Sample Valuation

PRESENTATION TO INVESTORS | VALUATION ANALYSIS

Project Google

CONFIDENTIAL | 25 JANUARY 2010

Sample Valuation

Table of Contents

I. INDUSTRY OVERVIEW………………………………………………… 3

II. COMPANY OVERVIEW………………………………………………… 6

III. FINANCIAL OVERVIEW……………………………………………….. 10

IV. APPENDIX……………………………………………………………….. 18

Confidential Project Google

Sample Valuation

Project Google

INDUSTRY OVERVIEW | INTERNET SOFTWARE & SERVICES

3

Sample Valuation

Industry Overview Project Google

Global Search Market Posted 46% Growth in 2009

The worldwide internet search reached over 131 billion queries in December 2009. This statistic

represents:

4 billion searches per day

175 million searches per hour

2.9 million searches per minute

The U.S. had the largest share of the global individual search market with 22.7 billion searches

conducted by people age 15 or older.

0

5,000

10,000

15,000

20,000

25,000

United

States

China Japan United

Kingdom

Germany France South

Korea

Brazil Canada Russian

Federation

December-08

December-09

92% 28% 53% 44% 61% 38%

35%

48%

13%

Glo

ba

l S

earc

hes

(M

M)

Top 10 Countries by Number of Searches Conducted 22%

1) Source: “comScore Reports Global Search Market Growth of 46 percent in 2009.” (January 22, 2010)

2) Source: “comScore Reports Global Search Market Growth of 46 percent in 2009.” (January 22, 2010)

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Sample Valuation

Industry Overview Project Google

Google Sites Had a Dominate Share Of Search Query Volume in 2009

The U.S. core search market grew 16% overall in 2009

Google Sites search query volume grew 21 %

Microsoft Sites had the greatest growth in search volume at 49%

Ask Network increased its search query volume by 12%

5

Sample Valuation

Project Google

COMPANY OVERVIEW | GOOGLE INC.

6

Sample Valuation

Selected Company Data

Company Information

Company Name Google Inc.

Ticker: GOOG

Fiscal Year Ending Dec-31-08

Fiscal Year Ending + 1 Dec-31-09

Fiscal Year Ending + 2 Dec-31-10

Marginal Tax Rate 35.0%

Beta 1.08

Selected Market Data

Stock Valuation Date Jan/25/10

Share Price as of (01/25/10) $529.0

F.D. Shares Outstanding 320.3

Equity Value $169,435.4

Net Debt ($21,994.4)

Enterprise Value $147,441.0

Google NASDAQ

0 %

100 %

200 %

300 %

400 %

500 %

600 %

700 %

Google

Nasdaq

Company Overview Project Google

(1) (2)

1) Based on company filings.

2) Based on closing prices as of January 25, 2010. 7

Sample Valuation

Google Stock Price Trading History (1)

Volume Share Price

0

2,000

4,000

6,000

8,000

10,000

12,000

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

$600

$650

$700

Volume

Share Price

Vo

lum

e in

Th

ou

sa

nd

s

High (01/04/2010) $626.75

Low (03/09/2009) $290.89

Average $456.18

Price

High (04/17/2009) 10,730

Low (12/24/2009) 858.7

Average 3,480

Volume

Company Overview Project Google

1) Source: Yahoo! Finance.

Note: Price and volume data are based on closing prices and volumes. 8

Sample Valuation

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

$600

$650

$700

12 Feb 09

Google Exits Radio Advertising

Business. - Reuters

26 Mar 09

Google Cut 200 Jobs From Sales Force. -

Reuters

03 May 09

Apple and Google Ties are Investigated. -

NYT

05 Aug 09

Google to acquire On2 technologies.-Reuters

16 Sep 09

Google Acquires Carnegie Mellon Spin-Off ReCapture Inc. - Reuters

03 Apr 09

Google Could Be in Talks To Buy Twitter. - Reuters.

