You know, Larry, as you become the CEO,
I think which is a very interesting juncture
of Google's life cycle, you know, I think, you know,
there's a lot of, uh, questions that we get
from investors that, you know,
the proliferation of social networking
and how the traffic, you know,
more and more traffic source
that the social networking platforms are becoming.
So as Google, uh, you know, get to the next level,
you know, how do you think about the real-time search
in the social networking platforms
and becoming a brand-- and the web applications
and the mobile apps,
how do you think Google become the point of,
you know, pla--uh, place
that we can send traffic to other places?
Schmidt: You know, Sergey, you've been driving
most of this,
and maybe, Larry, you can comment as well.
Brin: Um, yeah.
I think that, uh, you pointed out
two important trends, I think.
Uh, one is the notion of real time.
And the other, the broad notion of social
in terms of identity relationships and so forth.
And I think both of those are very important to search.
And in fact, you've seen over the past year or so
us roll out functionality along those lines.
Uh, first of all, of course,
we have the real-time updates
now built into our search.
Um, which includes Twitter and other sources.
You've also seen us deploy social search,
which allows you to find search results
that are, uh, that are related to people who you know
and friends of their friends and so forth.
And you see those
right in the main search results of the web.
But I think that this is really just
the tip of the iceberg.
And I think there's far more opportunity.
You know, we've touched just one percent
of the capabilities that could be deployed in that realm.
And I think you should expect us
to continue to developing--
uh, to develop those kinds of capabilities.
Schmidt: Larry, did you want to add anything to that?
Page: I mean, uh, the last part of what Sergey said
really resonates with me.
I think that, uh, there is--there is, uh,
if you think about the next five years
of what your life will be like online
and socially and what kind of things
the tools will be able to do,
we're only at the very, very early stages of that.
And I'm incredibly excited about the possibilities of that.
Schmidt: Um, thank you.
I think we have time for one more question,
and I'll just have a final comment.
Jay: Our next question comes from Justin Post
with Bank of America.
Post: Uh, thank you.
We've noticed a lot of changes on--
on the site.
Moving you farther down the purchasing funnel.
And we've heard some regulatory pushbacks,
so maybe this is a question for you, Eric.
But also potential some advertiser complaints.
So we're just wondering how the changes
in your search ad results are really--
are they really driving your revenues
and helping drive the strong growth,
and how are you dealing with the advertisers
and the regulatory environment
on some of those changes that might be, um,
replacing some of the functionality
of other websites? Thank you.
Schmidt: The, um, there's question
that our extraordinary results
are partly coming from algorithmic improvements
that we do all the time.
Our basic strategy, or course,
is to have the right ad in the right spot,
you know, done exactly right, every time.
And we do, you know, literally billions of these
every day.
And so that's sort of the great magic of Google,
if you will.
We've looked very, very carefully
at how we make the decisions as to, you know,
which ads go where and so forth.
And we're pretty happy
with the choice that we made,
which was ranking ads and so forth.
There have been some competitor complaints
and so forth of that,
and we've done a pretty thorough review.
But so far, we're pretty happy with it,
and we think it will pass the necessary complaints
and so forth that people are hearing.
Um, so I think, with that, I think we've sort of run,
Patrick is saying we've run over our time.
I really appreciate everybody sort of letting us
come in and do this.
I wanted to say to you that it's been a great privilege
to be, um, the CEO for ten years,
literally a decade.
And a decade's a long time to be a CEO.
So I'm very much looking forward to this--
a new role, uh, more strategic role,
and something where I can work on some new things
which I'm excited about.
And I'm even more looking forward
to working with my, literally,
best friends and partners, Larry and Sergey.
And I hope you all-- all understand
how powerful this triumvirate has been,
and how, for us personally,
and how much it means to us as individuals.
So thank you all.
And, Patrick, you want to just sort of take over?
Pichette: Absolutely. Thank you so much,
Larry, Sergey, Eric,
to take the time to join us this afternoon.
So with that, what we'll do is,
uh, if you don't mind muting your buttons.
Perfect. We're gonna jump right into it.
And we'll go to our more regular conversations.
So I will start with my opening remarks
on the financials.
Jonathan's gonna give us, uh, his read of the year.
And then, uh, we'll join--
we'll be joined by the guests for our Q&A, uh, section.
So...how else to talk about 2010 and Q4
as a phenomenal ending to a very good year at Google?
I mean, our, you know, incredibly strong performance
in Q4 and 2010 overall,
I mean, is really a testimonial
to the fundamental trends in the digital economy.
Those trends, they're fueling huge opportunities
for innovation, for growth, both at Google
both also in the entire ecosystem.
One of these profound trends
is the shift from advertising offline to online,
and it continues at quite a rapid clip.
And, you know, you've seen its human growth
both in our core search business
but across the board as well.
A case in point is revenue growth is in our core
accelerated strongly in the second half of 2010,
which is really particularly impressive
if you think about it given that in 2/4/2009,
you know, was itself a very strong quarter.
So in addition, you know,
investments in our newer businesses,
you know, the usual suspects of Display,
Mobile, Enterprise-- they are also in parallel
creating a second powerful growth engine for Google.
Jonathan will give you more details on that in a minute.
But at a high level, I just want to make it clear
that, you know, how can we not be happy
with the overall performance and trajectories of 2010
and on that basis, you know, be excited about our prospects
for 2011 and beyond?
So let me turn for the specifics
of the performance of the quarter now.
Let's go through our results.
Gross revenue-- we grew 26% year over year
to 8.4 billion.
