June 6, 2008

Patrick Pichette

Re: Offer of Employment with Google Inc.

Dear Patrick:

On behalf of Google Inc., I am pleased to offer you the exempt position of Senior Vice President and Chief Financial Officer, reporting to the Chief Executive Officer, subject to the terms and contingencies set forth below. The position is located in Mountain View, California. Your start date shall be August 1, 2008 and you will assume the position of CFO effective August 12, 2008.

You will receive an annual salary of $450,000, which will be paid biweekly and subject to a periodic review. You are eligible to participate in the Company Bonus Program; your annual bonus target will be 150% of base salary. Bonuses under the Company Bonus Plan are discretionary. The actual bonus amount could be larger or smaller than this amount, based on your performance and the performance of the Company. Whether a bonus will be awarded in a particular bonus period, and in what amount, is within Google’s sole discretion. Both your base salary and the components of your bonus are subject to periodic review.

Additionally, upon your start date, Google will pay you a one-time Sign-On Bonus of $500,000. This will be taxed as supplemental income. At the completion of six months of full-time employment with us, Google will pay you an additional $500,000 Cash Bonus. This will also be taxed as supplemental income. In the event your employment is terminated within the first six months of your employment, the Cash Bonus payout will be accelerated and paid on the termination date or as soon thereafter as Company business practices allow, but in any case within thirty (30) days of your termination. If you terminate your employment at Google before the one year anniversary of your start date, other than as a result of a breach by Google of this Agreement, you will be required to repay the Sign-On Bonus and Cash Bonus. Any required repayment will be prorated based on the number of remaining calendar days until the one year anniversary of your start date.

Google will pay relocation costs and provide reimbursement for specified moving expenses as outlined in Google’s North American Officer Relocation Policy. In order to receive these benefits, you will be required to work with a third party vendor provider designated by Google to assist in employee moves.

As a regular full-time employee you will be eligible for various benefits offered to similarly-situated Google employees in accordance with the terms of Google’s policies and benefit plans. Among other things, these benefits currently include medical and dental insurance, life insurance, and a 401(k) retirement plan. You will automatically be enrolled in the 401(k) plan at 4% into the Wellesley Fund, which is a balanced fund of stocks and bonds. You will be able to change your deferral amount and fund allocation upon your hire. The eligibility requirements and other information regarding these benefits are set forth in more detailed documents that are available from Google. With the exception of the “employment at will” policy discussed herein, Google may, from time to time in its sole discretion, modify or eliminate its policies and the benefits offered to employees.

Upon approval by our Board of Directors, you will be granted four new hire equity grants. Per the Governance Guidelines of the Leadership Development and Compensation Committee of our Board of Directors, the Grant Date of these four equity grants will be on the Wednesday of the week following your start date.

The first award will be a stock option grant to purchase 11,112 shares of Google Class A common stock. Your options will be nonqualified stock options with an exercise price equal to the closing fair market value of the underlying stock on the Grant Date. Your options will vest at the rate of 1/4th on the date one year after you commence employment, and will vest an additional 1/48th each month thereafter, for a total vesting period of 48 months.

The second award will be a grant of 5,556 Google Stock Units (GSUs). Your GSUs will vest at a rate of 1/4th each year over the next four years, beginning on the date one year after you commence employment, for a total vesting period of 48 months. At that time, the vested number of GSUs will convert to a number of Google Class A common shares.

Vesting in both of these stock option and GSU awards is contingent on continued employment on the applicable vesting dates.

The third award will be a grant of 910 GSUs. Your GSUs will vest at a rate of 100 percent at six months. At that time, the vested number of GSUs will convert to a number of Google Class A common shares. In the event your employment terminates prior to the six-month vesting date (other than as a result of your resignation), you will immediately vest in this grant.

The fourth award will be a grant of 910 GSUs. Your GSUs will vest at a rate of 100 percent at twelve months. At that time, the vested number of GSUs will convert to a number of Google Class A common shares. In the event your employment is terminated after six months but prior to the twelve-month vesting date (other than as a result of your resignation), you will immediately vest in this grant.