09 Nov 09

Google Signs Agreement To Acquire AdMob. -Reuters

23 Nov 09

Google To Buy Display Advertising Startup Teracent. -DJ

06 Dec 09

Google Buys Online Word Processing Startup AppJet.-

Reuters

13 Jan 2010

Rejecting Censorship, Google Threatens To Quit

China. -Reuters

26 Oct 09

On2 Technologies Announced Proposed Settlement in Litigation. -Reuters

Company Overview Project Google

Google Stock Trading History (1)

1) Yahoo! Finance.

Note: Price and volume data are based on closing prices and volumes. 9

Sample Valuation

Project Google

FINANCIAL OVERVIEW | GOOGLE INC.

10

Sample Valuation

Financial Overview Project Google

$200.00 $700.00 $1,200.00 $1,700.00

$1081.61

$1617. 37

$ 553.59

$540.46 $1348. 58

$626.76

$600.00 $635.00

Median: $659.9

$170.89

$193.75

$290.89

COMPARABLE

PUBLIC

COMPANIES

PRECEDENT

TRANSACTIONS

DISCOUNTED

CASH FLOW

PREMIUMS PAID

ANALYSIS

52-WEEK RANGE

ANALYST PRICE

TARGETS

$781.66

212.2% - (50.0%)

(3.6%) - (31.7%)

(1.3%) - (60.0%)

(83.4%) - (14.9%)

(11.1%) - (16.0%)

175.4% - (67.0%)

GOOGLE VALUATION –

IMPLIED PRICE PER SHARE

Valuation Summary PREMIUM

TO 01/25/2010

PRICE: $533.50

7.2x – 34.7x

7.9x – 50.8x

18.8x – 25.6x

18.4x – 42.7x

10.8x – 21.0x

20.2x – 21.2x

9.5x – 60.1x

10.8x – 90.0x

30.8x – 43.5x

30.1x – 75.0x

16.2x – 34.9x

33.4x – 35.3x

EBITDA P/E

IMPLIED 2009E MULTIPLES

1) Based on selected comparable companies for the “Internet Software & Services” sector.

2) Selected transactions are based on data provided by techcrunch.com and company press-releases.

3) Reflects WACC of 12.1% and exit multiple of 14.5x.

4) Source: Techcrunch.com. Includes transactions greater than $1 billion from 2007 to date.

5) Based on closing prices as of January 25, 2010.

6) Based on selected Wall Street analysts„ equity reports on October 16, 2009.

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Sample Valuation

Financial Overview Project Google

Multiples Analysis Share

Price % of 52- Market Enterprise

Company Name Ticker 1/11/2010 Week High Capitalization Value Cash Debt LTM FYE +1 FYE +2 LTM FYE +1 FYE +2

Amazon.com, Inc. AMZN $120.4 17.5% $52,915.0 $49,030.0 $4,001.0 $116.0 2.3x 2.1x 1.6x 30.9x 27.5x 19.2x

eBay Inc. EBAY $23.7 8.2% $30,630.3 $27,671.0 $3,159.3 $200.0 3.3x 3.2x 3.0x 9.2x 9.0x 8.0x

Yahoo Inc. YHOO $15.9 12.0% $22,220.8 $17,801.3 $4,503.1 $83.6 3.7x 3.8x 3.6x 10.3x 10.5x 10.0x

Microsoft Corp. MSFT $29.3 7.0% $260,494.6 $260,494.6 $36,728.0 $5,996.0 4.1x 3.8x 3.5x 9.8x 9.5x 8.6x

Maximum $120.4 17.5% $260,494.6 $260,494.6 $36,728.0 $5,996.0 4.1x 3.8x 3.6x 30.9x 27.5x 19.2x

75th Percentile $52.1 13.4% $104,809.9 $101,896.1 $12,559.3 $1,649.0 3.8x 3.8x 3.5x 15.5x 14.7x 12.3x

Median $26.5 10.1% $41,772.6 $38,350.5 $4,252.0 $158.0 3.5x 3.5x 3.3x 10.1x 10.0x 9.3x

Mean $47.3 11.2% $91,565.1 $88,749.2 $12,097.8 $1,598.9 3.3x 3.2x 2.9x 15.0x 14.1x 11.5x