Our Google websites revenue was up 28% year over year
to 5.7 billion.
And we saw strength across most major geographies
and verticals.
Our AdSense revenue was up 22% year over year to 2.5,
again, with continued strength in our Google Display Network.
Where other revenue was up 31% to 273 million.
Our global aggregate paid click growth was very strong,
up 18% year over year and up 11% quarter over quarter.
This is really reflecting, as I mentioned,
the accelerating shift of offline to online.
Without a doubt, as each year shows,
there's more and more holiday shopping happening online.
Our aggregate cost per click growth also was pretty healthy,
up 5% year over year and 4% quarter over quarter.
And know that FX had a negative impact
on CPC growth year over year
although a positive impact quarter over quarter.
Remember, too, that this is an aggregate number
and that includes, you know,
the dotcom and AdSense properties.
If I turn toward your graphic performance,
the U.S. and the rest of the world's
are both growing at a very healthy pace.
And our results clearly show that
while the U.K. continued to lag a little bit,
uh, in the global economic recovery.
Revenue from the U.S. was up just shy of 30% at 29%
to 4.1 billion, and in our earning slides
you can find--that you can find on our investor website--
you'll see that we've broken down our revenue
by U.S., U.K., and rest of world
to show the impact of FX
and the benefits from our hedging program.
So I encourage you to go through these slides
for the exact calculations.
The international revenue
accounted for 52% of our revenue, up--
or, sorry--4.4 billion and up 25% year over year.
And it includes 25 million of benefits
from our hedging program, so a relatively small number.
Using fixed exchange rates, though,
our international revenue would have been roughly
132 million higher year over year.
As I said, the U.K. was a little slower,
and it was up 14% year over year to 878 million.
If I turn to expenses--
traffic acquisition cost, 2.1 billion
or 25% of advertising revenue.
Other cost of revenue was 877
including stock-based compensation of 45 mil.
And finally, all operating expenses
totaled 2.5 billion, including approximately
351 million in stock-based conference--conce--
SPC. Compensation.
The increase year over year in OpEx
was primary due to our increases in payroll, advertising,
and promotion spent, and professional services.
As a result of all this, our non-GAAP operating profit,
which excludes our stock-based compensation,
increased at 3.4 billion in Q4
resulting in non-GAAP operating margin of 40%.
Our head count was up approximately 1,000
for the quarter,
and we ended the year roughly at 24,400 full-time employees.
Our effective tax rate, you should know,
was 19% in Q4.
And this reflects the R&D tax credit legislation
that passed in December in the U.S.
and for which we recognize the full benefit in Q4.
Now let me turn to cash management.
OI&E was 160 million for Q4.
which reflects the continued
good portfolio management performance.
And always offset a little bit by our FAS 133 expenses.
For more detail again on OI&E,
I just encourage you to refer to the slides
of the company in this call and our IR site.
Our operating cash flow was very strong
at $3.5 billion for the quarter.
CapEx for the fourth quarter was 2.5 billion.
I mean, obviously, significantly above the last quarter.
But remember, the majority of this increase
was from the purchase of the New York building.
The remaining balances was, as usual,
primarily related to our datacenter and operations.
As a reminder,
we'll continue to make significant CapEx investments,
and yet you have another data point
to show that they do tend to be lumpy from quarter to quarter
depending on when we'll be able to make these investments.
We're very pleased with our free cash flow.
We--despite having purchased
the office building in New York, right,
just shy of $1 billion.
And the office building's obviously a one-time event.
So...but all this has been said.
Google is in excellent financial performance for 2010.
The incremental revenue for the year of $5.7 billion
and operating cash flow around $11 billion--
that is a phenomenal performance,
plus a digital economy that's clearly on high gear.
So why... in that context, you know,
you can understand why we're so optimistic,
and it's with confidence
that we're pursuing an aggressive growth agenda.
We talk about, you know, growth agenda means investing,
and so here's a couple of places where
we have decided to invest and will continue to invest.
First we talked about the intense competition,
if you remember, on our last call,
uh, in--for labor.
So as part of the strategy to answer this challenge
we have announced competition change in Q4
which will affect all of our employees.
We've made two changes to attract and retain
the best talent.
First, we raised all base salaries
by 10% across the board.
In addition to that, we shifted some compensation
from bonus into base salary
for non-execs.
And I repeat, for non-execs.
Which is, you know, which will result for them
in more stable income for our employees.
And please note that all those changes
are really becoming effective on January 1st of this year,
so they're not included into our Q4 results.
Remember also that with salary increases
come ripple effects such as 401Ks
or employee taxes or other
that will actually flow through as well.
So if that's for compensation,
we've also made and continue to make
strategic investments in sales and marketing
for both new products but also advertiser acquisition
Product areas like Chrome and Chrome OS,
which are such a part of our future,
follow our core philosophy of building these open platforms
with big optionality and creating infrastructure
where everybody on the web can succeed...
you know, we'll continue to push on those.
But also, acquiring advertisers
will and continues to remain a top priority.
We're also investing in our long-term infrastructure
including both facilities and our core-computing network.
As you've seen in Q4,
the purchase of New York City office
was not only a wise investment
but a clear commitment to our New York City site
and, frankly, a reflection of our optimism
about our growth prospects.
Investing in innovation
is also about making tough choices.
And we've made them to 2010 as well
by choosing to close products or initiatives
that weren't working as well as we would have liked
or just had run their courses.
So for examples, we did shut down the Wave product
and we've also shut down our consumer channel for Nexus
in 2010.
And also many other smaller projects
that we wouldn't talk usually on the call,
but things like Goog-411.
