Jan Dawson Chief Analyst

(408) 744-6244 jan@jackdawresearch.com

@jandawson

Google Q1 2015 earnings slides

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DisclaimerThe charts in this deck are based on the company’s reported financial and operating metrics, together with other metrics derived from them by Jackdaw Research. While every effort has been made to ensure the accuracy of the data presented, and the absence of errors, we make no guarantee of accuracy and accept no liability for decisions made based on the information contained in this document. Readers should always consult the source documents if making financial or other decisions regarding the company concerned.

Revenues, $m

Source: Google reporting, Jackdaw Research analysis

0

5,000

10,000

15,000

20,000

Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015

Revenue mix

Source: Google reporting, Jackdaw Research analysis

0%

20%

40%

60%

80%

100%

Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015

Google Sites ads Google Network ads Other

Revenue split by ad segment

Source: Google reporting, Jackdaw Research analysis

0%

20%

40%

60%

80%

Q1 2007 Q4 2007 Q3 2008 Q2 2009 Q1 2010 Q4 2010 Q3 2011 Q2 2012 Q1 2013 Q4 2013 Q3 2014

Google websites Google Network Members' websites

Revenue split by region

Source: Google reporting, Jackdaw Research analysis

0%

10%

20%

30%

40%

50%

Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015

United States United Kingdom Rest of the world

Year on year growth for ad businesses

Source: Google reporting, Jackdaw Research analysis

-25%

0%

25%

50%

75%

100%

Q1 2007 Q4 2007 Q3 2008 Q2 2009 Q1 2010 Q4 2010 Q3 2011 Q2 2012 Q1 2013 Q4 2013 Q3 2014

Google Websites Network Total ad revenues

Year on year growth rates by region

Source: Google reporting, Jackdaw Research analysis

0%

10%

20%

30%

40%

50%

Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015

United States United Kingdom Rest of the world Total

Other revenues, $m

Source: Google reporting, Jackdaw Research analysis

0

500

1,000

1,500

2,000

Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015

Year on year growth – Other revenues

Source: Google reporting, Jackdaw Research analysis

-100%

0%

100%

200%

300%

400%

500%

Q1 2007 Q4 2007 Q3 2008 Q2 2009 Q1 2010 Q4 2010 Q3 2011 Q2 2012 Q1 2013 Q4 2013 Q3 2014

Margins

Source: Google reporting, Jackdaw Research analysis

0%

10%

20%

30%

40%

50%

60%

70%

Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014

Gross margin Operating margin Net margin

Cost components as % of revenues

Source: Google reporting, Jackdaw Research analysis

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

R&D as % of revenues S&M as % of revenues G&A as % of revenues

Capital spending

Source: Google reporting, Jackdaw Research analysis

0%

5%

10%

15%

20%

0

1,000

2,000

3,000

Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014

Capex ($m) Capital intensity (capex/revenue)

Traffic acquisition costs, $m

Source: Google reporting, Jackdaw Research analysis

0

1,000

2,000

3,000

4,000

Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015

Traffic acquisition costs as % of advertising revenue

Source: Google reporting, Jackdaw Research analysis

20%

22%

24%

26%

28%

Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015

Network TAC as % of Network revenue

Source: Google reporting, Jackdaw Research analysis

67%

69%

72%

74%

76%

Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015

Sites TAC as % of Sites revenue (to Q3 2014)

Source: Google reporting, Jackdaw Research analysis

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Q1 2009 Q4 2009 Q3 2010 Q2 2011 Q1 2012 Q4 2012 Q3 2013 Q2 2014 Q1 2015

Ad metrics indexed to Q4 2008

Source: Google reporting, Jackdaw Research analysis

0

1

2

3

4

Q4 2008 Q3 2009 Q2 2010 Q1 2011 Q4 2011 Q3 2012 Q2 2013 Q1 2014 Q4 2014

Paid clicks indexed to Q4 2008 Cost-per-click indexed to Q4 2008

Ad metrics indexed to Q2 2011

Source: Google reporting, Jackdaw Research analysis

50

100

150

200

250

Q2 2011 Q4 2011 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014

Paid clicks indexed to Q2 2011 Cost-per-click indexed to Q2 2011

Ad metrics indexed to Q4 2012

Source: Google reporting, Jackdaw Research analysis

50

75

100

125

150

175

Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

Network paid clicksSites paid clicksNetwork cost-per-clickSites cost-per-click

Year on year change in ad metrics

Source: Google reporting, Jackdaw Research analysis

-20%

-10%

0%

10%

20%

30%

40%

50%

Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015

Network paid clicks Sites paid clicksNetwork cost-per-click Sites cost-per-click

Employees (excluding Motorola)

Source: Google reporting, Jackdaw Research analysis

0

10,000

20,000

30,000

40,000

50,000

60,000

Q1 2010 Q3 2010 Q1 2011 Q3 2011 Q1 2012 Q3 2012 Q1 2013 Q3 2013 Q1 2014 Q3 2014 Q1 2015

Revenue per employee, $000s

Source: Google reporting, Jackdaw Research analysis

250

275

300

325

350

375

Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015

Annual revenue per employee, $m

Source: Google reporting, Jackdaw Research analysis

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011 Q4 2012 Q4 2013 Q4 2014

Year on year headcount growth

Source: Google reporting, Jackdaw Research analysis

-30%

0%

30%

60%

90%

Q1 2007 Q4 2007 Q3 2008 Q2 2009 Q1 2010 Q4 2010 Q3 2011 Q2 2012 Q1 2013 Q4 2013 Q3 2014

Jan Dawson Chief Analyst

(408) 744-6244 jan@jackdawresearch.com

@jandawson

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