25th Percentile $21.7 7.9% $28,527.9 $25,203.5 $3,790.6 $107.9 3.0x 2.9x 2.7x 9.6x 9.4x 8.5x

Minimum $15.9 7.0% $22,220.8 $17,801.3 $3,159.3 $83.6 2.3x 2.1x 1.6x 9.2x 9.0x 8.0x

Google Inc. GOOG $533.5 14.9% $170,879.4 $148,885.0 $21,994.4 $0.0 8.9x 8.3x 7.2x 14.2x 14.0x 11.8x

Margins Analysis

LTM CapEx

Company Name FYE '06-08 FYE '08-10 FYE '06-08 FYE '08-10 FYE '06-08 FYE '08-10 % Revenue LTM FYE +1 FYE +2 LTM FYE +1 FYE +2

Amazon.com, Inc. 33.8% 26.7% 42.1% 34.7% 51.0% 25.7% 2.0% 5.7% 4.6% 5.7% 7.3% 7.5% 8.3%

eBay Inc. 19.6% 3.2% 18.3% 3.8% 19.3% 8.2% 6.6% 26.3% 29.6% 31.9% 35.9% 35.4% 37.9%

Yahoo Inc. 8.8% (4.9%) (2.5%) (0.9%) (13.5%) (20.8%) 9.5% 20.1% 8.8% 13.2% 35.9% 36.6% 36.5%

Microsoft Corp. 6.9% 6.3% 7.9% 3.3% 5.9% 3.0% 4.9% 37.1% 35.4% 36.0% 41.8% 39.8% 40.4%

Maximum 33.8% 26.7% 42.1% 34.7% 51.0% 25.7% 9.5% 37.1% 35.4% 36.0% 41.8% 39.8% 40.4%

75th Percentile 23.2% 11.4% 24.3% 11.5% 27.2% 12.6% 7.3% 29.0% 31.0% 32.9% 37.4% 37.4% 38.5%

Median 14.2% 4.7% 13.1% 3.5% 12.6% 5.6% 5.8% 23.2% 19.2% 22.5% 35.9% 36.0% 37.2%

Mean 17.3% 7.8% 16.5% 10.2% 15.7% 4.0% 5.8% 22.3% 19.6% 21.7% 30.2% 29.8% 30.7%

25th Percentile 8.3% 1.2% 5.3% 2.3% 1.0% (2.9%) 4.2% 16.5% 7.7% 11.3% 28.7% 28.4% 29.4%

Minimum 6.9% (4.9%) (2.5%) (0.9%) (13.5%) (20.8%) 2.0% 5.7% 4.6% 5.7% 7.3% 7.5% 8.3%

Google Inc. 47.4% 13.9% 49.0% 16.1% 46.9% 12.3% 5.7% 53.5% 46.1% 48.1% 62.7% 59.4% 61.3%

EV/Revenue EV/EBITDA

Revenue Growth (CAGR) EBITDA Growth (CAGR) EBIT Growth (CAGR) EBITDA Margin EBIT Margin

($ in millions, except per share data )

Comparable Public Companies (1)

1) Based on selected comparable companies for the “Internet Software & Services” sector. 12

Sample Valuation

1) Source: “Yahoo to buy rest of Right Media for $680mln.” (Reuters, 04/30/2007)

Note: Includes 20% stake (~$200MM) Yahoo! acquired in October, 2006.

2) Source: “Microsoft to Acquire aQuantive, Inc.” (Microsoft, 05/18/2007)

3) Source : “Google to Acquire DoubleClick.” (Google, 04/13/2007)

4) Source :”WPP has agreed to acquire 24/7 Real Media for $11.75 per share.” (WPP, 05/17/2007)

5) Source: “CISCO Announces Agreement to Acquire WebEx.”(CISCO, 03/15/2007)

6) Source: “CBS to buy CNET Networks.” (05/15/2008)

7) Source : “Adobe to Acquire Omniture.” (Adobe, 10/23/2009)

