Yahoo 2004 Annual Report Download - page 27

We may be subject to legal liability for online services.
We host a wide variety of services that enable individuals and businesses to exchange information, generate content,
advertise products and services, conduct business and engage in various online activities on an international basis. The
law relating to the liability of providers of these online services for activities of their users is currently unsettled both
within the United States and internationally. Claims have been threatened and have been brought against us for defama-
tion, negligence, copyright or trademark infringement, unlawful activity, tort, including personal injury, fraud, or other
theories based on the nature and content of information that we provide links to or that may be posted online or
generated by our users or with respect to auctioned materials. In addition, Yahoo! was the subject of a claim brought by
certain entities in a French court regarding, among other things, the availability of certain content within our services
which was alleged to violate French law. We may be subject to similar actions in domestic or other international
jurisdictions in the future. Our defense of any such actions could be costly and involve significant time and attention of
our management and other resources.
We also periodically enter into arrangements to offer third-party products, services, or content under the Yahoo! brand or
via distribution on various Yahoo! properties, including stock quotes and trading information. We may be subject to
claims concerning these products, services or content by virtue of our involvement in marketing, branding, broadcasting
or providing access to them, even if we do not ourselves host, operate, provide, or provide access to these products,
services or content. While our agreements with these parties often provide that we will be indemnified against such
liabilities, such indemnification may not be adequate.
It is also possible that, if any information provided directly by us contains errors or is otherwise negligently provided to
users, third parties could make claims against us. For example, we offer Web-based email services, which expose us to
potential risks, such as liabilities or claims resulting from unsolicited email, lost or misdirected messages, illegal or
fraudulent use of email, or interruptions or delays in email service. Investigating and defending any of these types of
claims is expensive, even to the extent that the claims do not ultimately result in liability.
We may have difficulty scaling and adapting our existing technology architecture to accommodate increased traffic and technology
advances or customer requirements.
Yahoo! is one of the most highly trafficked Websites on the Internet and is regularly serving an increased number of users
and delivering an increased number of daily page views. For example, the usage levels of email and the number and
complexity of advertisers utilizing our sponsored search offerings have increased. In addition, the products and services
offered by Yahoo! have expanded and changed significantly and are expected to continue to expand and change rapidly in
the future. There is also an increased use of rich media content such as audio and video. Rapid increases in the levels or
types of use of our online properties and services could result in delays or interruptions in our service. In particular, the
technology architectures utilized for our services are highly complex and may not provide satisfactory support in the
future, as usage increases and products and services expand, change and become more complex. In the future, we may be
required to make significant changes to our architectures, including moving to completely new architectures. If we are
required to switch architectures, we may incur substantial costs and experience delays or interruptions in our service.
These delays or interruptions in our service may cause users and customers to become dissatisfied with our service and
move to competing providers of online services. Further, to the extent that demands for our services increase, we will
need to expand our infrastructure, including the capacity of our hardware servers and the sophistication of our software.
This expansion is likely to be expensive and complex, and require additional technical expertise. As we acquire users who
rely upon us for a wide variety of services, it becomes more technologically complex and costly to retrieve, store and
integrate data that will enable us to track each user’s preferences. Any difficulties experienced in adapting our architec-
tures and infrastructure to accommodate increased traffic, to store user data and track user preferences, together with the
associated costs and potential loss of traffic, could harm our operating results, cash flows from operations and financial
condition.
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