Google 2015 Annual Report Download - page 36

Table of Contents Alphabet Inc. and Google Inc.
32
Research and Development
The following table presents our R&D expenses, and those expenses as a percentage of revenues, for the periods
presented (in millions):
Year Ended December 31,
2013 2014 2015
Research and development expenses $ 7,137 $ 9,832 $ 12,282
Research and development expenses as a percentage of revenues 12.9% 14.9% 16.3%
R&D expenses consist primarily of:
• Labor and facilities-related costs for employees responsible for R&D of our existing and new products and
services;
• Depreciation and equipment-related expenses; and
• Stock-based compensation expense.
R&D expenses increased $2,450 million and increased as a percentage of revenues from 2014 to 2015. These
increases were primarily due to an increase in labor and facilities-related costs of $1,502 million and an increase in
stock-based compensation expense of $487 million, both largely as a result of a 16% increase in R&D headcount.
The increase in labor and facilities-related costs was also impacted by expenses resulting from project milestones in
Other Bets established several years ago. In addition, there was an increase in depreciation and equipment-related
expenses of approximately $248 million and an increase in professional services of $174 million due to additional
expenses incurred for consulting and outsourced services.
R&D expenses increased $2,695 million and increased as a percentage of revenues from 2013 to 2014.
These increases were primarily due to an increase in labor and facilities-related costs of $1,289 million and an increase
in stock-based compensation expense of $559 million, both largely as a result of a 27% increase in R&D headcount.
In addition, there was an increase in depreciation and equipment-related expenses of $425 million and an increase
in professional services of $371 million due to additional expenses incurred for consulting and outsourced services.
We expect that R&D expenses will increase in dollar amount and may fluctuate as a percentage of revenues in
2016 and future periods.
Sales and Marketing
The following table presents our sales and marketing expenses, and those expenses as a percentage of revenues,
for the periods presented (in millions):
Year Ended December 31,
2013 2014 2015
Sales and marketing expenses $ 6,554 $ 8,131 $ 9,047
Sales and marketing expenses as a percentage of revenues 11.8% 12.3% 12.1%
Sales and marketing expenses consist primarily of:
• Labor and facilities-related costs for our personnel engaged in sales and marketing, sales support, and certain
customer service functions;
• Advertising and promotional expenditures related to our products and services; and
• Stock-based compensation expense.
Sales and marketing expenses increased $916 million and remained relatively flat as a percentage of revenues
from 2014 to 2015. The increase in dollar amount was primarily due to an increase in labor and facilities-related costs
of $329 million and an increase in stock-based compensation expense of $184 million, largely resulting from a 12%
increase in sales and marketing headcount. In addition, there was an increase in advertising and promotional expenses
of $184 million and an increase in professional service fees of $158 million due to additional expenses incurred for
consulting and outsourced services.
Sales and marketing expenses increased $1,577 million from 2013 to 2014 and increased as a percentage of
revenues from 2013 to 2014. These increases were primarily due to an increase in advertising and promotional
expenses of $614 million. In addition, there was an increase in labor and facilities-related costs of $571 million and
an increase in stock-based compensation expense of $163 million, both largely resulting from a 15% increase in sales
and marketing headcount.