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Inside Google's Wallet

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The editors at Masters in Finance Degree Guide decided to research the topic of:

Inside Google's Wallet

How the World's 2nd Most Valuable Tech Company Spends Its Money

Ever since Google was first incorporated in 1998, its meteoric rise has set the standard for other tech companies in the Internet age. Now one of the world's most innovative companies, Google has a constantly expanding list of software and hardware products, including Android, the world's most-used smartphone platform. Find out how Google spends its ever-expanding income.

An Overview of Earnings

Net income


- 2011: $9.737 billion
- 2010: $8.505 billion
- 2009: $6.52 billion
- 2008: $4.227 billion
- 2007: $4.204 billion

Major sources of income


- $26.145 billion from Google websites
- $10.386 billion from Google Network Members' websites

The Cost of Maintaining Google

Mostly traffic acquisition costs, plus operating expenses for data centers, including:


- Depreciation
- Labor
- Energy
- Bandwidth
- Transaction fees

Costs


- 2011: $13.188 billion
- 2010: $10.417 billion
- 2009: $8.844 billion

Traffic acquisition costs

Paid to Google Network members under arrangements through AdSense and to distribution partners


- Total traffic acquisition costs
- 2011: $8.811 billion
- 2010: $7.317 billion
- 2009: $6.169 billion

Research, Sales and Administration


- All Google employees received a ~10% base salary raise in 2011
- Research and development
- Expenses over time
- 2011: $5.162 billion
- 2010: $3.762 billion
- 2009: $2.843 billion
- Increase in 2011 attributed in part to:
- $875 million increase in facilities- and labor-related costs
- $200 million increase in stock-based compensation
- Sales and marketing
- Expenses over time
- 2011: $4.589 billion
- 2010: $2.799 billion
- 2009: $1.984 billion
- Increase in 2011 attributed in part to:
- $787 million increase in facilities- and labor-related costs
- $700 million increase in advertising and promotional expense
- General and administrative expenses
- Expenses over time
- 2011: $2.724 billion
- 2010: $1.962 billion
- 2009: $1.668 billion
- Increase in 2011 attributed in part to:
- $350 million increase in facilities- and labor-related costs
- $260 million increase in professional services, mostly consulting and legal expenses
- $116 million increase in stock-based compensation

Google's Tax Rate


- Income tax provision
- 2011: $2.589 billion
- 2010: $2.291 billion
- 2009: 1.861 billion
- Income tax rate, U.S.
- 2011: 21%
- 2010: 21.2%
- 2009: 22.2%

Key Expenses in 2011


- Acquired Motorola for ~$12.5 billion
- $784 million increase in cost of data centers
- $676 million to acquire ITA, maker of flight search software
- 8GB Google Nexus 7 tablet, released July 2012
- $151.75 bill of materials
- $7.30 manufacturing cost
- BOM + manufacturing = 80% of retail price

For all its expenses, Google offers many of its products for free. Perhaps that's the key to making your company a part of everyday life on a global scale.



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