Less than 2% of mobile carriers’ subscribers “Like” them on Facebook despite the millions of dollars they collectively spend in an effort to promote their services on the world’s most popular social network. Facebook made its initial public offering on Friday and while the company’s stock price dipped below the IPO price of $38 on Monday and continued to slide on Tuesday, Facebook’s offering was the biggest Internet IPO of all time by nearly 10 times. There is no denying that Facebook and the 900 million people who use the social network are of tremendous value to businesses looking to promote their services, but mobile carriers have seemingly not found success thus far as they attempt to bolster Facebook fan counts.

According to a recent report from market research firm Strand Consult, mobile carriers are wasting millions trying to promote their services on Facebook. Following discussions with a number of carriers around the world as well as an extensive study, the firm found that an average of less than 2% of carriers’ customers are fans of them on Facebook despite substantial resource investments.

Internationally, Strand found that no network operator covered in its study was liked by more than 4% of its subscriber base. In the United States, the firm looked at Verizon Wireless, AT&T and Sprint, and found that none of the nation’s top-3 carriers even broke the 3% mark.

“We were especially surprised when we looked at the American operators, Verizon, AT&T and Sprint, operators that spend millions of dollars in marketing and have internal and external teams working on Facebook,” Strand analysts wrote in a research note discussing the study. “For all their work, they can’t budge much above 2%. Such small results hardly seem worth the effort.”

Strand Consult clarified that it does not believe wireless service providers should forgo a Facebook presence, but it says the benefits of companies’ efforts on Facebook are not yet clear. Companies focus on likes because results are easily measured, but true return may lie elsewhere.

“Indeed, we have seen solid evidence from around the world that social media—operators’ own support websites, Facebook, Twitter, and other user-driven tools, can help reduce support costs,” Strand wrote. “For those tasks, we recommend social media. But we have yet to see Facebook as a solid driver for leads and sales.”

The effectiveness of Facebook’s advertising was called into question earlier this week when General Motors confirmed that it would be pulling the $10 million the company spends annually on Facebook ads because they are not delivering results. Now, just one day before Facebook’s initial public offering, a study conducted by marketing agency Greenlight suggests that nearly half of all Facebook users will never click on a sponsored post or display ad.

According to VentureBeat, the study found that 44% of respondents said they would never click on a Facebook ad while 3% said they regularly click ads on Facebook’s site and 10% said they do so often. And of course, when it comes to Facebook, a survey isn’t a survey unless it mentions privacy — 30% of the 500 people polled by Greenlight said they strongly distrust Facebook with their personal data.

“With over 30% of respondents saying they ‘strongly distrust’ Facebook with their personal data, Facebook’s advertising program has an upward struggle,” Greenlight director Hannah Kimuyusaid. “Facebook’s advertising program allows brands to connect with more than 800 million potential customers, through targeting their age, gender, location, and interests, in other words – personal data.”

Kimuyu did note, however, that those respondents who did click ads on Facebook  found them to be “effective and engaging.”

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General Motors, the world’s largest automaker and third biggest advertiser in the U.S., plans to stop advertising on Facebook, The Wall Street Journal reported on Tuesday. After meeting with Facebook managers to address concerns, the company’s marketing executives were left unconvinced of the effectiveness of the site’s advertising methods, claiming its paid ads had little impact on consumers. GM will thus pull its $10 million ad spend, although the automaker will continue to use the social networking site to display free content on its own Facebook page. GM is only skeptical about Facebook, and not about digital advertising as a whole; the company spends almost $300 million each year on digital brand advertising. The news comes at a bad time for Mark Zuckerberg and company, who are on the verge of their initial public offering.

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As we get closer to the official announcement of Samsung’s Galaxy S III, more information is beginning to surface. In addition to our exclusive reports on the device’s specifications and materials, we have now learned new details surrounding Samsung’s launch and marketing push for its new flagship handset. We have been told that there will be a huge international roll-out for the Galaxy S III, and the sleek new smartphone will be the official device of the 2012 Summer Olympics — this is one reason we’re told Samsung is hosting its unveiling event in London. In addition, there could be simultaneous launch events in New York City, Seoul and Dubai according to our source. We are also told that the Samsung Galaxy S III will come in two color options, one in blue and black, and a second in white. There will be 16GB and 32GB models as well, and additional specs include a 1080p HD display, a quad-core Exynos processor and integrated 4G LTE.