Please be aware that this program and subsequent programs could be changed at any time, at the discretion of the Board of Directors. Also note that Google makes no representation about the future value of the stock options or GSUs granted herein and you should expect that the value of these grants will fluctuate in the future. Finally, the receipt of such grants shall be conditioned upon the subsequent execution by the grantee of Google’s appropriate form of GSU and Stock Option grant agreement.

For annual equity grants awarded in 2009 and thereafter, your grants will be reviewed pursuant to the same general process employed for all Executives of comparable status.

We encourage you to consult a tax professional for information regarding all current tax reporting requirements related to the compensation and benefits discussed above.

You are being offered employment at Google based on your personal skills and experience, and not due to your knowledge of any confidential, proprietary or trade secret information of a prior or current employer. Should you accept this offer, we do not want you to make use of or disclose any such information or to retain or disclose any materials from a prior or current employer. Likewise, as an employee of Google, it is likely that you will become knowledgeable about confidential, trade secret and/or proprietary information related to the operations, products and services of Google and its clients. To protect the interests of both Google and its clients, all employees are required to read and sign the At Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement as a condition of employment with Google. This Agreement, which provides for arbitration of all disputes arising out of your employment, will be provided for your review; you will be required to sign it on your first day of employment.

Google has a strict policy against conflicts of interest. Google’s code of conduct is located at http://investor.google.com/conduct.html. Before deciding whether to accept or reject this offer letter, please read the code of conduct carefully as it contains certain prohibitions against, among other things, holding outside employment, board memberships or advisory board positions in companies that may cause a conflict of interest. In order to avoid actual or perceived conflicts of interest, we ask that you work with Andy Hinton, General Counsel and Global Compliance and Ethics Officer, to pre-approve board positions before joining Google.

Google has a strict policy against insider trading, which prohibits, among other things, employees, contractors and temporary workers from trading Google stock during certain time periods and engaging in any derivative transactions in Google stock. It will be your responsibility to educate yourself regarding Google’s insider trading policies and to ensure you are in full compliance. If you have any questions about Google’s policy against insider trading, please contact Human Resources.

Further, if an export control license is required in connection with your employment, this offer is further contingent upon Google’s receipt of the export control license and any similar approvals. Your employment with Google will commence following receipt of such export control license and governmental approvals; and is conditioned upon your (a) maintaining your employment with Google, and (b) continued compliance with all conditions and limitations contained in such a license. If for any reason such export control license and governmental approvals cannot be obtained within six (6) months from your date of signature, this offer will automatically terminate and have no force and effect.

Please understand that this letter does not constitute a contract of employment for any specific period of time, but will create an “employment at will” relationship. This means that the employment relationship may be terminated with or without cause and with or without notice at any time by you or Google. No individual other than the Chief Executive Officer of Google has the authority to enter into any agreement for employment for a specified period of time or to make any agreement or representation contrary to Google’s policy of employment at will. Any such agreement or representation must be in writing and must be signed by you and the Chief Executive Officer. Your signature at the end of this letter confirms that no promises or agreements that are contrary to our at will relationship have been committed to you during any of your pre-employment discussions with Google, and that this letter, along with the At Will Employment, Confidential Information, Invention Assignment and Arbitration Agreement, contain our complete agreement regarding the terms and conditions of your employment.

We look forward to an early acceptance of this offer. This offer will remain open for 7 (seven) business days following your receipt of this letter and is contingent upon your start date of August 1, 2008. This offer is contingent upon satisfactory results from your background check, which we expect will be completed by Tuesday, June 10th. Additionally, this offer and your employment are contingent upon satisfactory results from your background check. To indicate your acceptance of Google’s offer, please sign and date the enclosed original and return it to us in the envelope provided. A duplicate original is enclosed for your record. Please arrive at 9:00 AM on your first day of employment for a tour of the office and for your new hire orientation. Orientation will be held at our Mountain View offices. In order for Google to comply with the Immigration Reform and Control Act, your employment with Google is contingent on your eligibility to work in the United States. Accordingly, please bring appropriate verification of eligibility to work in the United States on your first day.

Patrick, we look forward to working with you.

Sincerely,
Laszlo Bock
Vice President, People Operations
Google Inc.