And yes, we're investing aggressively
but with discipline--
you know, really, as we mentioned in the last call,
pouring a lot of resources
on what we call our hockey sticks
with a clear focus on long-term ROI.
And, yes, we'll continue to invest heavily,
but with the same proven discipline
and results that you've witnessed from us
over the last few years.
So in summary,
we're incredibly pleased of our performance of 2010,
optimistic of our trajectory for '11 and beyond.
Accordingly, we continue to invest aggressively
in a bold innovation agenda.
So with that, I'll turn it over to Jonathan
to speak about the product milestones in Q4 and 2010,
and then we'll take it over to Q&A.
Jonathan, all yours.
Rosenberg: Okay. Well, thanks, Patrick.
So we certainly did have a great year at Google,
and I'd really like to think some of it stems from
the unique way that we manage our product
and engineering machine.
When we hire product managers,
they often come in and they ask me,
they say, "So how do we measure success at Google?"
And I always tell them, "It's simple.
"At the end of the year,
"we make a list of all of your successes
"and your failures.
"You're then measured on the sum of your successes
and by how much you learned from your failures."
So at the beginning of 2010,
one of our concerns was that as we scaled,
this approach might lead to our being spread too thin.
Instead we thought
maybe we needed to put more wood behind fewer arrows.
So we made some changes.
And I think they addressed this concern
without actually affecting the basic philosophy
of how we've always run product and engineering at Google.
So let's talk about what we changed.
At the beginning of the year,
we decided to double down on the core
so that search and search ads--
and I think the financial numbers
that you guys are seeing today
reflect the fact that that was a successful bet.
But behind those numbers
is a really relentless stream of new features
and product innovations.
For example, we made a big effort this year
to make Search more interactive,
and you can see that with Google Instant.
And then more recently,
we made the previews instant as well.
And earlier in the year,
we launched new user interfaces
for both web search and image search
to make it easier and to make it more intuitive
to work with the results after you run a search.
And we're also making Search more intelligent.
We made several changes to results.
So now you can see things like a concert schedule
or the answers to the questions
highlighted right in the snippet.
And we're also now starting to now roll out Playsearch.
So when we know that you're looking for something
that's in the neighborhood like an ice cream shop or something,
we'll pull reviews, web pages, the address, and a photo
all together for you.
We also doubled down on the Ad side of house.
In the past year
we've launched several new ad formats
which we've told you about,
site links, seller rating ads.
Recently we just added this product listing ads
with photos and prices.
It makes sense that if I'm shopping for something
like a coffeemaker,
it's helpful to see more information in the ad.
But the biggest boost of all
came from good, old-fashioned ads quality improvements.
Q4 was our best quarter in years from a quality standpoint.
We launched over 20 updates
which led to gains that were nearly double
those that we would normally see in a strong quarter.
So although we've been at this for years,
we're still finding lots and lots of ways
to make ads better.
The other change in 2010
was that several of our new businesses
started to achieve escape velocity.
And our philosophy is to encourage lots of innovation,
and then we feed the winners and starve the losers.
And this creates kind of a Darwinian
but sort of Googlian environment
in which new businesses emerge and grow.
And in 2010, it's really clear
that some new winners started to emerge--
like Display.
We now have over 2 million publisher partners.
The number of transactions
on the DoubleClick Ad Exchange tripled,
and publishers who sell their ad space via the exchange
are nearly tripling their revenue
when the exchange wins the auction.
YouTube revenue more than doubled.
We began adding features like live streaming
to help partners deliver, and ultimately, of course,
to monetize content in new ways.
Enterprise added impressive customers
like the U.S. government's General Services Administration.
And we expanded distribution with partnerships
like the deal with SoftBank in Japan.
Android now activating over 300,000 phones per day.
It's helped drive a 10x year over year increase
in the volume of searches from Android devices.
And finally in 2010,
I think we were more structured in our approach to our business.
The product and sales teams are working together
more closely than ever,
thanks in large part to my buddy here, Nikesh.
Patrick's rigor helped us dynamically reallocate resources
and, as he mentioned, cancelled a few projects
like Wave and Nexus One Direct to consumer
that weren't achieving their goals.
So what does all this mean for 2011?
I think you can expect more of the same.
We're gonna double down again
on the core of search and search ads.
We're gonna feed the 2010 winners--
Display, YouTube, Enterprise, and Android,
and we're gonna do it all
with even greater financial rigor
and cross-functional coordination all over the world.
But I'm also excited about the prospect
for a couple of our newest businesses--
local and commerce.
In local, over 5 million businesses
have claimed their Google place pages,
and we recently started testing a new ad product
which we call Boost,
and that gives businesses a really easy and fast way
to promote themselves online
and to connect with the people who are searching for them.
In commerce, we're investing a lot to close the loop
from online to offline shopping.
I think I mentioned on four different earnings calls
in the past couple of years,
the key to unlocking mobile commerce
was to make it easier for people to both search
and then to consummate their transaction
from their mobile device.
Someone on my team actually counted back on the calls,
and it was four times.
I think a smartphone's become ubiquitous,
and local businesses put their inventory online.
I think this is the year
where phones will play the big role in commerce
that I've long predicted.
There will be some important differences in 2011.
We will invest in hiring even more product managers
and engineers.
We're gonna give them greater autonomy,
and we're gonna push them to work faster.
In fact, we're asking everyone here
to do more and to do it faster.
Through the year, we'll tally our successes.
I'm sure you all will probably remind us of any failures,
so we can keep learning from them.