Announce Transaction

Date Acquiror Target Revenue EBITDA Value LTM FYE+1 LTM FYE+1

04/29/07 Yahoo Inc. Right Media $70.0 $18.0 $850.0 12.1x N/A 47.2x N/A

05/18/07 Microsoft Corp. aQuantive Inc., $492.6 $129.5 $6,376.9 12.3x 9.9x 46.7x 39.3x

04/13/07 Google Inc. DoubleClick $232.0 $72.0 $3,100.0 13.4x 10.4x 46.7x 31.6x

05/17/07 WPP Group 24/7 Real Media $215.0 $20.8 $668.6 2.8x 2.2x 29.0x 22.3x

03/15/07 CISCO Systems WebEX Com. Inc. $380.0 $124.1 $3,090.5 7.2x 6.0x 22.1x 18.6x

05/15/08 CBS Corp. CNET Networks $408.2 $73.3 $1,794.3 4.3x 4.0x 23.8x 20.1x

10/23/09 Adobe Systems Omniture, Inc. $335.5 $68.8 $1,771.0 4.9x 3.6x 24.1x 11.2x

Maximum $492.6 $129.5 $6,376.9 13.4x 10.4x 47.2x 39.3x

75% Percentile $394.1 $98.7 $3,095.3 12.2x 8.9x 46.7x 29.3x

Median $335.5 $72.0 $1,794.3 7.2x 5.0x 29.0x 21.2x

Mean $304.8 $72.4 $2,521.6 8.1x 6.0x 34.2x 23.9x

25th Percentile $223.5 $44.8 $1,310.5 4.6x 3.7x 23.9x 19.0x

Minimum $70.0 $18.0 $668.6 2.8x 2.2x 22.1x 11.2x

DoubleClick is a provider of digital marketing technology

and services with a focus on ad serving, media, video,

search and affiliate marketing.

24/7 Real Media provides multi-platform internet marketing

strategies including behavioral targeting, ad serving and

Web advertising.

WebEx Communications Inc. provides on-demand

collaboration, online meeting, web conferencing and video

conferencing applications.

CNET is an interactive media company providing tech

product reviews, news and price comparisons, free

software downloads, daily videos, and podcasts.

Omniture is a provider of online business optimization

products and services including integrated set of

optimization applications for online analytics, channel

analytics, visitor acquisition and conversion.

aQuantive is a digital marketing company with three

distinct business segments: digital marketing services;

digital marketing technologies; and digital performance

media.

Target LTM EV/Revenue EV/EBITDA

Target description

Right Media, Inc. is an online advertising company that

operates the Right Media Exchange (RMX), a marketplace

that enables advertisers, publishers, and ad networks to

trade digital media.

Precedent Transactions

($ in millions)

Financial Overview Project Google

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13

Sample Valuation

Financial Overview Project Google

Fiscal Year Ending 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 DCF Assumptions

Discount Rate 12.1%

Revenue (excl. TAC) $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9 Tax Rate 35.0%

EBIT $8,246.3 $9,888.8 $11,470.0 $13,300.2 $14,998.1 Mid-Year Conversion (Y/N)? Y

Less: Taxes $3,074.4 $3,694.7 $4,304.0 $5,010.6 $5,680.3 Terminal Multiple 14.5x

Debt-Free Earnings $5,171.9 $6,194.1 $7,166.1 $8,289.6 $9,317.8 Gordon Growth Approach (Y/N)? N

Less: Capital Expenditures ($1,984.6) ($1,871.1) ($1,657.9) ($1,865.6) ($2,082.2) Gordon Growth Rate 8.0%

Less: Working Capital Requirements ($328.6) ($515.8) ($525.0) ($577.4) ($581.3)

Add: Depreciation and Amortization $1,302.2 $1,557.4 $1,775.0 $1,973.7 $2,216.0 Terminal Multiple Increment 1.0x

Add: Stock-Based Compensation $1,073.5 $1,155.1 $1,184.4 $1,267.9 $1,326.0 Discount Rate Increment 1.0%

Total Net Investment $62.4 $325.6 $776.6 $798.6 $878.6

Terminal Value Assumptions

Net Debt-Free Cash Flows: $5,234.3 $6,519.7 $7,942.6 $9,088.2 $10,196.4 Terminal EBITDA $18,540.1