Image source: Android Advice

Google on Thursday reported its results for the first quarter, topping Wall Street’s estimates. The Internet giant managed earnings of $10.08 per share on $10.65 billion in revenue, beating analysts EPS estimates of $9.64 and $8.1 billion in sales. Net revenue came in at $8.14 billion after $2.51 billion in traffic acquisition costs, in line with estimates. In the same quarter a year earlier, Google posted an adjusted profit of $8.08 per share $6.5 billion in sales. The company also plans to create a new class of non-voting capital stock that effectively creates a 2-for-1 stock split. The new class C shares will be traded under a separate ticker. “Google had another great quarter with revenues up 24% year on year,” Google CEO Larry Page said in a statement. “We also saw tremendous momentum from the big bets we’ve made in products like Android, Chrome and YouTube. We are still at the very early stages of what technology can do to improve people’s lives and we have enormous opportunities ahead. It is a very exciting time to be at Google.” A letter from Google co-founders Larry Page and Sergey Brin explaining the decision to split the company’s stock follows below along with the Google’s earnings release.

Introduction

Throughout our evolution, from privately held start-up to large, publicly listed company, we have managed Google for the long term—enjoying tremendous success as a result, especially since our IPO in 2004. Sergey and I hoped, though we did not expect, that Google would have such significant impact, and this progress has made us even more impatient to do important things that matter in the world. Our enduring love for Google comes from a strong desire to create technology products that enrich millions of people’s lives in deep and meaningful ways. To fulfill these dreams, we need to ensure that Google remains a successful, growing business that can generate significant returns for everyone involved.

Corporate Structure

When we went public, we created a dual-class voting structure. Our goal was to maintain the freedom to focus on the long term by ensuring that the management team, in particular Eric, Sergey and I, retained control over Google’s destiny. As we explained in our first founders’ letter:

“We are creating a corporate structure that is designed for stability over long time horizons. By investing in Google, you are placing an unusual long term bet on the team, especially Sergey and me, and on our innovative approach…

We want Google to become an important and significant institution. That takes time, stability and independence…

In the transition to public ownership, we have set up a corporate structure that will make it harder for outside parties to take over or influence Google. This structure will also make it easier for our management team to follow the long term, innovative approach emphasized earlier…

The main effect of this structure is likely to leave our team, especially Sergey and me, with increasingly significant control over the company’s decisions and fate, as Google shares change hands…

New investors will fully share in Google’s long term economic future but will have little ability to influence its strategic decisions through their voting rights…

Our colleagues will be able to trust that they themselves and their labors of hard work, love and creativity will be well cared for by a company focused on stability and the long term…

As an investor, you are placing a potentially risky long term bet on the team, especially Sergey and me. …. Sergey and I are committed to Google for the long term.”

I wanted to quote all that because these were the clear, well-publicized expectations we established for investors in 2004. While this decision was controversial at the time, we believe with hindsight it was absolutely the right thing to do. Eight years later, these statements are still remarkably accurate, and everyone involved has realized tremendous benefits as a result. Given Google’s success, it’s unsurprising that this type of dual-class governance structure is now somewhat standard among newer technology companies.

In our experience, success is more likely if you concentrate on the long term. Technology products often require significant investment over many years to fulfill their potential. For example, it took over three years just to ship our first Android handset, and then another three years on top of that before the operating system truly reached critical mass. These kinds of investments are not for the faint-hearted.

We have protected Google from outside pressures and the temptation to sacrifice future opportunities to meet short-term demands. Long-term product investments, like Chrome and YouTube, which now enjoy phenomenal usage, were made with a significant degree of independence.

We have a structure that prevents outside parties from taking over or unduly influencing our management decisions. However, day-to-day dilution from routine equity-based employee compensation and other possible dilution, such as stock-based acquisitions, will likely undermine this dual-class structure and our aspirations for Google over the very long term. We have put our hearts into Google and hope to do so for many more years to come. So we want to ensure that our corporate structure can sustain these efforts and our desire to improve the world.

Effectively a Stock Split: And a New Class of Stock

Today we announced plans to create a new class of non-voting capital stock, which will be listed on NASDAQ. These shares will be distributed via a stock dividend to all existing stockholders: the owner of each existing share will receive one new share of the non-voting stock, giving investors twice the number of shares they had before. It’s effectively a two-for-one stock split—something many of our investors have long asked us for. These non-voting shares will be available for corporate uses, like equity-based employee compensation, that might otherwise dilute our governance structure.