I hope you all now better understand our sense of optimism
from a product perspective for 2011.
I'm confident you guys will help us keep track
of how this year's product efforts play out
on the important scorecard of financial progress.
Thanks a lot and back to Patrick.
Pichette: Thank you, Jonathan.
Now, Jonathan and I have made a noble attempt
on the back of the big announcement of today
to keep your attention over the last ten minutes.
So I hope you'll have taken all the notes that you had to,
and now what we'll do is we'll turn it to Jay.
Nikesh is joining us, so he's getting set up in his chair
with his phone.
And we'll turn it over to Jay,
and we'll go through the Q&A section of this call.
Jay, give us the instructions, please.
Jay: And, ladies and gentlemen,
if you'd like to ask a question at this time,
please press *1 on your telephone keypad.
If you're using a speakerphone, please pick up your handset
or press any mute function you may have
to allow your signal to reach our equipment.
Once again, that is *1 if you'd like to ask a question.
And we'll go to Ben Schachter with Macquarie.
Schachter: Guys, congratulations on the quarter and the year.
Jonathan, I want to ask you a question about Mobile
and specifically how Google thinks about the differences
between tablet users and smartphone users
and how those differences are really influencing
the high-level view of how you're viewing
the overall evolving mobile market.
And then, Patrick, if you could just address
the sales and marketing line,
which I think was somewhat unexpectedly high.
Rosenberg: Sure, Ben, we can take that in order.
I'll go with the first question.
I think it's probably easier to talk about, initially,
how tablets and smartphones are similar, right?
Both of them are growing at a terrific pace.
As is the case with Mobile, what we see on these devices
is that Search usage on the tablets
tends to peak on the weekend, and it dips on the weekdays.
So it's generally complimentary to Desktop,
which we've talked about before.
You know, what does that suggest?
Maybe that people are using them more
for personal usage as opposed to business.
We do see on tablets, the weekend peak
is a little bit more pronounced than it is on phones.
I think that's probably the case
because, you know, people pretty much always carry
their smartphone during the week.
Some of the bigger differences--
the tablet users tend to search more for things like news,
and they tend to do more shopping-related topics
when you compare them to smartphone users.
I think there's some anecdotal data
that they may convert better,
but I haven't actually been through all of that in detail.
I tend to think that the tablets behave
a little bit more like desktop devices than do smartphones,
'cause it's a little easier to input information into them,
like a credit card.
I think the other major difference
is the UI approaches are different, right?
You know, apps--like, the Gmail app for the tablet
is more designed for the big screen.
So, you know, I think they're both taking off,
and the revenue from tablets as well as smartphones
reflects that.
Pichette: All right, I'll take the second question.
If there's a good proof
that we just don't kind of, like, streamline our lines
in terms of expenses,
but we go opportunistically and in a smart move,
I think sales and marketing is a great example of that.
And I--You know, if you think of the last 12 months,
what we've clearly shown
is how much in high gear is the digital economy.
And when that opportunity shows up, right,
we just needed to jump on it and decide to fuel it.
And on the marketing side, you know, and even on sales--
I mean, Nikesh-- I'll actually ask Nikesh
to give you a bit of color on the sales side,
but on the marketing side, when you have big platforms
like Chrome and Chrome OS
that can and will be incredibly successful if promoted,
why wouldn't you do it now?
You know, I hear from the financial community
the other side, which is, you know,
"What are you doing with your money?"
Well, we have great opportunities.
Why wouldn't we jump on it with this kind of market?
And on the sales side, Nikesh, you could probably give
a color commentary as well.
Arora: Thank you, Patrick. Hi, guys.
I think what is important, you have to understand,
we decided to put our sort of foot to the pedal
later this year.
And there was an area of our customers that advertised
we decided to continue to put more focus on,
which is the small- to medium-sized advertisers,
because that's where a lot of our growth engine
is going to come from in the future.
And effectively, a lot of the sales costs there
are advertiser acquisition costs,
because once we bring them into our system,
they stay there for a while,
and they continue to work with us
and continue to generate more revenues.
And some of the revenue performance you're seeing
has been across the small channels,
some of the mid-tier channels,
and that investment is sort of already beginning to bear fruit.
Pichette: Thank you, Nikesh.
Let's go to our next question.
Jay: Our next question comes from Mark Mahaney with Citi.
Mahaney: If I could ask a question
on the local-advertising play,
and it sounds like you've got a couple of products
you've been working on rolling out for a while.
I think you also may have attempted
an acquisition intra-quarter.
Could you maybe quantify the opportunity for us?
Is this something
that has always been part of the buildup plan?
Is there something you saw in the last 12 months
that really indicated that this was the time
to accelerate the efforts against local advertising?
And then do you already feel
like you've got all the assets now in place,
or are you still gonna look for more assets
in order to have that play, you know, viable?
Thank you.
Pichette: Let me just-- As a preamble, right,
we do not talk about MNA.
Local has always been part of our strategy.
And, you know, Nikesh can talk
about, you know, the initiatives
or just about the initiatives we're doing there
in terms of the Boost and the products that you have--
or maybe Jonathan-- the Boost product.
It's one more of the initiatives we have in local,
but local is just to kind of give
a sense of framework, right?
It's one out of every 5 searches
have some form of local kind of tendency or factor.
So it's not kind of a side event for us.
Rosenberg: Sure, Mark.
I mean, you know, I think
we've been very focused on local
since, wow, going all the way back to maybe my second year,
when we acquired Keyhole here with the Google--
which was basically the original company
that built Google Earth.