Projection Year 1.0 2.0 3.0 4.0 5.0 Terminal Multiple 14.50

Discount period 0.5 1.5 2.5 3.5 4.5 Terminal Value $268,831.6

Discount Factor @ 12.1% 0.94 0.84 0.75 0.67 0.60 Discount Period 4.50

PV of Net Debt-Free Cash Flows: $4,944.8 $5,496.5 $5,975.8 $6,102.1 $6,109.7 Discount Factor @ 0.60

PV of Terminal Value $161,084.2

Free Cash Flow Growth Rate: % of Enterprise Value

Enterprise Value $189,713.0

Sensitivity Analysis Implied Equity Value and Share Price

Enterprise Value $189,713.0

Enterprise Value 12.5x 13.5x 14.5x 15.5x 16.5x Less: Net Debt ($21,994.4)

10.1% $180,286.2 $192,310.8 $204,335.4 $216,359.9 $228,384.5

11.1% $173,589.4 $185,134.6 $196,679.7 $208,224.9 $219,770.0 Implied Equity Value $211,707.4

12.1% $167,209.2 $178,298.1 $189,386.9 $200,475.8 $211,564.7 F.D. Shares Outstanding 320.3

13.1% $161,127.8 $171,782.2 $182,436.7 $193,091.1 $203,745.6 Implied Share Price $660.9

14.1% $155,328.7 $165,569.3 $175,809.9 $186,050.6 $196,291.2

Distribution of Value

Period Cash Flow 15.1%

Terminal Cash Flow 84.9%

Implied Share price 12.5x 13.5x 14.5x 15.5x 16.5x Total 100.0%

10.1% $631.5 $669.0 $706.6 $744.1 $781.7

11.1% $610.6 $646.6 $682.7 $718.7 $754.8 Implied Analyses

12.1% $590.7 $625.3 $659.9 $694.5 $729.2 LTM EBITDA Multiple 18.1x

13.1% $571.7 $605.0 $638.2 $671.5 $704.7 NFY EBITDA Multiple 17.9x

14.1% $553.6 $585.6 $617.5 $649.5 $681.5 Implied Gordon Growth Rate 13.4%

Dis

cou

nt

Rate

D

iscou

nt

Ra

te

Exit Multiple

Exit Multiple

($ in millions, except per share data)

Discounted Cash Flow Analysis

14

Sample Valuation

($ in millions)

WACC Analysis

Source: Company filings, Yahoo! Finance and equity research.

Weighted Average Cost of Capital (WACC) = (Cost of Debt*(1- Tax Rate) * Debt to Enterprise Value) +

(Cost of Equity * Equity to Enterprise Value) + (Cost of Preferred *Preferred to Enterprise Value )

Cost of Equity = Risk Free + (Levered Beta * Equity Risk Premium)

Risk Free Rate is based on the 30-year treasury rate of 4.375%.

Equity Risk Premium (average) is sourced from equity research and press-releases.

Financial Overview Project Google

Market Debt to Preferred to Equity to

Preferred Value of Total Debt to Total Total Total

Ticker Debt Stock Equity Capitalization Equity Capitalization Capitalization Capitalization