MOUNTAIN VIEW, Calif. (June 25, 2008) – Google Inc. (NASDAQ: GOOG) today announced that Patrick Pichette will be named Senior Vice President and Chief Financial Officer. Most recently, Mr. Pichette served as President of Operations at Bell Canada, a leading global communications company.

Mr. Pichette brings nearly 20 years of experience in financial operations and management in the telecommunications sector, including 7 years at Bell Canada, which he joined in 2001 as Executive Vice President of Planning and Performance Management. During his time at Bell Canada, he held various executive positions, including CFO from 2002 until the end of 2003, and was instrumental in the management of the most extensive communications network in Canada and its ongoing migration to a new national IP-based infrastructure. Prior to joining Bell Canada, Mr. Pichette was a partner at McKinsey & Company, where he was a lead member of McKinsey's North American Telecom Practice. He also served as Vice President and Chief Financial Officer of Call-Net Enterprises, a Canadian telecommunications company, from 1994 to 1996. Mr. Pichette earned a BA in Business Administration from Université du Québec à Montréal and an MA in Philosophy Politics and Economics from Oxford University, where he attended as a Rhodes Scholar. He is also chairman of the board of Engineers Without Borders (Canada).

Reporting to Google Chairman and Chief Executive Officer Eric Schmidt, Mr. Pichette will start on August 1, and he will assume responsibility for the company's financial operations and become CFO on August 12.

"Patrick brings the expertise and track record of a successful CFO, along with the hands-on business experience of a seasoned operations executive," said Dr. Schmidt. "This strong combination of skills and experience will be an important addition to Google's executive management team and will support our ongoing efforts to increase value for our users, advertisers and partners." Schmidt added, "On behalf of all my colleagues at Google, we welcome Patrick and, once again, thank George Reyes for all that he's done for Google."

"Google is a great company with a phenomenal brand and an outstanding management team," said Pichette. "As an avid user of Google products, I've admired the company for many years and am excited about working with my new colleagues in Mountain View and around the world."

1:30 p.m. Pacific: Waiting for the call to start. I note that Eric Schmidt's promise to rein in hiring hasn't had much effect. Aside from the DoubleClick acquisition, which added 1,500 employees, Google itself hired 851 employees. Google's employee count, continues to expand at roughly 5 percent a quarter. As of the end of March, before laying off roughly 150 DoubleClickers, Google had 19,156 employees. At that rate, Google will have 27,000 employees by the end of 2009.

1:35 p.m.: The usual crew: CEO Eric Schmidt, Larry and Sergey, outgoing CFO George Reyes, and top executives Jonathan Rosenberg and Omid Kordestani. Sergey must have hightailed it back from Tahiti, where he was recently spotted consorting with blog mogul Arianna Huffington and Wendi Deng, wife of News Corp. CEO Rupert Murdoch.

1:37 p.m.: Schmidt says that Google is performing well "regardless of the business environment" and that its strategy is "transformative." See what I meant by "chest-thumping glee"? He addresses concern about Google's paid clicks, saying growth was "higher than third parties had speculated."

1:39 p.m.: Schmidt talks about its Web-based apps business, saying "all the pieces are coming together." He cites a partnership with Salesforce.com, but doesn't give any numbers. In other words, it's not a real business yet.

1:40 p.m.: Reyes, who resigned as CFO last August but still hasn't been replaced, recites the figures found in the press release. Is his sole remaining duty sparing Schmidt from having to utter a sentence with a number in it during this call? He's stumbling over simple phrases as he reads from a script.

1:44 p.m.: "Approximately 15 percent of the DoubleClick U.S. workforce" — another 200 or so — "are expected to leave in the near term," says Reyes, because they are in "transitional" roles.

1:46 p.m.: Sergey Brin takes the mic. He starts by talking about "almost 100 search improvements" made in the quarter. A lot of those, he says, are international — in other words, nothing that U.S. users will see. Google is increasingly showing non-website results, like books, images, and videos, in its search results. He claims mobile growth, but doesn't give any numbers.

1:52 p.m.: Larry Page starts talking about ads. He says Google has introduced demographic targeting for social networks, using gender and age information. The lack of this up until the recent quarter might explain why Google's social-network ads have performed so poorly. Until now, instead of fessing up to this basic technological shortcoming, Google has been blaming partners like MySpace for lower-than-expected revenues.

