Yahoo 2003 Annual Report Download - page 34

Cash flows for the years ended December 31, 2002 and one week to three years. The Company recognizes market-
2003 were as follows (in thousands): ing services revenue related to banner advertisements as
‘‘impressions’’ are delivered by the Company. ‘‘Impres-
Year-over-Year sions’’ are defined as the number of times that an adver-
2002 2003 Change ($) tisement appears in pages viewed by users of the Yahoo!
Net cash provided by network. Sponsorship advertising agreements have longer
operating activities $ 302,448 $ 428,144 $ 125,696 terms than banner advertising agreements, typically rang-
Net cash used in ing from three months to three years, and often involve
investing activities $(345,854) $ (1,121,589) $ (775,735) multiple element arrangements (arrangements with more
Net cash provided by than one deliverable) that may include placement on
(used in) financing specific properties, exclusivity and content integration.
activities $ (21,810) $ 1,086,326 $1,108,136 Sponsorship advertisement revenues are recognized as
‘‘impressions’’ are delivered or ratably over the contract
The increase in net cash provided by operating activities period, where applicable. Text-link advertisements, includ-
was primarily related to the overall increase in revenues ing pay-for-performance search advertisements or results
that we describe above. We also generated cash from our are recognized in the period in which the ‘‘click-throughs’’
convertible note offering and proceeds from the exercise of occur. ‘‘Click-throughs’’ are defined as the number of
stock options by our employees. We used the cash we times a user clicks on an advertisement or search result.
generated to continue to pursue our investment and Per-query search fees are recognized based on the query
acquisition strategies and completed two significant acqui- volume in the period, and revenue from customers who
sitions in 2003. On March 19, 2003, we completed the pay a fixed fee to be included in the Web search index are
acquisition of Inktomi Corporation, a provider of Web recognized over the term of the agreement. Transactions
search and paid inclusion services on the Internet. On revenue includes service fees for facilitating transactions
October 7, 2003, we completed the acquisition of Over- through the Yahoo! network, principally from our com-
ture Services, Inc. a provider of commercial search services merce properties. Transactions revenue is recognized when
on the Internet, including pay-for-performance search there is evidence that the qualifying transactions have
services. occurred and collection of the resulting receivable is rea-
sonably assured.
Revenue Recognition. Our revenues are derived principally
from services, which include marketing services, fees, and Revenues from pay-for-performance search and rich media
listings. We recognize revenue in accordance with Securi- advertisements from our agreement with Overture are
ties and Exchange Commission Staff Accounting Bulletin included in marketing services for the period from Janu-
No. 104 (‘‘SAB 104’’), ‘‘Revenue Recognition,’’ and ary 1, 2003 through October 7, 2003, the date we
Emerging Issues Task Force (‘‘EITF’’) Issue 00-21, ‘‘Reve- acquired Overture, and for the years ended December 31,
nue Arrangements with Multiple Deliverables.’’ In all 2002 and 2001. Revenues from Overture for the period
cases, revenue is recognized only when the price is fixed from January 1, 2003 through October 7, 2003 amounted
or determinable, persuasive evidence of an arrangement to 12 percent of total revenues for the year ended Decem-
exists, the service is performed, and collectibility of the ber 31, 2003. Revenues from Overture amounted to
resulting receivable is reasonably assured. The results of 14 percent of total revenues for the year ended Decem-
operations of acquisitions completed during each year are ber 31, 2002. No one customer accounted for 10 percent
included in our consolidated statements of operations or more of total revenues during 2001.
starting from the date of the acquisition.
We have agreements with various affiliates, networks of
Marketing services revenue is primarily generated from the Web properties that have integrated our search service into
sale of rich media advertisements (banner and other media their sites, to provide pay-for-performance search results.
advertisements), sponsorship and text-link advertisements, We pay affiliates based on click-throughs on these listings.
(including pay-for-performance search advertisements), In accordance with EITF Issue No. 99-19, ‘‘Reporting
paid inclusion, algorithmic searches and transactions reve- Revenue Gross as a Principal Versus Net as an Agent,’’ the
nue. Banner advertising agreements typically range from revenues derived from pay-for-performance search results
related to traffic supplied by affiliates are reported gross of
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