Amazon.com, Inc. AMZN $116.0 $0.0 $52,915.0 $53,031.0 0.2% 0.2% 0.0% 99.8%

eBay Inc. EBAY $200.0 $0.0 $30,630.3 $30,830.3 0.7% 0.6% 0.0% 99.4%

Yahoo Inc. YHOO $83.6 $0.0 $22,220.8 $22,304.4 0.4% 0.4% 0.0% 99.6%

Microsoft Corp. MSFT $5,996.0 $0.0 $260,494.6 $266,490.6 2.3% 2.2% 0.0% 97.8%

Median $158.0 $0.0 $41,772.6 $41,930.6 0.5% 0.5% 0.0% 99.5%

Mean $1,598.9 $0.0 $91,565.1 $93,164.1 0.9% 0.9% 0.0% 99.1%

Google Inc. GOOG $0.0 $0.0 $170,879.4 $170,879.4 0.0% 0.0% 0.0% 100.0%

Equity

Levered Unlevered Risk Cost of Cost of Cost of

Ticker Beta Beta Premium Equity Debt Preferred WACC

Amazon.com, Inc. AMZN 1.25 1.25 7.0% 13.1% 0.0% 0.0% 13.1%

eBay Inc. EBAY 1.92 1.91 7.0% 17.8% 0.5% 0.0% 17.7%

Yahoo Inc. YHOO 0.76 0.76 7.0% 9.7% 0.0% 0.0% 9.7%

Microsoft Corp. MSFT 0.96 0.95 7.0% 11.1% 2.4% 0.0% 10.9%

Median 1.11 1.10 7.0% 12.1% 0.2% 0.0% 12.0%

Mean 1.22 1.22 7.0% 12.9% 0.7% 0.0% 12.8%

Google Inc. GOOG 1.10 1.10 7.0% 12.1% 0.0% 0.0% 12.1%

15

Sample Valuation

($ in millions)

Premiums Analysis – Technology M&A Deals Over $1 Billion with Public,

U.S.-Based Sellers Since 01/01/2007

Financial Overview Project Google

1) Source: “Microsoft to Acquire aQuantive, Inc.” (Microsoft, 05/18/2007)

2) Source: “CISCO Announces Agreement to Acquire WebEx.”(CISCO, 03/15/2007)

3) Source: “CBS to buy CNET Networks.” (05/15/2008)

4) Source : “Adobe to Acquire Omniture.” (Adobe, 10/23/2009)

5) Source: “HP to Acquire EDS for $13.9 Billion.” (HP, 05/13/2008)

6) Source: “Sun and Oracle.” (Sun, 04/20/2009)

7) Source: “Dell to Acquire Perot Systems for $3.9Billion.” (Dell, 09/21/09)

8) Source: “CISCO Announces Agreement to Acquire Starent Networks.” (CISCO,10/13/2009)

9) Source: “HP to Acquire 3Com for $2.7 Billion.” (HP, 11/11/2009)

10) Source: “IBM to Acquire SPSS Inc. to Provide Clients Predictive Analytics Capabilities.” (IBM, 07/28/2009)

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Date Equity Offer Share Price History Premium/(Discounts)

Acquirer Target Announced Value Price 1-Day 20-Day 1-Day 20-Day

Microsoft Corp. aQuantive Inc., 05/18/07 $6,376.93 $66.50 $35.87 $31.90 85.4% 108.5%

CISCO Systems, Inc. WebEX Com. Inc. 03/15/07 $3,090.52 $57.00 $25.98 $26.18 119.4% 117.7%

CBS Corp. CNET Networks 05/15/08 $1,794.35 $11.50 $7.95 $7.95 44.7% 44.7%

Adobe Systems, Inc. Omniture, Inc. 10/23/09 $1,771.04 $21.50 $21.48 $21.51 0.1% (0.05%)

Hewlett-Packard EDS 05/13/08 $13,900.00 $25.00 $24.13 $17.17 3.6% 45.6%

Oracle Corp. Sun Microsystems 04/20/09 $7,400.00 $9.50 $6.69 $7.94 42.0% 19.6%

Dell Inc. Perot Systems 09/21/09 $3,900.00 $30.00 $17.91 $17.00 67.5% 76.5%

CISCO Systems, Inc. Starent Systems 10/13/09 $2,900.00 $35.00 $34.97 $34.39 0.1% 1.8%

Hewlett-Packard 3Com 11/11/09 $2,700.00 $7.90 $5.41 $5.84 46.0% 35.3%

IBM SPSS 07/28/09 $1,200.00 $50.00 $35.09 $33.37 42.5% 49.8%

Max $66.50 $35.87 $34.39 119.4% 117.7%

75th Percentile $46.25 $32.72 $30.47 62.1% 69.8%

Median $27.50 $22.81 $19.34 43.6% 45.1%

Mean $31.39 $21.55 $20.33 45.1% 49.9%

25th Percentile $14.00 $10.44 $10.21 13.2% 23.6%

Min $7.90 $5.41 $5.84 0.1% (0.0%)

