Yahoo 2003 Annual Report Download - page 19

Factors that may be considered a change in circumstances Our agreements with advertisers and sponsors generally
indicating that the carrying value of our amortizable have terms of three years or less and, in many cases, the
intangible assets may not be recoverable include a decline terms are one year or less or in the case of Overture’s
in stock price and market capitalization, and slower business, may be immediately terminable by the advertiser.
growth rates in our industry. We may be required to rec- The agreements often have payments contingent on usage
ord a significant charge to earnings in our financial state- or ‘‘click-through’’ levels. Accordingly, it is difficult to
ments during the period in which any impairment of our forecast these revenues accurately. However, our expense
goodwill or amortizable intangible assets is determined. At levels are based in part on expectations of future revenues,
December 31, 2003, our goodwill and amortizable intan- include guaranteed minimum payments to our affiliates in
gible assets were $2.3 billion. In the first quarter of 2002, connection with our pay-for-performance advertising ser-
we recorded a transitional impairment charge of $64 mil- vices, and are fixed over the short-term with respect to
lion as a cumulative effect of an accounting change, upon certain categories. We may be unable to adjust spending
the adoption of Statement of Financial Accounting Stan- quickly enough to compensate for any unexpected revenue
dards No. 142 ‘‘Goodwill and Other Intangible Assets.’’ shortfall.
The majority of our revenues are derived from marketing Overture depends on a limited number of sources to direct
services. Demand from our current and potential clients for users and businesses to its service to conduct searches.
online advertising is difficult to forecast accurately.
The users and businesses that conduct searches on Over-
For the fiscal year ended December 31, 2003, approxi- ture’s service come from a limited number of sources. In
mately 74 percent of our total revenues came from addition to the Yahoo! properties, sources for users con-
marketing services. Our ability to continue to achieve sub- ducting searches are members of Overture’s affiliate net-
stantial advertising revenue depends upon: work, including portals, browsers, and other affiliates.
Overture’s agreements with affiliates vary in duration, and
• growth of our user base, including through our depending on the agreement, provide varying levels of dis-
email and other communications services; cretion to the affiliate in the implementation of the Over-
ture service, including the degree to which affiliates can
• broadening our relationships with advertisers to modify the presentation of the Overture search results on
small and medium size businesses; their websites or integrate the Overture services with their
own services, and may be terminable upon the occurrence
• our user base being attractive to advertisers; of certain events, including failure to meet certain service
levels, material breaches of agreement terms, changes in
• demand for our commercial search services by control (including the change of control of Overture
advertisers, users and businesses, including prices which occurred with Yahoo!’s acquisition of Overture) or
paid by advertisers, the number of searches per- in some instances, at will. Overture may not be successful
formed by users and the rate at which they click- in renewing any of its affiliate agreements, or if they are
through to commercial search results; renewed, they may not be on as favorable terms. The loss
of any of these affiliates or adverse change in implementa-
• our ability to maintain our affiliate program for tion of the Overture service by our affiliates could harm
our commercial search services; our ability to generate revenue and our operating results.
• our ability to generate significant traffic to our
Decreases or delays in advertising spending due to general
Websites;
economic downturns could harm our ability to generate
advertising revenue.
•our ability to derive better demographic and other Expenditures by advertisers tend to be cyclical, reflecting
information from our users; and overall economic conditions as well as budgeting and buy-
ing patterns. In the recent past, the overall market for
• continued acceptance of the Web by advertisers as advertising, including Internet advertising, was generally
an advertising medium. characterized by softness of demand and the reduction of
marketing and advertising budgets or the delay in
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