And, really, the idea was that ultimately the Web
should be this virtual mirror of the world at all times,
and that mirror of the world becomes much more useful
when it's more relevant,
and it's more relevant to the users
when you get everything organized
around places in the physical world.
And I think the other thing
which has come into play more recently
is that technology has made it possible,
through the use of GPS and smartphones,
for us to understand where you are.
And so I think what we've recognized more recently
is that because smartphones
have become deployed more aggressively
that we can supply you with relevant information
about the places that you're near
with the appropriate, you know, contextual-oriented search.
So, you know, if you're at a restaurant,
you want to pull up a menu.
You don't want just the menu that the waiter handed you.
You want the one in there
that has the reviews and the picks from your friends.
So I think what's basically changed
over the course of the last year
is it's become easier for local businesses
to identify themselves in context on Google,
and it's become easier for us to find out where you are.
And then, of course, we've mapped that with Nikesh's team,
which is working on selling Boost and Tags
and some of the other ad formats
that we've developed specifically for local.
Pichette: Thank you, Mark. Thank you for your question.
We'll go to the next question, please.
Jay: Our next question comes from Doug Anmuth
with Barclays Capital.
Anmuth: Great. Thanks for taking the questions.
Patrick, can you talk a little bit more
about your philosophy
just around the New York headquarters?
I think this is the first time where you've actually
really come out and confirmed the purchase.
And, you know, why do you need to own
the New York headquarters,
rather than sort of getting access to it in some other way?
And why is this a good use of capital?
And then, secondly, can you just talk,
just following up on local--
discuss whether you really are building out,
you know, more of a local sales force,
you know, in addition
to, obviously, the local products themselves?
Pichette: I'll take the first.
And then I'll let Nikesh
talk about the initiatives we're doing on the local side.
Look, we have 2,000 employees
on site today in New York.
And our business and our engineering center--
It's a big engineering center, by the way.
It's not only a big kind of sales center,
but it's a big engineering center.
So if you think of the eastern hub being that place,
with 2,000 and growing at the pace at which we're growing,
it's actually very difficult to find in New York
a place that would accommodate that number of employees
in an environment that fits Google's standards
and Google's needs.
We do not-- I mean, we actually believe
that living in a tower where there's a very small footprint
on the floor to floor
is terrible for the Google culture.
So there's very few buildings in New York
that actually can accommodate our needs, right?
Replacing that building for us or moving out of there
would actually be probably very difficult
to find another place and then be prohibitively expensive.
And then, finally, it gives us a lot of control
over growing into that space.
So all of this to say
on top of, you know, what we believe will be--
you know, is a very good investment.
So for all these reasons--
Coming back to the previous--
It's not about carrier hotel owning.
It really is about the "Googliness."
So for all these reasons, I think it did make sense,
and we called it a one-time item,
because it just fitted so well our strategy.
For the local sales force, I'll turn it to Nikesh
to give you a bit more details on our strategy there.
Arora: I think it's important to understand
that, you know, local-- the way you define it,
actually, ends up in three different interpretations.
One is we've always had local features to our AdWords product.
You could've always localized your advertising towards users
who are in a certain area, certain territory.
So you've always had the ability to localize.
The other thing we've done on local is, you know, the way--
I think local is sometimes synonymous
with smaller advertisers and smaller territories,
and towards that end, we have created
more simplistic set of products around Tags and Boost,
which is more amenable to the advertisers.
They don't have to do a lot of work.
Sometimes they don't even have their own web sites,
and that allows them to still participate
in the online economy.
And third, we, for the longest of times,
had partnerships with other companies
who have been selling advertising on our behalf
to smaller advertisers,
be it in small local areas,
or we've been using other partners
who will use their sales forces
to call on smaller advertisers for us.
So we are gonna use a combination
of all these three efforts to continue to pursue
our local strategy going forward.
Pichette: Thank you for your question, Doug.
Let's go to our next question, please.
Jay: Our next question comes from Brian Pitz with Barclays--
or, I'm sorry, with UBS.
Pitz: Great. Thanks.
And, Patrick, would you give us
a rough, organic revenue-growth rate excluding acquisitions?
And then, secondly, a question on ads.
Are you guys seeing any competitive share shifts
in dollars from Search or Display
towards other social platforms or applications?
Pichette: So on the second one,
I'll let Nikesh give you a sense.
On the first one, I don't have the breakdown,
and we don't provide the breakdown.
But I can tell you that all of our core properties
are growing very well...
And not only our core properties,
but also, you know, our new-growth businesses as well.
When you look at the numbers
for--for just the google.com growing year over year,
28%, right?
How can you not be happy with that kind of performance?
And so overall, we're very pleased
with our growth rate of revenue.
I'll let Nikesh talk about the second piece.
Arora: I think it's important to understand that Search,
for the longest of times, has been performance advertising
and so has a large chunk of Display.
It's been performance advertising.
So the newer players you're talking about
are sort of playing the brand-display space.
So overall, if you look at it, the stronger trend
is shift of brand dollars
from the offline world into the online world,
and continuing shift of some of those dollars--
sales and marketing dollars into performance-based advertising.
So we're seeing that shift both on our Search side.
We're seeing that shift both on our Display side
and also seeing some brand dollars on the Search side
and some brand dollars on the Display side.
So I think, you know, it's more than fair to say that right now
the bigger trend is the shift from offline to online,
and there's been less of an allocation shift
within the online world, because you have all these measures--
all these means are measurable, and you're seeing better ROI
for these measurable events in both performance Display,
performance Search, so that's where the trend is.
Pitz: Great. Thanks.