16

Sample Valuation

Financial Overview Project Google

Price

Firm Date Rating Target

Susquehanna Financial Group 10/16/2009 Positive $625.00 $22.72 - $25.69

Morgan Stanley 10/16/2009 Overweight $625.00 $20.17 - $22.87

Jefferies & Co. 10/16/2009 Buy $600.00 $23.02 - $26.54

Credit Suisse 10/16/2009 Outperform $600.00 $22.51 - $26.18

Collins Stewart 10/16/2009 Buy $635.00 $22.68 - $25.89

Median $625.00 $22.68 - $25.89

Mean $617.00 $22.22 - $25.43

Spencer Wang

Sundeep Aggarwal

Analyst

Name

Earnings Per Share

Marianne Wolk

Mary Meeker

Youssef H. Squali

Wall Street Analysts’ Price Targets

Source: Thomson Reuters One Banker and analysts‟ equity research reports on October 16, 2009. 17

Sample Valuation

Project Google

APPENDIX

18

Sample Valuation

Income Statement (Exc. TAC) - Google Inc.:

FY2006A FY2007A FY2008A FY2009P FY2010P FY2011P FY2012P FY2013P

Net revenue (Exc.TAC): $7,296.1 $11,660.1 $15,856.6 $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9

Other cost of revenue: $916.2 $1,715.2 $2,682.5 $2,826.3 $2,976.0 $3,124.3 $3,258.5 $3,380.1

Research & development: $1,601.3 $2,120.0 $2,793.2 $3,071.7 $3,521.8 $3,920.0 $4,441.2 $4,942.4

Sales & marketing: $849.5 $1,461.3 $1,946.2 $2,071.5 $2,324.2 $2,692.3 $2,949.7 $3,358.1

General & sales: $751.8 $1,279.3 $1,802.6 $1,663.7 $1,850.5 $2,143.6 $2,326.2 $2,648.2

Total operating Expenses: $4,118.8 $6,575.7 $9,224.6 $9,633.2 $10,672.6 $11,880.2 $12,975.6 $14,328.9

Operating Income: $3,177.3 $5,084.4 $6,632.0 $8,246.3 $9,888.8 $11,470.0 $13,300.2 $14,998.1

4% 11% 11% 9% 10%

EBITDA: $4,207.3 $6,920.7 $9,251.7 $10,622.0 $12,601.3 $14,429.4 $16,541.8 $18,540.1

EBITDA margin: 57.7% 59.4% 58.3% 59.4% 61.3% 61.8% 63.0% 63.2%

EBITDA growth: N/A 64.5% 33.7% 14.8% 18.6% 14.5% 14.6% 12.1%

Interest & other, net: $461.0 $589.6 $316.4 $537.7 $667.4 $827.0 $1,015.9 $1,231.3

Impairment of equity investments: $0.0 $0.0 ($1,094.8) $0.0 $0.0 $0.0 $0.0 $0.0

Pre-tax income: $3,638.3 $5,674.0 $5,853.6 $8,784.0 $10,556.1 $12,297.1 $14,316.0 $16,229.3

Income tax provision $933.6 $1,470.3 $1,626.7 $3,074.4 $3,694.7 $4,304.0 $5,010.6 $5,680.3

Effective Income tax: 25.7% 25.9% 27.8% 35.0% 35.0% 35.0% 35.0% 35.0%

Net Income: $2,704.8 $4,203.7 $4,226.9 $5,709.6 $6,861.5 $7,993.1 $9,305.4 $10,549.1

Net income margin: 37.1% 36.1% 26.7% 31.9% 33.4% 34.2% 35.4% 36.0%

Net income growth: N/A 55.4% 0.6% 35.1% 20.2% 16.5% 16.4% 13.4%

Weighted average diluted shares outstanding: 309.5 316.2 317.5 317.5 317.5 317.5 317.5 317.5