1:54 p.m.: Page says Google is "really excited" about YouTube ads. As he is about the acquisition of DoubleClick. As he is about the Salesforce.com partnership. Is there anything he's bored by? In a typical nerd mistake, he throws out terms like "wikis" and "cloud applications" without defining them for the Wall Street analysts who are listening, but not particularly caring.

1:57 p.m.: Schmidt wraps up quickly and goes to questions.

1:58 p.m.: Question on the search for a new chief financial officer. "We're very pleased George has remained," says Schmidt. "We have not made any offers yet." That, according to insiders familiar with the search, is simply a lie: Google has made two offers to prospective CFOs, both of whom have declined.

2:00 p.m.: Sales chief Omid Kordestani says that Toyota and Dunkin' Donuts, among others, have signed up as YouTube advertisers.

2:02 p.m.: Sergey Brin, who declared his hatred of Web banners years ago when Google launched its simple text ads, fields a question about putting banners on Google-owned sites. He notes that YouTube already carries banners, and other sites like Google Images and social network Orkut might also add them.

2:05 p.m.: Schmidt says the company hasn't seen any problems from the larger economy, batting away suggestions the U.S. is heading into an advertising recession. He says that in internal conversations, Google executives have concluded that it would do well even if a recession came, because its ads are so targeted.

2:10 p.m.: Brin fields a question about mobile ads. He says in markets where the devices and networks work well — "basically, Japan" — the ads perform well.

2:14 p.m.: Jonathan Rosenberg, who normally handles product management, is fielding a simple question about seasonality by offering a baroque explanation involving Easter's and a leap year. I suppose Google Calendar does fall under his purview.

2:17 p.m.: Talking about the failure of Google's ads to perform well on social networks, Larry Page turns to upspeak: "It's an area where we've applied a lot of new technologies?" He goes on to say that Google is "optimistic" and getting advertisers to embrace new tools "takes some time." In other words: Not our fault, and technology will fix everything once the Luddites die off.

2:20 p.m.: Kordestani admits that in retail, in the first quarter, Google has seen some "postponements" of budgets, but that other industries have made up for the shortfalls. As he flails, Jonathan Rosenberg, who's not actually in charge of advertising, jumps in. Schmidt finally cuts the answer short and goes to the next question.

2:28 p.m.: Kordestani fumbles another question about "integrated advertising" — campaigns which use search adds, display, and YouTube — with a rambling nonanswer.

2:34 p.m.: An analyst asks if U.S. revenues were flat quarter-over-quarter, not counting DoubleClick's contribution. Schmidt: "We know that it's not macroeconomic. It can have as much to do with the timing of deals." The classic excuse of enterprise-software companies, which Schmidt learneda t Sun and Novell: Blame laggard customers. And with that, Schmidt wraps up the call.

• Omid Kordestani, SVP, Global Business & Sales: The big winner, receiving 25,000 shares of stock valued at $11.2 million and 50,000 options valued at $6.3 million — though the company's shares are currently trading just a few points above the $448 strike price. Kordestani exercised 60,000 shares worth of options last year, worth $32.7 million.
• Jonathan Rosenberg, SVP, Product Management: $5.8 million in cash and $14 million in stock and options.
• Alan Eustace, SVP, Engineering: $5.2 million in cash and $14 million in stock and options.
• George Reyes, retiring CFO: A distant fourth at $5.1 million in cash and $10.5 million in stock and options.

This year, expect more of the same: The company will not change executive compensation programs, after comparing them to market peers. It increased pay and stock packages last year.

The one number that jumped out to me was the amount of bad debt the company wrote down. Doubtful accounts amounted to $46 million, of which the company wrote down $30 million as bad debt, which nearly doubled from 2006. That's less than 1 percent of net profit, but can't be a good trend for a company with a lot of small accounts in a recessionary economy. Google's shareholders are hurting, as are its customers. But its executives? Doing just fine, thank you.

CEO Eric Schmidt says of Reyes:Though we fully appreciate his decision to step back from active management, we'll miss his thoughtfulness, good humor and wisdom.What he means:

That Reyes sure made us laugh a lot, especially when he tried to make us plan budgets, didn't he?

