Yahoo 2003 Annual Report Download - page 58

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The Company has agreements with various affiliates, net- Statement of Position 98-9, ‘‘Modification of SOP
works of Web properties that have integrated the Com- No. 97-2 with Respect to Certain Transactions.’’ License
pany’s search service into their sites, to provide revenue is recognized when persuasive evidence of an
pay-for-performance search results. The Company pays arrangement exists, delivery of the license has occurred,
affiliates based on click-throughs on these listings. In the fee is fixed or determinable, and collection is proba-
accordance with EITF Issue No. 99-19, ‘‘Reporting Reve- ble. License revenue from Portal Solutions was not mate-
nue Gross as a Principal Versus Net as an Agent,’’ the rial to the Company as it represented less than one per-
revenue derived from pay-for-performance search results cent of total revenue for all periods presented. Platform
related to traffic supplied by affiliates are reported gross of services are sold as a subscription and are recognized rata-
the payment to affiliates. This revenue is reported gross bly over the subscription period. Platform services are
primarily due to the fact that the Company is the primary priced based on the specific content or service purchased
obligor to the customers of the pay-for-performance search by the customer. These services are optional and renewa-
services. ble annually at fixed renewal rates. Maintenance is gener-
ally sold under annual contracts with fixed renewal rates.
Periodically, the Company engages in barter transactions Maintenance revenue is recognized ratably over the con-
for marketing services. Barter revenue is recognized over tract period. Yahoo! Portal Solutions revenues have repre-
the periods in which the Company completes its obliga- sented less than 10 percent of total revenues in all periods
tions under the arrangement. The Company recognizes presented.
revenue on barter arrangements in accordance with EITF
Issue No. 99-17, ‘‘Accounting for Advertising Barter Listings revenue consists of revenues generated from a
Transactions,’’ which requires advertising barter transac- variety of consumer and business listings-based services,
tions to be valued based on similar cash transactions that including access to the HotJobs database and classifieds
have occurred within six months prior to the barter trans- such as Yahoo! Autos, Yahoo! Real Estate and other search
action, and also Accounting Principles Board No. 29 services. Revenue is recognized in the month in which the
(‘‘APB 29’’) ‘‘Accounting for Nonmonetary Transactions,’’ services are performed, provided that no significant Com-
which requires nonmonetary transactions to be based on pany obligations remain and collection of the resulting
the fair values involved, similar to monetary transactions. receivable is reasonably assured.
Barter revenues represented 7 percent, 2 percent and
Deferred revenue primarily comprises contractual billings
1 percent of total revenues for 2001, 2002 and 2003,
in excess of recognized revenue and payments received in
respectively. During 2001, 2002 and 2003, the Company
advance of revenue recognition.
delivered approximately 1.6 billion, 3.5 billion, and
4.3 billion impressions, respectively, under advertising bar-
Traffic Acquisition Costs. The Company enters into agreements
ter arrangements where fair value was not determinable of varying duration with affiliates that integrate the Com-
under EITF 99-17 and, accordingly, revenue was not pany’s pay-for-performance search service into their sites.
recognized. There are generally three economic structures of the affili-
ate agreements: fixed payments based on a guaranteed
Fees revenue consists of revenues generated from a variety
minimum amount of traffic delivered, which often carry
of consumer and business fee-based services, including
reciprocal performance guarantees from the affiliate, varia-
SBC Yahoo! DSL and Dial, Yahoo! Personals, Small Busi-
ble payments based on a percentage of the Company’s
ness Services, Yahoo! Mail and Yahoo! Enterprise Solu-
revenue or based on a certain metric, such as number of
tions, including Yahoo! Portal Solutions. With the excep-
searches or paid clicks, or a combination of the two.
tion of Yahoo! Portal Solutions, revenue is recognized in
the month in which the services are performed, provided The Company expenses, as cost of revenues, traffic acqui-
that no significant Company obligations remain and col- sition costs under two methods; agreements with fixed
lection of the resulting receivable is reasonably assured. payments are expensed pro-rata over the term the fixed
Revenue from Yahoo! Portal Solutions consists of software payment covers, and agreements based on a percentage of
license and service revenues, which are principally plat- revenue, number of paid introductions, number of
form and maintenance services. Yahoo! Portal Solutions
revenue is recognized in accordance with Statement of
Position No. 97-2, ‘‘Software Revenue Recognition’’ and
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