Yahoo 2003 Annual Report Download - page 20

spending of budgeted resources. As a result, advertising technology malfunctions, computer viruses or hacker
spending decreased. Since Yahoo! derives a large part of its attacks. Other potential service interruptions may result
revenues from advertising fees, any decreases in or delays from unanticipated demands on network infrastructure,
of advertising spending could reduce our revenues or neg- increased traffic or problems in customer service to our
atively impact our ability to grow our revenues. Even as access customers. Our ability to control technical and cus-
economic conditions improve, marketing budgets and tomer service issues is further limited by our dependence
advertising spending may not increase from current levels. on SBC and BT for connectivity, customer service, joint
marketing and technical integration of aspects of our
Due to intense competition, we may not be able to generate
access service. Significant disruptions in our access service
substantial revenues from the Internet access market.
could harm our goodwill, the Yahoo! brand and ultimately
could significantly and negatively impact the amount of
In 2002 we launched SBC Yahoo! DSL and SBC Yahoo! revenue we may earn from our service.
Dial, an Internet access service provided through an alli-
ance with SBC Communications Inc. In 2003 we
Some of our sponsorship arrangements may not generate
launched BT Yahoo! Internet, a range of broadband and
anticipated revenues.
dial-up Internet access services provided in the United
Kingdom through an alliance with British Telecommuni- A key element of our strategy is to generate marketing
cations plc (‘‘BT’’). These access services combine custom- services revenue through sponsored services and place-
ized content and services from Yahoo! (including browser ments by third parties in our online media properties in
and other communications services) and DSL transport addition to banner advertising. We typically receive spon-
and Internet access from SBC Internet Services (an affili- sorship fees or a portion of transactions revenue in return
ate of SBC Communications Inc.) and BT. These Internet for minimum levels of user impressions to be provided by
access services compete with many large companies, some us. These arrangements expose us to potentially significant
of which may have substantially greater market presence financial risks in the event our usage levels decrease,
(including an existing user base), financial, technical, mar- including the following:
keting or other resources than those committed to the
• the fees we are entitled to receive may be adjusted
product offerings with SBC and BT. In the United States,
downwards;
these services primarily compete directly or indirectly with
established Internet services, such as AOL and MSN; • we may be required to ‘‘make good’’ on our obli-
other national telecommunications companies and regional gations by providing alternative services;
Bell operating companies; and broadband Internet access
providers such as Earthlink, Inc., Comcast Corporation, • the sponsors may not renew the arrangements or
and other cable broadband providers. In the United King- may renew at lower rates; and
dom, these services primarily compete directly or indi-
rectly with established Internet services, such as AOL and • the arrangements may not generate anticipated
Freeserve plc; other major UK Internet service providers; levels of shared transactions revenue, or sponsors
and cable broadband providers such as NTL Incoporated may default on the payment commitments in such
and Telewest Communications. As a result of these and agreements as has occurred in the past.
other competitive factors, these services may not be able
to attract, grow or retain a customer base, which would Accordingly, any leveling off or decrease of our user base
negatively impact our ability to sell customized content (or usage by our existing base) or the failure to generate
and services through this channel. anticipated levels of shared transactions revenue could
result in a significant decrease in our revenues.
Our success in the Internet access market will depend on
technical and customer service issues, which we have a
limited ability to control.
Internet access services, including SBC Yahoo! DSL, SBC
Yahoo! Dial and BT Yahoo! Internet, are susceptible to
natural or man-made disasters such as earthquakes, floods,
fires, power loss, or sabotage, as well as interruptions from
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