Pichette: Thank you, Nikesh, for the answer.
Let's go to the next question.
Jay: Our next question comes from Ross Sandler
with RBC Capital Markets.
Sandler: Great. Thanks, guys.
Two questions--
First, Patrick, a question on the Display business.
If you look out and analyze the financial statements
for just about any publicly traded ad network out there,
these business seem to peak out in the--
the operating margins seem to peak out
in the 20% to 25% range.
Do you think there's anything structurally different
about Google's approach in the Display business
that could allow Google
to achieve higher operating margins,
or is that just a peak for that kind of business model?
And then, Nikesh, just a quick question
on the ROW acceleration.
So 31% year over year--
Can you talk a little bit
about which regions that's coming from,
or is it across the board?
And is there any acceleration
from new revenue areas like Display,
or is it just a core-surge business?
Thank you.
Pichette: I think the--
On the first one, let me answer, the Display,
and then I'll let Nikesh talk about the performance worldwide.
I think in Display, the most fundamental issue is
if you're on your own network
or if you're optimizing for other's network
and participating in other's network.
So if you think of YouTube,
it's our own property, and therefore,
you have a completely different set of economics.
And so you just got to make sure
you don't compare apples and oranges.
So one, you know, obviously,
has a much higher margin than the other,
and the question then is the mix.
So if you think of us and Display, where we have,
you know, the whole suite of services,
from, you know, what used to be Teracent
and all the other pieces,
then you have the mix of properties,
and that's how you have to think about it.
In terms of geographic split and performance, I'll let--
It's a fantastic story.
So why don't I let Nikesh give you the color commentary on it?
Arora: Just before that,
adding to what Patrick said on the Display stuff,
I think it's also important to understand
the contribution of the Ad Exchange,
which basically allows you to bring buyers
and sellers together.
And we are seeing a serious uplift
for people who are participating on the Ad Exchange,
in terms of revenues.
So, you know, while your traditional Display business
you might be seeing margin profiles that are different,
and I can't predict future margin profiles,
but clearly, there's an uplift and a benefit to advertisers
who participate in the exchange,
or are publishers who participate in the exchange.
So that's also beneficial.
Pichette: We have three sources, Nikesh, right?
'Cause you have to add the Ad Exchange on top of that.
Arora: Yeah, yeah.
So in terms of the sort of rest of the world performance,
I think there are some things that are notable this quarter,
in addition to our usual stalwarts,
where the U.S. continues to be strong
and the rest of the world is strong.
You know, Germany has maintained its strength
because of its economic development,
which has been different from the rest of Europe.
So that has showed up in our results as well.
I'm very particularly excited
about some of the turnaround we've achieved in Japan,
because we've been putting in a concerted effort
over the last many months to try and, you know,
put an aggressive foot out in the marketplace,
in terms of bringing in more partners, more advertisers
and generally upgrading the entire effort
in Japan from our side.
So we are seeing the results of that.
In addition to that, some of the commodity markets,
markets where commodities are strong--
Brazil, Australia, some of those have been strong in general.
The U.K. continues to be weak, as you noticed,
but that is still--it is a very strong market for us.
It's a big market for us as well.
Pichette: In closing on that topic,
I think it's worth noting,
if you do your financial math,
and you move Rest Of World into Constant Effects,
so if you take out the fact
that we had crosswinds over year over year,
in fact our growth rate for Rest Of World
is over 30%. It's 31%.
So again, you know, very good-- very good momentum there.
Thanks for the question, Ross.
Let's go to the next question, please.
Jay: Our next question comes from Scott Devitt
with Morgan Stanley.
Devitt: Hi, thank you.
Paid click growth on a percentage basis
was the highest rate in two years,
and you mentioned a few things in the call--
better ads, better targeting, even local monetization,
and I was just wondering to what extent
some other factors came into play as well,
particularly Google Instant,
and the roll-out of that product,
as well as the incremental nature
of smartphone and tablet queries.
Thank you.
Pichette: Okay, so I think that for paid click growth,
you really have to look at a couple of factors,
and I just want to start
by kind of debunking a myth on Google Instant, right?
Everybody seems to have--
There's kind of a buzz out there
that Google Instant is the driver
for a lot of the revenue growth,
and, in fact, Google Instant is neutral.
It is not making any significant contribution
to our revenue growth.
What's really making the contribution is...
There's really, you know,
our growth is driven by three interdependent drivers
that are all acting and fueling together.
One is clearly the strength of the economic recovery
and the consumer shift online.
And you can look-- ever since Thanksgiving,
and you've seen it from external sources as well,
people have moved online.
They're spending a lot of time shopping online,
looking for coupons.
So the behavior is, you know, strong economic recovery,
which brings a lot more participants into the auctions,
because they want to be where the users are.
In addition to that, right,
you have a second compounding factor pounding on it,
which is platforms are changing, right?
The use of mobile phones, iPads,
you know, Instant Search too, but, you know, also Geo.
The fact that you get, you know,
instant location, you can get coupons,
all these things, right, from a platform perspective
are driving it on top of it.
And then, finally, right,
it is true that Jonathan's team's fantastic job
at, you know, making great ads,
tuning, and monetization
like the Vis URL--
And, Jonathan, you may want to take a second
to talk about Vis URL.
It's those factors that are really driving the CPC growth
and the click-through rate growth,
rather than, you know, Instant Search.
So I just want to be clear,
because I know there's a rumor on the street running
that it's all about Instant Search,
and Instant Search is about the user.
It's people spending, you know, 10% faster.