He has done an excellent job in keeping us financially disciplined while protecting the best of our entrepreneurial culture.

Reyes didn't warn us loudly enough that we were hiring too many people, so he's out of here.

Working at Google these past 5 and a half years has been an extraordinary ride.

Stop the world, I want to get off.

2:27 p.m. Pacific Gene Munster of Piper Jaffray, the analyst who's drawn a fake blog of his own, gets the last question, asking about Google's efforts in China. Schmidt uses his favorite word, "accelerating," to describe Google's place in the market. He also mention's Google's "tenacity." Translation: It's going to take years for Google to improve its market share in China significantly. And with that, the call wraps up.

2:19 p.m. Pacific "There are lots and lots of rumors, which is always very exciting," says Eric Schmidt. He's talking about Google's wireless plans, of course, but I'm strongly considering repurposing it as a Valleywag blurb.

2:16 p.m. Pacific Was the headcount cost primarily driven by sales hires? Kordestani talks about a reorganization of the salesforce to get them to sell more than just search ads. That's got to be expensive, and a reorganized salesforce is usually less productive. This might explain some of Google's overhiring and the resultant earnings miss.

2:11 p.m. Pacific Omid Kordestani, Google's top sales executive, appears to be a convert to the cult of "conversational marketing," claiming that YouTube allows for "two-way conversations." Sure, if you consider juvenile YouTube comment threads to be a form of conversation.

2:08 p.m. Pacific Did a Google executive on the call just belch? Seriously, people. It's an earnings call. Have some respect.

2:02 p.m. Pacific Schmidt dodges a question about why paid clicks are flat, dumping the question in SVP Jonathan Rosenberg's lap. Rosenberg claims that paid click growth was hurt by seasonality. Which is it? Seasonally flat, or accelerating? Brin pops in and adds that tweaks to make ads more targeted also kept the growth down.

2:00 p.m. Pacific Eric Schmidt takes over again, trying to wrap up by claiming that Google's growth is "accelerating." Really? Even for a Ph.D. in computer science, apparently, math is hard.

1:58 p.m. Pacific Page starts talking about how Google works with software developers. Sadly, unlike manic Microsoft CEO Steve Ballmer, he does not start yelling, "Developers, developers, developers, developers, developers!"

1:56 p.m. Pacific Cofounder Larry Page takes over from Brin. Even he can't resist teasing Brin about searching for 1960s IBM equipment. He's talking about YouTube's partnership to put videos on the iPhone, and he says, "You can waste very many hours and also enjoy useful content like mainframe videos [on the iPhone]."

1:54 p.m. Pacific Just as Google started disclosing "paid clicks," a measure of the size of its advertising business, Brin reveals that it's now allowing advertisers to buy pay-per-action ads — in other words, paying Google for ads by the lead or sale. Curious if the company will start disclosing the number of actions, too.

1:51 p.m. Pacific Brin talks up two of Google's worst-named products: iGoogle, a personalized homepage, and Gadgets, customized content modules that appear on iGoogle. (Most people in the industry call those modules "widgets," which makes Brin's peculiar parlance for them annoying.)

1:48 p.m. Pacific Now Sergey Brin takes the horn. He talks up "universal search," which is the technology by which Google gives its own products — YouTube, Google Maps, and so on — privileged positions in Google's search results. He describes how he found a YouTube video about a 1960s IBM mainframe as an example of how mainstream consumers will benefit. Rrrrrright.

1:46 p.m. Pacific It almost sounds like CFO George Reyes is breathing a bit heavily. Everything okay, George? I didn't think things were that bad. A deep breath right after he gives Google's new headcount figure: 13,748 Googlers.

1:41 p.m. Pacific Schmidt fesses up: Google has overhired, causing costs to rise. He says the company is going to be watching headcount going forward. Google, no longer Silicon Valley's hiring machine? That's a frightening thought. Or perhaps comforting for startups trying to recruit engineers. Sure enough, Schmidt wraps up his comments in record time and hands the call to Reyes, who has to dissect the bad news for analysts and investors.

