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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 we’re doing in:
– F/X
– Portfolio
– Financial Risk
– Systems
Google’s Mission

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

3
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
Projects
• Build for the short term
• Develop vertical solutions

• Create content
Content
• Discount tail content

• Focus on the average user
Users
• Hold user data hostage

6
Google Evolution

1995 1998 2000 2003 2004 2005 2006

?

Core Search Ads Monetization Communications Collaboration ?
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Google Is a Data-Driven Company…
Search, Sites, My Sites
My Ads

Google
Trends Google
Website
Optimizer

Google Ad Metrics Google Analytics
Continued Strong Performance
Gross Revenue GAAP Operating Profit
$11,767
(millions)

$12,000
$10,605

(millions)
($7,399 first 9mths) $4,000 $3,550
$10,000 ($2,489 first 9mths) $3,644
$3,600
$3,200
$8,000
$2,800
$6,139 $2,400
$6,000 $2,017
$2,000

$4,000
$1,600
$3,189
$1,200

$2,000 $1,466 $800 $640
$342
$440 $400 $186
$86 $11
$0 $0
2001 2002 2003 2004 2005 2006 Q1-Q3 '07 2001 2002 2003 2004 2005 2006 Q1-Q3 '07
2001 2002 2003 2004 2005 2006 Q1-Q3 '07

$11.00 GAAP EPS (Diluted)$9.94 Operating Cash Flow
$4,200 $4,082

(millions)
$10.00 ($6.64 first 9mths) $9.50 $3,581
$9.00 $3,800 ($2,670 first 9mths)

$8.00 $3,400
$3,000
$7.00
$2,600 $2,459
$6.00 $5.02
$2,200
$5.00
$1,800
$4.00
$1,400
$3.00 $977
$1,000
$2.00 $1.46
$600 $395
$1.00 $0.45 $0.41 $155
$200 $31
$0.00
-$200
2002 2003 2004 2005 2006 Q1-Q3 '07 2001 2002 2003 2004 2005 2006 Q1-Q3 '07
2001 2002 2003 2004 2005 2006 Q1-Q3 '07

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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
Starting with a Clean Slate
 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!!!!
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 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
Personnel Focus

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
Google Treasury Organization – Q1
‘07

Brent Callinicos
VP, Treasurer

Portfolio Manager Assistant Treasurer
(1 HC) (1 HC)

Operations
& Cash Management
(1 HC)

Stock Services
(4 HC)
Google Treasury Organization – Q3 ‘07
Brent Callinicos
VP, Treasurer

Assistant Treasurer
Assistant Treasurer Assistant Treasurer
Cash Mgmt, Insurance Executive Assistant
Portfolio Management F/X
& Stock Services

Business Risk Mgmt
Portfolio Manager F/X Manager
(Insurance)

Business Risk Mgmt
Portfolio Analyst F/X Analyst
(Insurance)

Operations Corporate Finance
Portfolio Manager
& Cash Management & F/X Mgr

Operations
Portfolio Analyst Corporate Finance Analyst
& Cash Management

Operations
& Cash Management
•Blue = Heads at end of Q1
Stock Services •Grey = hired in Q2/Q3
(3 HC)
•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
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
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  Team of 2 (going to 3 in ’08)
• Broad policy  Focused world-class policy
• Balance Sheet only  Full F/X revenue cycle
• No specific risk parameters  Statistical risk drives policy
• Forwards only  Full range of economically-
efficient instruments
 Full range of systems
• No 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 I J E H
D Consultant
F G
L B C RFP M & Google
Vendor
Landscape
DEMOS

AUG
FINALIST VENDORS

Process Overview A B
• Onsite Vendor Overviews Final C
• Surveys Vendors
• Detailed RFP SEPT
• Detailed Onsite Demos
• Demo Score Cards
• eAuction (SW license,
maintenance fees, hosting)
FINAL APPROVAL
• Full Day Deep Dive
GO-FORWARD DECISION
Demos
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