That is a huge number, 10%,
and that's why we did Instant Search.
So maybe Vis URL is a good example
that you want to talk about, Jonathan?
Rosenberg: Yeah, sure.
Um, I guess other than the ads' quality improvements,
which I can cover in a second,
I think the only other area that Patrick didn't cover
would basically just be the new ad formats,
all of which are boosting click-through rates,
and I mentioned those in my prepared remarks,
the product-listing ads,
more recently offer ads, coupon-based ads.
The seller ratings, which we've also launched,
have significant impact in click-through rates,
as well as does Sitelinks.
But I think that probably the most significant thing
in terms of what impacted the whole ads area this quarter
was this concept that we call Visible URL,
and basically what we did was,
on the top ads,
we moved the advertiser's URL
down to its own separate line below the creative,
rather than having it be part of the creative,
and, you know, that obviously makes it easier
for people to see where they will go if they click.
And it's actually a little bit of an interesting story.
I'll give you some of the background,
because I think this is by far the most significant change
that we'd had from an ads quality perspective
in a very long time.
It turned out early in the quarter
some of the engineers in Japan
noticed that it was really hard to read the creative,
because we actually had the ad's URL,
which was in Latin characters,
mixed in with the ad's creative,
which was in Kanji,
and, you know, it didn't really take brilliant research
to figure out that human perception
gets really confused when characters switch like that
in the middle of a sentence.
People just sort of skip the whole sentence.
And, you know, if they skip something,
that's sort of really bad
when that sentence is a text ad.
So we ran this experiment in Japan,
and we moved the URL down to its own line,
and click-through rates went up dramatically,
so we launched that feature pretty expeditiously
in, I think, Japan, China, Korea, and Russia.
And then what happened is the engineers
kind of said, "Well, hey, just for fun,
let's try that in the rest of the world."
And we actually didn't expect so much,
'cause we didn't have the same dynamic
of Latin characters versus Kanji,
but it turned out that people skipped sentences
with long, unusual words in it.
So people were tuning out that line,
and we quickly launched this feature globally.
It was one of the fastest things that we ever launched
after the ads testing.
I believe we launched it right around Thanksgiving,
and that had a very significant change
in the clicks that we saw in the course of the quarter.
Pichette: So I just--
to close on that, just to kind of say it is--
And I know that Jonathan has used that trumpet
a number of times in the past,
but just continues to illustrate
how much more innovation there is left in both formats,
and in just, you know,
all of the things that we do
in terms of innovation in the ad space.
Thank you for your question, though.
Let's go to our next question.
Jay: Our next question
comes from Jeetil Patel with Deutsche Bank.
Patel: Great. If we look at the kind of revenue line
from a kind of customer-based standpoint,
whether it's Fortune 500
or Ad Age 100 versus internet pure-play endemics,
and then the small to medium sized business category,
I guess, you know, the SMB category
was weaker post, you know,
during the credit crisis,
and, uh, you know, had a hard time coming back.
I'm curious as to your thoughts
as to how it's coming back today,
and do you think there's a different way
of approaching that SMB market
as you look ahead into this year end
going forward in terms of products,
or maybe ways to help drive leads or sales
for that segment of the market?
Pichette: I'll let Nikesh answer the question.
Just one point of clarification on your statement, though.
And during the recession a couple years ago,
I think you mentioned that we thought the SMBs
were kind of going down,
and, in fact, Nikesh will clarify that
they were going the other way.
So, Nikesh, I'll leave it to you to answer the question.
Arora: Thank you for the question.
I think the important thing to understand
is that we're seeing a...
I'd say a disproportionate amount of strength
from the very large advertisers across the board,
because effectively what's happened over the years
is that they've gone out and really strengthened
their E-commerce offerings.
They've gotten their act together.
They've got all the logistics in place.
And, you know, given that this was the quarter
of Christmas and Thanksgiving,
you saw tremendous amounts of strength
from large advertisers wanting to play
against the pure-play internet players.
Now, in addition to that,
what has also happened is we've put an effort
of the last six months
on the SMB and mid-market side.
In the mid-market side,
we've basically gone ahead
and adopted a higher-touch strategy.
We spend more time on the phone with our customers.
We even go and visit some of our mid-tier customers,
because, to be fair, over the years,
they've grown to be larger mid-tier customers
than they used to be in the past.
So we have put in sort of a conscious,
higher-touch strategy,
and, last but not least,
for the smaller advertisers,
we're working very closely with our product team
and Jonathan and his team
to try and look at various systemic and algorithmic
improvements you can make working with them
in large, direct marketing campaigns,
and where we could continue
to really churn that area,
to continue to acquire more,
which is related to the earlier comment
on slightly higher sales spending,
on trying to acquire smaller advertisers.
So we have efforts across the board,
across all three categories.
We don't think that effort is done and fully over with.
Patel: Do you think the business model
or pricing model has to be different there,
whether it's percentage of sale,
or some other kind of approach
to going after the spend in that segment?
Arora: No, I think to be fair,
if you look at some of the simplification
we've done on the advert size in our local products,
which is another way of thinking about smaller advertisers,
that is a way to create a simpler product for them,
where they don't have to put in a lot more effort,
or we have things like keywordless ads,
where they don't have to go ahead
and sort of work towards screening keywords,
or we've got, you know,
on the display side, we've got contextual targeting.
We create ad groups very, very quickly,
so we may continue to make product improvements,
which allow things to be more and more simple,
so advertisers can sort of
you know, go out and do their daily business,
as opposed to spend time
understanding more complicated stuff on our side,
so, yes, you're right, there are different,
simpler products we create for them,
which have slightly different pricing,
so that they can continue to participate
in the online economy.