We recognize that some people, particularly those who opposed this structure at the start, won’t support this change—and we understand that other companies have been very successful with more traditional governance models. But after careful consideration with our board of directors, we have decided that maintaining this founder-led approach is in the best interests of Google, our shareholders and our users. Having the flexibility to use stock without diluting our structure will help ensure we are set up for success for decades to come.

In November 2009, Sergey and I published plans to sell a modest percentage of our overall stock, ending in 2015. We are currently halfway through those plans and we don’t expect any changes to that, certainly not as the result of this new potential class. We both remain very much committed to Google for the long term.

It’s important to bear in mind that this proposal will only have an effect on governance over the very long term. In fact, there’s no particular urgency to make these changes now—we don’t have an unusually big acquisition planned, in case you were wondering. It’s just that since we know what we want to do, there’s no reason to delay the decision. Also note that there will be no immediate change in votes, because everyone will still have the same number. In addition, Eric, Sergey and I have all agreed to “stapling” arrangements so that, above set thresholds, if our economic interest in Google were to decline, our votes would as well. We also have provisions to ensure all shareholders are treated fairly from an economic perspective.

For more details on all of this, please see the postscript below from our Chief Legal Officer, David Drummond, and the preliminary proxy statement we will file with the SEC next week.

Conclusion

We have always managed Google for the long term, investing heavily in the big bets we hope will make a significant difference in the world. Some of these bets have been tremendous, funding our activities and generating significant gains for our shareholders. Others have been less successful. But the ability to take these kinds of risks has been crucial to Google’s overall success and we aim to maintain this pioneering culture going forward.

The proposal we announced today is consistent with the governance philosophy we articulated when we took the company public, as well as the trend for newer technology companies to adopt strong dual-class structures. We believe that it will provide great competitive strength—insulating Google from short-term pressures, whatever the source, for a long time to come, while also giving us more flexibility around equity grants.

Investors and others have always taken a big bet on us, the founders, and that bet will likely last longer as a result of these changes. We are honored that so many of you have put your trust in us and we recognize the tremendous responsibility that rests on our shoulders. We think this is a good thing because users rely on Google to produce and operate amazing technology products and to safely and responsibly store their data. This is our passion.

Sergey and I share a profound belief in the potential for technology to improve people’s lives and we are enormously excited about what lies ahead. I couldn’t write a better conclusion to this founder’s letter than what we wrote in 2004… so here goes: “We have a strong commitment to our users worldwide, their communities, the web sites in our network, our advertisers, our investors, and of course our employees. Sergey and I, and the team will do our best to make Google a long term success and the world a better place.”

Google Announces First Quarter 2012 Results and Proposal for New Class of Stock

Proposal Would Effectively Implement 2-for-1 Stock Split While Preserving Long-Term Governance Structure

MOUNTAIN VIEW, Calif. – April 12, 2012 – Google Inc. (NASDAQ: GOOG) today announced financial results for the quarter ended March 31, 2012.

“Google had another great quarter with revenues up 24% year on year,” said Larry Page, CEO of Google.  “We also saw tremendous momentum from the big bets we’ve made in products like Android, Chrome and YouTube. We are still at the very early stages of what technology can do to improve people’s lives and we have enormous opportunities ahead.  It is a very exciting time to be at Google.”

Google announced today that its Board of Directors unanimously approved a stock dividend proposal designed to preserve the corporate structure that has allowed Google to remain focused on the long term. More information is available on our Investor Relations site, including a letter from our founders Larry Page and Sergey Brin explaining the proposal, and in our forthcoming proxy statement.

Q1 Financial Summary

Google reported revenues of $10.65 billion for the quarter ended March 31, 2012, an increase of 24% compared to the first quarter of 2011. Google reports its revenues, consistent with GAAP, on a gross basis without deducting traffic acquisition costs (TAC). In the first quarter of 2012, TAC totaled $2.51 billion, or 25% of advertising revenues.

Google reports operating income, operating margin, net income, and earnings per share (EPS) on a GAAP and non-GAAP basis. The non-GAAP measures, as well as free cash flow, an alternative non-GAAP measure of liquidity, are described below and are reconciled to the corresponding GAAP measures at the end of this release.