1:39 p.m. Pacific Eric Schmidt begins his comments. He's hesitant and stumbles a bit before trying to claim that the results were "strong." The most positive thing he says is that Google's main search website performed well. What he doesn't get to right away: Paid clicks, the way Google makes moeny from advertising, were stagnant from the first quarter to the second quarter.

1:37 p.m. Pacific Call is starting. On the call: CEO Eric Schmidt, CFO George Reyes, cofounders Larry Page and Sergey Brin, and top executives Jonathan Rosenberg and Omid Kordestani. It's the usual crew for a Google earnings call.

1:35 p.m. Pacific Want to know why Google missed earnings? Look no further than its operating expenses, which mostly consist of payroll and data-center costs. They're now 31 percent of revenue, up from 27 percent in the first quarter. That's a big jump, percentage-wise. Operating expenses grew by about 25 percent, while revenues only grew 6 percent quarter-over-quarter. Scary. Expect Wall Street analysts to start talking about how Google needs to get its costs under control.

1:27 p.m. Pacific Waiting for the call to start. Google's revenues? $3.87 billion. Or as Dr. Evil might say, "Three point eight-seven BILLLLLLION DOLLARS!" Of course, I'm not comparing Google to Dr. Evil. Google actually paid out more than $1 billion to its AdSense distribution partners. You know that's funding a lot of Web 2.0 keggers.

Friday Night
Two googletards meet for Battlestar Galactica marathon on UPN but end up calculating their worth as the weekend stock price hovers around $415; after two epicurean Mike's Hard Lemonades, a message is sent to an internal developer list with an idea for (a) Google Base or (b) an old Yahoo/Microsoft product with a new AJAX interface.

Saturday Night/Sunday Morning
Senior VP Marissa Mayer returns to her email client from a night of weeping in front of a vanity mirror, costumed in lingerie and stilettos no one knows she owns; realizes (a) Google Base or (b) an old Yahoo/Microsoft product with a new AJAX interface is exactly what the company needs.

Monday Morning
CEO Eric Schmidt receives idea at a weekly staff meeting; pretends to understand it; in a halfhearted attempt to save face, makes offhand remark about how processors are much faster than when he was in grad school at Berkeley.

Two Weeks Later
Upstart, 20-something business development and/or marketing Googlies learn about it at the Googleplex cafeteria; confuse it with a competitor for Oracle's database solution and/or a product that will take down Boeing. Spread it casually at Marina bars to all their other dotcom friends.

45 Days Later
Om Malik receives phone call; does investigation; dispells rumors that an aircraft is involved but still poses question: is this an Ebay-Killer??

46 Days Later
Michael Arrington publishes "exclusive" screenshots on TechCrunch; says it lacks features which his Web 2.0 company Edgeio has; provides an irrelevant recommendation for Zooomr or Skobee.

47 Days Later
Zawodny blogs; laments that Yahoo had this idea in 1999; considers quitting; instead posts excel spread sheets cataloging (a) his weight loss (b) his Cessna's mileage.

48 Days Later
Chaos ensues at Microsoft, Yahoo, and/or Ebay; Fox buys Myspace anyway; Steve Ballmer throws a chair.

49 Days Later
John Battelle's intern discovers rumor, "breaks" story; Schmidt denies rumors to the New York Times; says Google is not out to displace any other company.

2 Months Later
Google blog announces a product which will displace some other company; Google engineers realize this is actually (a) Google Base or (b) an old Yahoo/Microsoft product with a new AJAX interface. Lose heart; but add it to their del.icio.us pages anyway.

2 Months and 1 week Later
Wall Street clods doubt Google after much inquiry; stock drops to $385; panic at the plex.

2 Months and 2 weeks later
Mayer holds damage control press event; research director Peter Norvig shows pictures of caseless servers last used in 1999; claims computers without cases are much more efficient; "70/20/10" is bandied about along with shrimp cocktail.

2 Months and 3 weeks later
CFO Reyes figures out math to make Google meet quarterly expectations; considers the follical implant surgery but in a late, lonely night at the office, rediscovers appreciation for the Jean Luc-Picard look.

3 months later
The math works; on a Friday the stock balloons to $415 in after hours; coincindentally, two googletards meet for another Battlestar Galactica marathon on UPN...