Rosenberg: Thank you for your question.
We have time, probably, for a couple more questions,
one or two more questions,
so let's go with the next one, please.
Jay: Our next question comes from Jason Maynard
with Wells Fargo securities.
Maynard: Hey, guys.
I had a question just on the mobile business.
You know, last quarter obviously saw some increased momentum.
I'm curious just from a pricing perspective
what you're starting to see from advertisers,
and, you know, what kind of progress
did you see over the last 90 days.
And maybe more importantly,
as NFC starts to become more prevalent,
and smartphones,
I mean, how do you think that changes the dynamic
in terms of what type of effective monetization
you're gonna see from the local commerce side?
Pichette: So let me give you just a few stats
to continue to keep the context, right?
Mobile search grew, you know,
four times on mobile devices
with full web browsers in the last year,
so there is no doubt that this market
is just absolutely cranking.
And, you know, we've--
There's a lot of work,
and I'll let Jonathan talk about it.
About, you know, how ad formats
are still kind of nascent and building,
both on the Display side and on the regular side,
and we see a lot of upside.
Jonathan, you probably want to kind of cover those.
Rosenberg: Yeah, you know,
we don't really actually break out the details
in terms of the exact differences.
Certainly the click-to-call ads
are generating millions of calls every month.
A lot of advertisers are running these campaigns.
I think one you can see if you try it is DirecTV.
We did launch a call-only option,
where the only clickable link in the ad
is actually a phone number,
which, not surprisingly,
substantially increases the click-through rate
on mobile devices.
And we've extended some of the desktop formats
pretty successfully to Mobile.
Sitelinks is one.
If you try a query on Oakley, you'll see one.
If you try seller ratings on something like running shoes.
So, you know, I think there's a lot--
a lot more to learn there,
but the advertisers are very excited and engaged.
At the moment I don't have any specific comments on NFC,
other than to go back to the statement
that I've made in previous calls,
which is when people are completing transactions
with these devices,
it becomes much more trackable,
and obviously significantly more valuable.
Maynard: Okay, thank you.
Pichette: Thank you for your question.
We'll take the last question.
Jay: Our last question comes from Steve Weinstein
with Pacific Crest.
Weinstein: Great, uh, thanks for taking my questions.
First, you commented that you were gonna be shifting
more compensation to base pay from bonus.
I was wondering if you could let us know
what the ratio had been historically
as far those two components of comp,
and then finally,
obviously, you know, the acceleration in all the matrixes
is pretty exciting,
and, you know, pretty positive for the outlook.
I was wondering if you could help us understand, though,
how much acceleration is happening
within the core business,
and how much of the acceleration
is maybe some of the newer businesses
really starting to get some scale,
and maybe tipping the overall momentum in the business.
Pichette: Yeah, so, thank you for your question
on compensation, first.
Look, as I said, we raised all salaries.
So if you think of kind of financial modeling for a second,
all salaries have been raised
10% across the board January 1st,
and that has a ripple effect on the...
the ripple effect of, you know,
the employer taxes, 401Ks,
and all the rest of the benefits.
It will also impact obviously everybody
that we bring on this year as well,
so as we bring in new people,
they are costing us now slightly more.
In addition to that,
what we've done is,
part of the bonus is--
kind of calculate it without giving you the exact number.
We had two components to our annual bonus,
one which is a company multiplier,
then one which is an individual multiplier.
And what we've done for the non-execs,
because we want execs
to actually continue to be treated differently,
the non-execs are treated in that--
what used to be the company multiplier,
which didn't really have a lot of influence on,
we shifted over to base pay.
And our individual multiplier,
component of the bonus,
continues to be a very kind of, you know,
directly involved into their calculation
of their personal bonus.
So by shifting that company multiplier,
which they didn't have a lot of influence on, right?
It just moves into more predictable cash flows
for them all through the year,
rather than waiting for the end of the year.
That was the rationale for doing it.
In terms of revenue growth,
I mean, you know, last quarter,
we gave kind of two indication points on Display,
on Mobile, right?
We've talked about the fact
that our quar-- you know, if you look at our,
you know, Enterprise business,
you know, 30 million users.
3 million businesses on apps.
You know, the kind of magnitudes of numbers we're talking about
in each of our growth areas,
whether it be Mobile, whether it be Android,
whether it be YouTube,
where, you know, we continue to have YouTube, right?
I mean, to give you a snippet,
YouTube's revenue more than doubled in 2010, right?
So that's why we're optimistic across the board,
and that's why we're very kind of open
about the fact that when you have, you know,
such a digital economy running in high gear,
why don't you take the opportunity
to invest at the time where it is actually transforming itself?
And that's what we're doing,
and we're delighted, in fact,
to continue to push hard on that.
And that's what you see also in sales and marketing.
So thanks for your question.
With that, um, let me reiterate.
So I probably-- hope I got your attention back,
'cause the front-end of this conversation
got totally side-swiped by the big three of you guys
showing up and taking over our seats and phones,
but phenomenal year end
to what has been a terrific year.
I have to thank all of our Googlers.
They do an amazing job every day.
It looks easy when I show up with Jonathan and Nikesh
and talk about these fantastic results,
but our Googlers do an amazing job all around the world.
And so does our partners.
And so, to them, thank you so much
for your fantastic efforts in 2010,
and we're just set up
for a fantastic 2011 again.
With that, I'll let Jay close the call.
Jay: That does conclude today's conference.
We thank you for your participation.