• GAAP operating income in the first quarter of 2012 was $3.39 billion, or 32% of revenues. This compares to GAAP operating income of $2.30 billion, or 27% of revenues, in the first quarter of 2011. Non-GAAP operating income in the first quarter of 2012 was $3.94 billion, or 37% of revenues. This compares to non-GAAP operating income of $3.23 billion, or 38% of revenues, in the first quarter of 2011.
• GAAP net income in the first quarter of 2012 was $2.89 billion, compared to $1.80 billion in the first quarter of 2011. Non-GAAP net income in the first quarter of 2012 was $3.33 billion, compared to $2.64 billion in the first quarter of 2011.
• GAAP EPS in the first quarter of 2012 was $8.75 on 330 million diluted shares outstanding, compared to $5.51 in the first quarter of 2011 on 326 million diluted shares outstanding. Non-GAAP EPS in the first quarter of 2012 was $10.08, compared to $8.08 in the first quarter of 2011.
• Non-GAAP operating income and non-GAAP operating margin exclude the expenses related to stock-based compensation (SBC) and a charge related to the resolution of a Department of Justice investigation in the first quarter of 2011. Non-GAAP net income and non-GAAP EPS exclude the expenses noted above, net of the related tax benefits. In the first quarter of 2012, the charge related to SBC and related tax benefits were $556 million and $118 million compared to $432 million and $92 million in the first quarter of 2011. In the first quarter of 2011, the charge related to the resolution of the Department of Justice investigation was $500 million. We recognized no tax benefit for the charge related to the resolution of the Department of Justice investigation. Reconciliations of non-GAAP measures to GAAP operating income, operating margin, net income, and EPS are included at the end of this release.

Q1 Financial Highlights

Revenues – Google reported revenues of $10.65 billion in the first quarter of 2012, representing a 24% increase over first quarter 2011 revenues of $8.58 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

Google Sites Revenues - Google-owned sites generated revenues of $7.31 billion, or 69% of total revenues, in the first quarter of 2012. This represents a 24% increase over first quarter 2011 revenues of $5.88 billion.

Google Network Revenues - Google’s partner sites generated revenues of $2.91 billion, or 27% of total revenues, in the first quarter of 2012. This represents a 20% increase from first quarter 2011 network revenues of $2.43 billion.

International Revenues - Revenues from outside of the United States totaled $5.77 billion, representing 54% of total revenues in the first quarter of 2012, compared to 53% in the fourth quarter of 2011 and 53% in the first quarter of 2011. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the fourth quarter of 2011 through the first quarter of 2012, our revenues in the first quarter of 2012 would have been $79 million higher. Excluding gains related to our foreign exchange risk management program, had foreign exchange rates remained constant from the first quarter of 2011 through the first quarter of 2012, our revenues in the first quarter of 2012 would have been $67 million higher.

• Revenues from the United Kingdom totaled $1.15 billion, representing 11% of revenues in the first quarter of 2012, compared to 11% in the first quarter of 2011.
• In the first quarter of 2012, we recognized a benefit of $37 million to revenues through our foreign exchange risk management program, compared to $14 million in the first quarter of 2011.

A reconciliation of our non-GAAP international revenues excluding the impact of foreign exchange and hedging to GAAP international revenues is included at the end of this release.

Paid Clicks – Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our Network members, increased approximately 39% over the first quarter of 2011 and increased approximately 7% over the fourth quarter of 2011.

Cost-Per-Click – Average cost-per-click, which includes clicks related to ads served on Google sites and the sites of our Network members, decreased approximately 12% over the first quarter of 2011 and decreased approximately 6% over the fourth quarter of 2011.

TAC - Traffic acquisition costs, the portion of revenues shared with Google’s partners, increased to $2.51 billion in the first quarter of 2012, compared to TAC of $2.04 billion in the first quarter of 2011. TAC as a percentage of advertising revenues was 25% in the first quarter of 2012, compared to 25% in the first quarter of 2011.

The majority of TAC is related to amounts ultimately paid to our Network members, which totaled $2.04 billion in the first quarter of 2012. TAC also includes amounts ultimately paid to certain distribution partners and others who direct traffic to our website, which totaled $468 million in the first quarter of 2012.

Other Cost of Revenues - Other cost of revenues, which is comprised primarily of data center operational expenses, amortization of intangible assets, content acquisition costs, and credit card processing charges increased to $1.28 billion, or 12% of revenues, in the first quarter of 2012, compared to $897 million, or 10% of revenues, in the first quarter of 2011.

Operating Expenses - Operating expenses, other than cost of revenues, were $3.47 billion in the first quarter of 2012, or 33% of revenues, compared to $3.34 billion in the first quarter of 2011, or 39% of revenues.

