Yahoo 2004 Annual Report Download - page 18

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RISK FACTORS
We face significant competition from companies such as Time Warner’s AOL, Google and Microsoft.
We face significant competition from companies that have combined a variety of services under one brand name in a
manner similar to Yahoo!, including AOL, Google, and Microsoft. AOL has access to content from Time Warner’s
movie, television, music, books, periodicals, news, sports and other media holdings; access to a network of cable and
other broadband users and delivery technologies; and considerable resources for future growth and expansion. Google, in
addition to search, offers many other services that directly compete with our services, including a consumer email service,
desktop search, local search, photos, maps, shopping services and Internet advertising solutions. Microsoft has introduced
its own search service and has announced plans to develop features that may make web search a more integrated part of
its Windows operating system. We expect these competitors increasingly to use their financial and engineering resources
to compete with us. In certain of these cases, most notably AOL, our competition has a direct billing relationship with a
greater number of their users through access and other services than we have with our users through our premium
services. This relationship may permit these competitors to be more effective than us in targeting services and advertise-
ments to the specific preferences of their users thereby giving them a competitive advantage. If our competitors are more
successful than us in attracting users and customers, our business and revenues could be adversely affected.
We also face competition from other Internet service providers, including destination websites and Internet access providers.
We also compete for customers and users with many other providers of online services, including online navigation, Web
search, commercial search, information, entertainment, recruiting, community, electronic commerce and Internet access
services. Some of our competitors in specific areas, particularly in specific vertical markets or commerce services, such as
shopping, auctions or travel, may have longer operating histories in the market, larger customer or user bases, and more
brand recognition in the specific market.
Our users must access our services through an Internet access provider, including providers of cable and DSL Internet
access. To the extent that an access provider or a computer or computing device manufacturer offers online services that
are competitive with those of Yahoo!, the user may find it more convenient to use the services or properties of that access
provider or manufacturer. In addition, the access provider or manufacturer may make it difficult to access our services by
not listing them in the access provider’s or manufacturer’s own directory. Further, through their direct billing relationship
with users, access providers may be better able to target services and advertisements to the preferences of their users.
In addition, smaller competitors may consolidate with larger competitors or with each other and become more competi-
tive. New competitors may also enter the market. If our competitors are more successful in attracting and retaining
customers and users, then our revenues could decline.
We face competition from other providers of sponsored search advertising services which could affect our operating results.
We compete directly with other providers of sponsored search advertising services, including FindWhat.com, Google,
LookSmart, Ltd., and Lycos Inc. In addition, we believe it is likely that there will be additional entrants to this
advertising market. Some of the existing competitors and possible additional entrants may have greater operational,
strategic, financial, personnel or other resources than we do, as well as greater brand recognition. These competitors
compete against us for affiliate arrangements and could cause us to have to enter into affiliate arrangements with less
favorable terms, to lose current affiliates or to fail to acquire new affiliates. The loss of affiliates or a reduction in the
revenue from affiliate arrangements could harm our business, operating results, and cash flows from operations.
We face significant competition from traditional media companies which could affect our operating results
.
We also compete with traditional media companies for advertising. Most advertisers currently spend only a small portion
of their advertising budgets on Internet advertising. If we fail to persuade existing advertisers to retain and grow their
spending with us and if we fail to persuade new advertisers to spend a portion of their budget on advertising with us,
our business and revenues could be adversely affected.
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