Yahoo 2001 Annual Report Download - page 16

In addition to historical information, the following discussion and analysis of management contains forward-
looking statements. These forward-looking statements involve risks, uncertainties and assumptions. The actual
results may differ materially from those anticipated in these forward-looking statements as a result of many
factors, including but not limited to, those discussed below, the results of any acquisition we may complete and
in the section entitled “Risk Factors” in reports we file with the Securities and Exchange Commission (the “SEC”)
such as our Annual Report on Form 10-K for the year ended December 31, 2001, which we recently filed and
is available at the SEC’s website at www.sec.gov. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management’s opinions only as of the date hereof and do not reflect
the results of any acquisitions which we have completed since December 31, 2001. Yahoo! Inc. undertakes no
obligation to revise or publicly release the results of any revision to these forward-looking statements. Readers
should carefully review the factors described in this document as well as in other documents we file from time
to time with the Securities and Exchange Commission, including the Quarterly Reports on Form 10-Q and any
Current Reports on Form 8-K to be filed by us in fiscal year 2002.
Overview
Yahoo! Inc. (“Yahoo!”) is a global Internet business and consumer services company that offers a com-
prehensive branded network of properties and services, currently to more than 219 million individuals
worldwide. As the first online navigational guide to the Web, www.yahoo.com, is a leading guide in terms
of traffic, advertising, household and business user reach. Yahoo!’s global brand reaches the largest audi-
ence worldwide. Through Yahoo! Enterprise Solutions, we also provide online business and enterprise serv-
ices designed to enhance the productivity and Web presence of our clients. Our global Web network
includes 24 world properties. Headquartered in Sunnyvale, California, we have offices in the United States,
Europe, Asia, Latin America, Australia and Canada.
We conduct our business globally and manage it geographically. We rely on an internal management
reporting process that provides revenue and certain operating cost information for making financial deci-
sions and allocating resources. Our principal areas of measurement and decision-making are the United
States and International.
Revenues. Our revenues are derived principally from services, which include marketing services, fees and
listings, and transactions. No one customer accounted for 10% or more of net revenues during these periods.
Marketing services revenues are primarily generated from the sale of banner and sponsorship adver-
tisements. Banner advertising agreements typically range from one week to three years. Sponsorship
advertising agreements have longer terms, ranging from three months to five years, and often involve mul-
tiple element arrangements. Banner and sponsorship advertisement revenues are recognized as “impres-
sions” are delivered or ratably over the contract period, where applicable, and when collection of the
resulting receivable is reasonably assured. “Impressions” are defined as the number of times that an adver-
tisement appears in pages viewed by users of the Yahoo! network. We recognize revenue on these
arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101
(“SAB 101”), “Revenue Recognition in Financial Statements.”
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Management’s discussion and analysis of
financial condition and results of operations
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Periodically, we engage in barter transactions for marketing services. Barter revenue is recognized
over the periods in which we complete our obligations under the arrangement. Prior to January 2000,
barter transactions were recorded at the fair value of the goods or services provided or received, whichever
was more readily determinable in the circumstances. In January 2000, we adopted Emerging Issues Task
Force No. 99-17 (“EITF 99-17”), “Accounting for Advertising Barter Transactions,” which requires adver-
tising barter transactions to be valued based on similar cash transactions that have occurred within six
months prior to the barter transaction. Barter revenues represented 7%, 7%, and 8% of total revenues for
2001, 2000, and 1999. During 2001, we delivered approximately 1.6 billion impressions, as compared to
1.1 billion in 2000, under barter arrangements where fair value was not determinable under EITF 99-17,
and accordingly revenue was not recognized.
Fees and listings revenues consist of revenues generated from a variety of consumer and business
fee and listings-based services, including Small Business Services, Yahoo! Portal Solutions (formerly
known as Corporate Yahoo!), broadcasting live and on-demand events, Yahoo! Personals, and certain
Search and Directory services. With the exception of Yahoo! Portal Solutions, revenues are recognized in
the month in which the services are performed, provided that no significant obligations remain and col-
lection of the resulting receivable is reasonably assured. Revenues from Yahoo! Portal Solutions consist
of software license arrangements and are recognized upon delivery of the software in accordance with
Statement of Position No. 97-2, “Software Revenue Recognition” and Statement of Position 98-9,
“Modification of SOP No. 97-2 with Respect to Certain Transactions.” Platform and maintenance revenues
for Yahoo! Portal Solutions are recognized on a straight-line basis over the term of the contract. Software
license revenues have represented less than 10% of total net revenues for 2001, 2000, and 1999.
Transactions revenues include service fees for facilitating transactions through the Yahoo! network,
principally from our commerce properties. Transactions revenues are recognized upon notification from
the customer that qualifying transactions have occurred and collection of the resulting receivable is rea-
sonably assured.
Results of Operations
Net Revenues. Net revenues by groups of similar service were as follows (dollars in thousands):
Years Ended December 31, 2001 * 2000 * 1999 *
Marketing services $538,771 75% $ 968,274 87% $533,323 90%
Fees and listings 146,445 20% 122,406 11% 55,268 9%
Transactions 32,206 5% 19,498 2% 3,195 1%
$717,422 $1,110,178 $591,786
*Percent of Net revenues
Marketing Services Revenues. Marketing services revenues are primarily generated from the sale of ban-
ner and sponsorship advertisements. Marketing services in 2001 decreased by $429.5 million, or 44%,
as compared to 2000. The decrease is due primarily to the softening of the global economy which signif-
icantly impacted many of our customers’ marketing budgets. Further impacting marketing services rev-
enues was the decrease in commitment levels and related pricing from companies who advertise on the
Internet. In addition, Internet companies spent significantly less money in 2001 due to diminished access
to capital markets as compared to 2000 and 1999. During 2001, our customer base has shifted toward
more traditional marketers. The increase in absolute dollars from 1999 to 2000 was due primarily to the