Stock-Based Compensation (SBC) – In the first quarter of 2012, the total charge related to SBC was $556 million, compared to $432 million in the first quarter of 2011.

We currently estimate SBC charges for grants to employees prior to March 31, 2012 to be approximately $2 billion for 2012. This estimate does not include expenses to be recognized related to employee stock awards that are granted after March 31, 2012 or non-employee stock awards that have been or may be granted.

Operating Income – GAAP operating income in the first quarter of 2012 was $3.39 billion, or 32% of revenues. This compares to GAAP operating income of $2.30 billion, or 27% of revenues, in the first quarter of 2011. Non-GAAP operating income in the first quarter of 2012 was $3.94 billion, or 37% of revenues. This compares to non-GAAP operating income of $3.23 billion, or 38% of revenues, in the first quarter of 2011.

Interest and Other Income, Net – Interest and other income, net increased to $156 million in the first quarter of 2012, compared to $96 million in the first quarter of 2011.

Income Taxes – Our effective tax rate was 18% for the first quarter of 2012.

Net Income – GAAP net income in the first quarter of 2012 was $2.89 billion, compared to $1.80 billion in the first quarter of 2011. Non-GAAP net income was $3.33 billion in the first quarter of 2012, compared to $2.64 billion in the first quarter of 2011. GAAP EPS in the first quarter of 2012 was $8.75 on 330 million diluted shares outstanding, compared to $5.51 in the first quarter of 2011 on 326 million diluted shares outstanding. Non-GAAP EPS in the first quarter of 2012 was $10.08, compared to $8.08 in the first quarter of 2011.

Cash Flow and Capital Expenditures – Net cash provided by operating activities in the first quarter of 2012 totaled $3.69 billion, compared to $3.17 billion in the first quarter of 2011. In the first quarter of 2012, capital expenditures were $607 million, the majority of which was related to IT infrastructure investments, including data centers, servers, and networking equipment. Free cash flow, an alternative non-GAAP measure of liquidity, is defined as net cash provided by operating activities less capital expenditures. In the first quarter of 2012, free cash flow was $3.09 billion.

We expect to continue to make significant capital expenditures.

A reconciliation of free cash flow to net cash provided by operating activities, the GAAP measure of liquidity, is included at the end of this release.

Cash – As of March 31, 2012, cash, cash equivalents, and short-term marketable securities were $49.3 billion.

Headcount – On a worldwide basis, Google employed 33,077 full-time employees as of March 31, 2012, up from 32,467 full-time employees as of December 31, 2011.

WEBCAST AND CONFERENCE CALL INFORMATION

A live audio webcast of Google’s first quarter 2012 earnings release call will be available at http://investor.google.com/webcast.html. The call begins today at 1:30 PM (PT) / 4:30 PM (ET). This press release, the financial tables, as well as other supplemental information including the reconciliations of certain non-GAAP measures to their nearest comparable GAAP measures, are also available on that site.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements that involve risks and uncertainties. These statements include statements regarding our continued investments in our core areas of strategic focus, our expected SBC charges, and our plans to make significant capital expenditures. Actual results may differ materially from the results predicted, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, unforeseen changes in our hiring patterns and our need to expend capital to accommodate the growth of the business, as well as those risks and uncertainties included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2011, which is on file with the SEC and is available on our investor relations website at investor.google.com and on the SEC website at www.sec.gov. Additional information will also be set forth in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2012. All information provided in this release and in the attachments is as of April 12, 2012, and we undertake no duty to update this information unless required by law.

ABOUT NON-GAAP FINANCIAL MEASURES

To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP operating income, non-GAAP operating margin, non-GAAP net income, non-GAAP EPS, free cash flow, and non-GAAP international revenues. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures,” “Reconciliation from net cash provided by operating activities to free cash flow,” and “Reconciliation from GAAP international revenues to non-GAAP international revenues” included at the end of this release.

We use these non-GAAP financial measures for financial and operational decision-making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses and expenditures that may not be indicative of our “recurring core business operating results,” meaning our operating performance excluding not only non-cash charges, such as SBC, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting, and analyzing future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to our historical performance and liquidity as well as comparisons to our competitors’ operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.

