Yahoo 2003 Annual Report Download - page 16

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In order to compete effectively, we may need to expend including, among others, AskJeeves, Inc., Google Inc, and
significant internal engineering resources or acquire other LookSmart, Ltd. Some of these competitors may have
technologies and companies to provide or enhance our longer operating histories focusing on providing Web
capabilities. If we are unable to maintain or expand our search services, larger customer or user bases and greater
customer and user base in the future, our revenues may brand recognition for their Web search businesses. In
decline. addition to the general acquisition risks highlighted in
these risk factors, we are subject to the risk that other
Companies such as Time Warner’s AOL and Microsoft may
companies with greater operational, strategic, financial,
have a competitive advantage because they have greater
personnel or other resources may choose to enter the Web
access to content, maintain billing relationships with more
search or paid inclusion spaces by acquisition or internal
customers and have access to established distribution
development, and may create greater competition for
networks.
advertisers, customers and users.
We face significant competition from Time Warner’s
If Overture fails to maintain its advertiser, user, business and
America Online business (‘‘AOL’’ or ‘‘America Online’’)
affiliate constituencies, our revenues could significantly
and Microsoft (‘‘Microsoft’’ or ‘‘MSN’’). The combination
decline and our business could be adversely affected.
of America Online and Time Warner provides America
Online with content from Time Warner’s movie and tele- Overture’s pay-for-performance search service is comprised
vision, music, books and periodicals, news, sports and of advertiser-generated listings, which are screened for rel-
other media holdings; access to a network of cable and evance and accessed by users and businesses through the
other broadband delivery technologies; and considerable Yahoo! properties and through Overture’s affiliates, a
resources for future growth and expansion. The America network of other Web properties that have integrated
Online/Time Warner combination also provides America Overture’s search service into their sites or that direct user
Online with access to a broad potential customer base traffic to Overture’s sites. The search listings are ranked
consisting of Time Warner’s current customers and according to the advertiser’s bid; that is, the higher the
subscribers of its various media properties. To a less signif- bid, the higher the ranking. Advertisers pay Overture the
icant extent, we also face competition from other compa- bid price for clicks on the advertiser’s search listing (also
nies that have combined a variety of services under one known as a paid introduction, click-through or a paid
brand in a manner similar to Yahoo!. In certain of these click). Overture’s success in pay-for-performance search
cases, most notably AOL and MSN, our competition has services depends in part on the maintenance of a critical
a direct billing relationship with a greater number of their mass of advertisers, users, and traffic generated by the
users through access and other services than we have with Yahoo! properties and Overture’s affiliates. Such a critical
our users through certain of our premium services. This mass encourages increased participation in Overture’s paid
relationship permits our competitors to have several placement search marketplace. To the extent Overture
potential advantages including the potential to be more experiences a decline in the number of any of these con-
effective than us in targeting services and advertisements stituents, the value of Overture’s paid placement service
to the specific taste of their users. could be harmed, and our revenues or business could be
adversely affected.
Our recent acquisitions of Inktomi and Overture expose our
business to greater competition in the area of algorithmic Web Our recent acquisition of Overture exposes our business to
search and paid inclusion services. greater competition with providers of pay-for-performance
advertising search services.
In March 2003 we completed our acquisition of Inktomi
Corporation (‘‘Inktomi’’), a provider of algorithmic Web As a result of our acquisition of Overture, we compete
search and paid inclusion services. In addition, we com- directly with other providers of pay-for-performance
pleted our acquisition of Overture Services, Inc. (‘‘Over- advertising services that are similar to Overture’s, includ-
ture’’) in October 2003, increasing our algorithmic Web ing Espotting Media, Inc. (which is under agreement to
search and paid inclusion business through Overture’s Alta be acquired by FindWhat), FindWhat.com, Google Inc,
Vista and Fast Search & Transfer Web search businesses. LookSmart, Ltd., and Terra Lycos. In addition, we believe
As a result of these acquisitions, we compete directly with it is likely that there will be additional entrants to the
other providers of Web search and related search services, pay-for-performance search market. Some of these entrants
10