Diluted EPS (GAAP): $8.74 $13.29 $13.31 $17.98 $21.61 $25.17 $29.31 $33.22

Depreciation: $494.4 $807.7 $1,212.2 $1,050.4 $1,336.5 $1,605.8 $1,844.0 $2,112.0

Amortization: $77.5 $159.9 $287.7 $251.8 $220.9 $169.2 $129.7 $104.0

Stock-based compensation: $458.1 $868.6 $1,119.8 $1,073.5 $1,155.1 $1,184.4 $1,267.9 $1,326.0

Historical Statement Projected Statements

($ in millions, except per share data)

Projected Income Statement

Appendix Project Google

1) Impairment of equity investments in AOL and Clearwire.

2) Per 2008 10K - SBC was estimated to be ~ $1.0 billion in 2009 and ~$1.4 billion thereafter. 19

(1)

(2)

Sample Valuation

Operating Expenses- Google Inc.:

FY2006A FY2007A FY2008A FY2009P FY2010P FY2011P FY2012P FY2013P

Cost of revenue: $916.2 $1,715.2 $2,682.5 $2,826.3 $2,976.0 $3,124.3 $3,258.5 $3,380.1

% of total revenue 12.6% 14.7% 16.9% 15.8% 14.5% 13.4% 12.4% 11.5%

Research and development: $1,228.6 $2,120.0 $2,793.2 $3,071.7 $3,521.8 $3,920.0 $4,441.2 $4,942.4

% of total revenue 16.8% 18.2% 17.6% 17.2% 17.1% 16.8% 16.9% 16.9%

Sales and marketing: $849.5 $1,461.3 $1,946.2 $2,071.5 $2,324.2 $2,692.3 $2,949.7 $3,358.1

% of total revenue 11.6% 12.5% 12.3% 11.6% 11.3% 11.5% 11.2% 11.5%

General and administrative: $751.8 $1,279.3 $1,802.6 $1,663.7 $1,850.5 $2,143.6 $2,326.2 $2,648.2

% of total revenue 10.3% 11.0% 11.4% 9.3% 9.0% 9.2% 8.9% 9.0%

Total operating expenses: $3,746.1 $6,575.7 $9,224.6 $9,633.2 $10,672.6 $11,880.2 $12,975.6 $14,328.9

% net revenue: 51.3% 56.4% 58.2% 53.9% 51.9% 50.9% 49.4% 48.9%

Historical Statements Projected Statements

Total Net Revenue (Exc. TAC) - Google Inc.:

FY2006A FY2007A FY2008A FY2009P FY2010P FY2011P FY2012P FY2013P

Search/Paid click revenue: $7,173.9 $11,396.8 $14,919.6 $16,553.3 $18,829.8 $21,275.0 $23,814.5 $26,422.4

% of advertising revenue: 99.9% 99.3% 98.2% 97.3% 96.2% 95.4% 94.5% 93.6%

Display/YouTube revenue: $10.0 $82.0 $270.0 $459.0 $734.4 $1,028.2 $1,388.0 $1,804.4

% of advertising revenue: 0.1% 0.7% 1.8% 2.7% 3.8% 4.6% 5.5% 6.4%

Total advertising revenue: $7,183.9 $11,478.8 $15,189.6 $17,012.3 $19,564.2 $22,303.1 $25,202.5 $28,226.9

% of net revenue: 98.5% 98.4% 95.8% 95.2% 95.2% 95.5% 95.9% 96.2%

Licensing & other revenue: $112.3 $181.3 $667.0 $867.1 $997.2 $1,047.1 $1,073.3 $1,100.1

% of net revenue: 1.5% 1.6% 4.2% 4.8% 4.8% 4.5% 4.1% 3.8%

Net Revenue: $7,296.1 $11,660.1 $15,856.6 $17,879.5 $20,561.4 $23,350.2 $26,275.8 $29,326.9

Growth: n/a 59.8% 36.0% 12.8% 15.0% 13.6% 12.5% 11.6%

Historical Statements Projected Statements

Appendix Project Google

Revenue And Operating Expenses Projections

20