Non-GAAP operating income and operating margin. We define non-GAAP operating income as operating income plus expenses related to SBC, and, as applicable, other special items. Non-GAAP operating margin is defined as non-GAAP operating income divided by revenues. Google considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of SBC and as applicable, other special items so that Google’s management and investors can compare Google’s recurring core business operating results over multiple periods. Because of varying available valuation methodologies, subjective assumptions and the variety of award types that companies can use under FASB ASC Topic 718, Google’s management believes that providing a non-GAAP financial measure that excludes SBC allows investors to make meaningful comparisons between Google’s recurring core business operating results and those of other companies, as well as providing Google’s management with an important tool for financial and operational decision making and for evaluating Google’s own recurring core business operating results over different periods of time. There are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes some costs, namely, SBC, that are recurring. SBC has been and will continue to be for the foreseeable future a significant recurring expense in Google’s business. Second, SBC is an important part of our employees’ compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that our peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP.

Non-GAAP net income and EPS. We define non-GAAP net income as net income plus expenses related to SBC, and, as applicable, other special items less the related tax effects. The tax effect of SBC is calculated using the tax-deductible portion of SBC and applying the entity-specific, U.S. federal and blended state tax rates. We define non-GAAP EPS as non-GAAP net income divided by the weighted average outstanding shares, on a fully-diluted basis. We consider these non-GAAP financial measures to be a useful metric for management and investors for the same reasons that Google uses non-GAAP operating income and non-GAAP operating margin. However, in order to provide a complete picture of our recurring core business operating results, we exclude from non-GAAP net income and non-GAAP EPS the tax effects associated with SBC and, as applicable, other special items. Without excluding these tax effects, investors would only see the gross effect that excluding these expenses had on our operating results. The same limitations described above regarding Google’s use of non-GAAP operating income and non-GAAP operating margin apply to our use of non-GAAP net income and non-GAAP EPS. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income and EPS calculated in accordance with GAAP.

Free cash flow. We define free cash flow as net cash provided by operating activities less capital expenditures. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business that, after the acquisition of property and equipment, including information technology infrastructure and land and buildings, can be used for strategic opportunities, including investing in our business, making strategic acquisitions, and strengthening the balance sheet. Analysis of free cash flow also facilitates management’s comparisons of our operating results to competitors’ operating results. A limitation of using free cash flow versus the GAAP measure of net cash provided by operating activities as a means for evaluating Google is that free cash flow does not represent the total increase or decrease in the cash balance from operations for the period because it excludes cash used for capital expenditures during the period. Our management compensates for this limitation by providing information about our capital expenditures on the face of the statement of cash flows and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Quarterly Report on Form 10-Q and Annual Report on Form 10-K. Google has computed free cash flow using the same consistent method from quarter to quarter and year to year.

Non-GAAP international revenues. We define non-GAAP international revenues as international revenues excluding the impact of foreign exchange and hedging. Non-GAAP international revenues are calculated by translating current quarter revenues using prior quarter and prior year exchange rates, as well as excluding any hedging gains realized in the current quarter. We consider non-GAAP international revenues as a useful metric as it facilitates management’s internal comparison to our historical performance.

The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.

Nokia’s new Lumia 900 smartphone is getting a huge push at AT&T, but the carrier’s marketing budget for the new flagship Windows Phone won’t quite add up to sky-high figure suggested on Monday. Ad Age published an unconfirmed report on Monday stating that AT&T is preparing a massive marketing blitz to promote the new Nokia smartphone BGR called Windows Phone’s best shot yet to gain ground in the mass market. The carrier will spend as much as $150 million promoting the Lumia 900 according to the report, more than it spent to launch the iPhone. Following our coverage of Ad Age’s report, a trusted source confirmed to BGR that this is, in fact, not the case. Our well-placed source states that while AT&T is planning to push Nokia’s new Lumia smartphone aggressively, the $150 million figure is not even close to reality. This makes sense considering the big budget Nokia reportedly has set aside for the Lumia 900, but our source had no information to offer regarding Nokia’s marketing plans. An AT&T spokesperson declined to comment.

In the coming months, AT&T will spend as much as $150 million to help promote Nokia’s latest flagship smartphone, the Lumia 900. According to Ad Age, the massive advertising budget is even greater than what the carrier spent promoting Apple’s iPhone, which continues to be the company’s top selling device. Since losing its exclusive partnership with Apple, AT&T has been adding smartphone subscribers at a slower rate than rival Verizon Wireless. With other revenue streams drying up, carriers are looking to add new smartphone users to propel growth from profitable data plans. “The bulk of the growth for carriers is coming from smartphone subscribers,” said Chris Larsen, telecom analyst for Piper Jaffray. “They generate higher monthly recurring fees and more revenue.” With Verizon nipping at the heels of AT&T’s smartphone users base — thanks to numerous high-end exclusives —the carrier needs to push its own exclusive smartphones to counter Verizon’s growth. “You can tell when you walk into a Verizon store they’ve made a lot of money selling Android—that’s what they’re promoting,” Forrester Research analyst Sarah Rotman Epps told Ad Age.

