Yahoo 2003 Annual Report Download - page 21

We may not be successful in expanding the number of users
quickly in order to obtain market share effectively. How-
of our electronic commerce services.
ever, in a number of international markets, especially
those in Europe, we face substantial competition from
We have focused, and intend to continue to focus, signifi- Internet Service Providers (‘‘ISPs’’) that offer or may offer
cant resources on the development and enhancement of their own navigational services and from other companies
our electronic commerce properties, such as Yahoo! Shop- that provide commercial search services. Many of these
ping. The success of our electronic commerce properties companies have a dominant market share in their territo-
depends on, among other things, our ability to attract and ries. Furthermore, foreign providers of competing online
retain well-known brands among our network of retailers, services may have a substantial advantage over us in
the ability to generate traffic to our commerce properties, attracting users in their country due to more established
and, in the case of Yahoo! Shopping, the rate at which branding in that country, greater knowledge with respect
users click through to product search results. Through our to the tastes and preferences of users residing in that
electronic commerce properties, we do not establish a country and/or their focus on a single market. We have
direct billing relationship with our users as a result of any experienced and expect to continue to experience higher
purchases they may make with the retailers. The revenue costs as a percentage of revenues in connection with the
that we derive from our electronic commerce properties is development and maintenance of our international online
typically in the form of lead-based fees, wherein retailers properties relative to our domestic experience. We have
pay a fee based on the number of times a user clicks on a selected international markets that may not develop at a
link to their site, transaction fees, and advertising fees. rate that supports our level of investment. In particular,
Users who had a favorable buying experience with a par- certain international markets may be slower than domestic
ticular retailer may contact that retailer directly for future markets in adopting the Internet as an advertising and
purchases rather than through our service. If our users commerce medium.
bypass our electronic commerce properties, such as Yahoo!
Shopping, and contact retailers directly, our revenue could
Our international operations are subject to increased risks.
decline. Competing providers of online shopping, includ-
ing merchants with whom we have relationships, may In addition to uncertainty about our ability to continue
provide a more convenient and comprehensive online to generate revenues from our foreign operations and
shopping experience due to their singular focus on elec- expand our international presence, there are certain risks
tronic commerce. As a result, we may have difficulty inherent in doing business on an international level,
competing with those merchants for users of electronic including:
commerce services and as a consequence our revenue
• trade barriers and unexpected changes in regula-
could decline or we could fail to generate significant reve-
tory requirements;
nues from electronic commerce.
We will continue to operate in international markets in which •difficulties in developing, staffing and simultane-
we have limited experience and are faced with relatively higher
ously managing a large number of unique foreign
costs and are exposed to greater risks.
operations as a result of distance, language and
cultural differences;
A key part of our strategy is to develop Yahoo!-branded
online properties and expand our commercial search offer- • longer payment cycles;
ings in international markets. We have developed, through
joint ventures, subsidiaries and branch offices, localized • currency exchange rate fluctuations;
properties in over 20 international countries. We also pro-
vide search services in 15 international countries. To date, • political or social unrest or economic instability;
we have only limited experience in marketing and operat-
ing our products and services internationally, and we rely • import or export restrictions;
on the efforts and abilities of our foreign business partners
in such activities. • seasonal reductions in business activity;
We believe that in light of substantial competition, we
need to expand our operations in international markets
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