Google To Acquire Russian Context Ads Service Begun.ru

Combination Will Create New Opportunities for Russian Users, Publishers and Advertisers

MOUNTAIN VIEW, Calif. (July 18, 2008) - Google (NASDAQ: GOOG) announced today that it has signed an agreement with Rambler Media to acquire ZAO Begun ("Begun"), a leading Russian context advertising service, for $140 million, subject to customary adjustments. This agreement emphasizes Google's commitment to improving the service it offers users, partners and advertisers in Russia, where digital advertising is currently experiencing rapid growth.

The acquisition of Begun will give advertisers access to a broader network of sites to advertise on, and publishers will benefit from a wider set of adverts to run on their sites. Users will see more relevant advertising across a much wider set of websites. Google will bring its advertising expertise and experience to Begun's network of websites.

"Google is very committed to giving Russian users, advertisers and partners the best possible service and experience," said Mohammad Gawdat, Managing Director Emerging Markets, Google. "This agreement will result in better search results and more relevant advertising for our Russian users and publishers."

“Begun is an excellent business which can fully develop its potential under Google's ownership," said Mark Opzoomer, Chief Executive Officer of Rambler Media. "Google has the technological and financial capacity to improve Begun's established advertising service in Russia."

"The entire industry will benefit from this transaction as there is a high potential for synergies," said Alexey Basov, General Director of Begun "It brings together Google's visionary technology and Begun's six years of successful experience in building advertising and dealer networks and direct sales in Russia."

The transaction remains subject to customary closing conditions and receipt of applicable regulatory approval and is expected to close in the third quarter of 2008.

Google Reports $5.37 billion In Q2 Revenues, Microsoft Reports Full Year Revenues of $60 Billion

Google had a strong quarter, given the challenging US and global economic climate. Revenues were basically flat vs. Q1 (+3 percent) but grew 39 percent as compared with the same quarter a year ago. AdSense and paid clicks were down slightly.

Google may not be "recession proof," but it's more so than most other online ad networks.

Revenues – Google reported revenues of $5.37 billion for the quarter ended June 30, 2008, representing a 39% increase over second quarter 2007 revenues of $3.87 billion and a 3% increase over first quarter 2008 revenues of $5.19 billion. Google reports its revenues, consistent with GAAP, on a gross basis without deducting TAC.

Google Sites Revenues - Google-owned sites generated revenues of $3.53 billion, or 66% of total revenues, in the second quarter of 2008. This represents a 42% increase over second quarter 2007 revenues of $2.49 billion and a 4% increase over first quarter 2008 revenues of $3.40 billion.

Google Network Revenues - Google's partner sites generated revenues, through AdSense programs, of $1.66 billion, or 31% of total revenues, in the second quarter of 2008. This represents a 22% increase over network revenues of $1.35 billion generated in the second quarter of 2007 and a 2% decrease over first quarter 2008 revenues of $1.69 billion.

International Revenues - Revenues from outside of the United States totaled $2.80 billion, representing 52% of total revenues in the second quarter of 2008, compared to 48% in the second quarter of 2007 and 51% in the first quarter of 2008. Had foreign exchange rates remained constant from the first quarter of 2008 through the second quarter of 2008, our revenues in the second quarter of 2008 would have been $88 million lower. Had foreign exchange rates remained constant from the second quarter of 2007 through the second quarter of 2008, our revenues in the second quarter of 2008 would have been $249 million lower.

Revenues from the United Kingdom totaled $774 million, representing 14% of revenue in the second quarter of 2008, compared to 15% in the second quarter of 2007 and 15% in the first quarter of 2008.

Paid Clicks - Aggregate paid clicks, which include clicks related to ads served on Google sites and the sites of our AdSense partners, increased approximately 19% over the second quarter of 2007 and decreased approximately 1% over the first quarter of 2008.

TAC - Traffic Acquisition Costs, the portion of revenues shared with Google’s partners, decreased to $1.47 billion in the second quarter of 2008. This compares to TAC of $1.49 billion in the first quarter of 2008. TAC as a percentage of advertising revenues was 28% in the second quarter, compared to 29% in the first quarter of 2008.

Google was down just over 8 percent in after hours trading. Microsoft, meanwhile, announced full year revenues of $60 billion:

Microsoft Corp. today announced revenue of $15.84 billion for the fiscal fourth quarter ended June 30, 2008, an 18% increase over the same period of the prior year. Operating income and diluted earnings per share for the quarter were $5.68 billion and $0.46, representing growth of 42% and 48%, respectively, over the same period of the prior year.

Online services grew revenues compared with a year ago, but also showed a bigger loss:

Yahoo reports Q2 earnings on July 22.