UPDATE: BGR has confirmed with a trusted source that AT&T’s marketing plans for the Nokia Lumia 900 are not in line with this report.

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Samsung on Tuesday confirmed that it is teaming up with OpenX Technologies to create a mobile ad platform that will rival Google and Apple, The Wall Street Journal reported. The service will be called Samsung AdHub Market and will enable companies to place advertisements on Samsung phones and tablets beginning in the second half of the year. Potential advertisers will be able to purchase ad space on mobile devices through both app developers and Samsung, and pricing details are not yet known. “This is the first time any device manufacturer has entered the ad tech space in this way,” said OpenX Chief Executive Tim Cadogan. “It is becoming very clear to the principals in the mobile space that advertising is going to be a very important part of the revenue mix.”

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Samsung’s Galaxy Note “phablet” is a hit, with the company having sold more than 5 million units to end users around the world. While Samsung has not yet shared any region-specific sales data, any success the phone has had in the United States can be attributed to the company’s advertising, a new study suggests. The huge handset’s launch in the U.S. was precluded by a series of ads most agree were not terribly effective — including one where the vendor tried to coin the term “Samsunged” — but the South Korea-based technology giant’s current television ad was recently named the most effective ad of the year so far. Read on for more.

Television analytics firm Ace Metrix announced this week that Samsung’s “The Best Of A Phone And A Tablet” commercial is the most effective ad of the first quarter in the U.S. The firm uses a proprietary ranking system dubbed “Ace Score” that measures viewer reaction to national TV ads on a scale of 0 to 950. Samsung’s commercial earned an Ace Score of 686 for the first quarter, besting Doritos and M&M’s, which were tied for the No.2 spot at 671. Samsung also held the No.5 position for a television advertisement.

“Q1 is arguably the most important quarter for advertising, as the Super Bowl, Oscars, and awards season in general drives the advertising agenda,” Ace Metrix CEO Peter Daboll said in a statement.  ”It will be very interesting to watch how Samsung’s continually impressive ads affect the company’s marketshare vis-à-vis competitors like Apple, which, this quarter, did not come close to measuring up to Samsung’s advertising prowess. Samsung’s top-ranked ad was particularly brilliant because it conveyed innovation and information without a narrator.”

BGR reviewed the Samsung Galaxy Note this past February and while we found it to be a fantastic device with a gorgeous high-definition display, we also felt that the device was far too large to be used comfortably as a phone.

An Australian court on Tuesday ruled that Google engaged in “misleading and deceptive” advertising practices, Reuters reported. The court said that between March 2006 and July 2007, Google published search results for queries related to Honda Australia with paid advertisements for Honda competitor CarSales. The advertisements led users to believes that CarSales was linked to Honda Australia. The search giant argued that it was not responsible for misleading search results since it was merely a conduit for advertisers. The court disagreed, however, and ordered Google to set up a compliance program that will ensure paid advertisements will not mislead consumers. The Australian Competition and Consumer Commission praised the ruling, saying that Google and other Internet search engines will now be held responsible for “deceptive paid search results.”

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Nokia launched a viral advertising campaign this past weekend to support the launch of its upcoming Lumia 900 smartphone. A website called Smartphone Beta Test targets Apple’s iPhone through a series of videos that remind users of “antennagate,” the device’s fragile design and the trouble of using the handset in direct sunlight. The website features Saturday Night Live alumnus Chris Parnell impatiently waiting for a countdown to expire, which is scheduled to run out on April 6th. While there is no mention of Nokia or the Lumia 900, WPCentral discovered a single Java script link-back to Nokia.com in the website’s source code, more or less confirming the company’s involvement. The Nokia Lumia 900 is scheduled to launch on April 8th on AT&T’s 4G LTE network for $99.99, though new subscribers can pre-order the sleek smartphone for free. The Smartphone Beta Test videos can be found after the break.

[Via WPCentral]

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Apple’s hot new iPad tablet has been a massive global success. The company recently announced that it sold more than 3 million new slates in fewer than four days of availability, making it the second most successful launch in the Apple’s history behind the iPhone 4S. Heat issues aside, Apple found itself in a bit of hot water earlier this week when Australian regulators took issue with Apple’s use of the term “4G” in its advertising. The new iPad indeed supports 4G LTE networks internationally, but is it not compatible with Telstra’s Australian 4G network. Apple argued in Federal Court on Wednesday that its iPad can connect to Australian HSPA networks which are considered to be “4G” in other markets, but the Australian Competition and Consumer Commission didn’t bite and neither did the court. In the end, ABC News in Australia reports that Apple agree to issue a statement clarifying that the new iPad does not support Telstra’s LTE network, and it will offer a refund to any buyers who feel they have been misled by Apple’s 4G claims.

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Google is attempting to file a patent that would thrust smartphone users into Orwell’s “1984.” TheNextWeb reported on Wednesday that the search giant is looking to patent a technology that can analyze the background noise during mobile phone calls and then serve up advertisements based on the environmental conditions Google hears. In short, the company’s famous “don’t be evil” motto may soon evolve into “we are going to listen to your phone calls to make money.” One example of Google’s proposed technology would recognize the background noise made by rain when a user makes a phone call in inclement weather, and then serve an advertisement for umbrellas. In addition, the system might also analyze background noise while users take photos and videos to serve up similar targeted ads. Of course there is no reason to sound the alarms just yet, as technologies described in patents often don’t see the light of day.

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Former Engineering Director at Google and current Partner Development Manager at Microsoft James Whittaker on Tuesday published a lengthy piece explaining why he chose to leave the Mountain View-based company after having been such a vocal Google evangelist for nearly three years. His post on Microsoft’s MSDN blogs reiterates a number of opinions that have been hot topics in the media of late, but he also offers several insights from a unique point of view that only an insider can offer. In short, Whittaker feels that Google co-founder and current CEO Larry Page completely ruined the company for him. Read on for more.

Whittaker’s main issue is what, in his opinion, was a core value shift that took place when former chief executive Eric Schmidt stepped down and Larry Page took over at the helm. The former Director acknowledges that advertising has always been Google’s main business, but until Larry Page took over at CEO, advertising was treated as a means to an end, providing the funding that allowed Google employees to build innovative products.

Once Page became Google’s top executive, Whittaker says, the opposite was true. Google’s products became a means to an end, providing the tools Google needs to collect as much personal information as possible about its users, thus better equipping the company to woo advertisers.

“Under Eric Schmidt ads were always in the background,” Whittaker wrote. ”Google was run like an innovation factory, empowering employees to be entrepreneurial through founder’s awards, peer bonuses and 20% time. Our advertising revenue gave us the headroom to think, innovate and create.” He continued, “But that was then, as the saying goes, and this is now.”

Whittaker says that Page became infatuated with Facebook, which is able to gather a massive amount of personal data about its users because of all the information they share using the service. Google needed a way to break into the social sharing space following failed attempts like Wave and Buzz, and advertising was the sole reason for this renewed focus on social networks.

“Larry Page himself assumed command to right this wrong,” Whittaker says in his post. “Social became state-owned, a corporate mandate called Google+. It was an ominous name invoking the feeling that Google alone wasn’t enough. Search had to be social. Android had to be social. You Tube, once joyous in their independence, had to be … well, you get the point. Even worse was that innovation had to be social. Ideas that failed to put Google+ at the center of the universe were a distraction.”

Whittaker concludes, “The old Google was a great place to work. The new one?

“-1″

Apple is being sued in New York by Frank Fazio, who claims that Apple falsely advertises Siri as a responsive and helpful when in fact the virtual assistant is allegedly anything but, The Wall Street Journal reported on Monday. Represented by Robbins Geller Rudman & Dowd, Fazio’s class-actions suit seeks unspecified damages and and a court order demanding that Apple cease all misleading advertising that depict Siri as responsive, user-friendly feature. “On many of Apple’s television advertisements, individuals are shown using Siri to make appointments, find restaurants, and even learn the guitar chords to classic rock songs or how to tie a tie,” Fazio’s complaint reads. “In the commercials, all of these tasks are done with ease with the assistance of the iPhone 4S’s Siri feature, a represented functionality contrary to the actual operating results and performance of Siri.” Fazio’s attorneys argue that their client and the class he represents have had nothing but trouble with Siri, which is unresponsive and often doesn’t understand what is being asked of it. Fazio’s full complaint is embedded after the break.

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