Yahoo 2004 Annual Report Download - page 39

This growth in our marketing services revenues is driven by our growing number of users, advertisers and inventory. As
our user base increases and users spend more time on the Yahoo! Network, they drive a higher number of page views,
which we view as inventory, and a higher number of search queries which result in a higher number of impressions and
paid clicks. This increased level of engagement on the Yahoo! Network attracts more advertisers to our advertising
services which also contributes to the growth in our marketing services revenue.
On the Yahoo! Network, our number of unique users worldwide as of December 31, 2004 was approximately 31 percent
higher than the number of unique users as of December 31, 2003 which was 24 percent higher than December 31,
2002. Unique users are the estimated number of people who visited the Yahoo! Network in a given time period.
The combined number of page views and searches, including those from our affiliate network, in 2004 and including the
effects of acquisitions, increased by approximately 50 percent as compared to 2003 with approximately 10 percent of the
increase in volume attributable to acquisitions. The combined number of page views and searches in 2003, including the
effects of acquisitions, increased by approximately 35 percent as compared to 2002 with approximately 5 percent of the
increase in volume attributable to acquisitions. The increase in the organic volume of page views and searches resulted
from the combined effect of an increased number of users, an expanded offering of properties which increases our
inventory of page views and the introduction of new sponsored search offerings. The combined average yield per page
view and search increased by approximately 55 percent in 2004 compared to 2003, of which approximately one-half is
attributable to acquisitions. The combined average yield per page view and search increased by approximately 30 percent
in 2003 compared to 2002, of which approximately 20 percent is attributable to acquisitions. The increase in organic
yield per page view and search is primarily due to a sales mix change towards higher yielding properties and advertising
services.
The average user is also spending more time on our Yahoo! Network. We believe this increase can be attributed to our
expanding offerings as well as our enhanced algorithmic search technology which provides a new level of personalization
to the search experience. We also believe this trend makes our network more attractive to advertisers and increases their
spending on our properties. Further, we believe the growth in users on the Yahoo! Network and on the Internet overall is
reflective of the increasing acceptance, importance and dependence of users on the Internet. As a result of this trend of
an increased on-line audience, advertisers are shifting more of their spending from traditional media to the Internet to
reach this growing audience.
Fees Revenue. Fees revenue in 2004 increased approximately $127 million, or 43 percent, as compared to 2003 of which
$10 million relates to acquisitions. Approximately $115 million was primarily associated with an increase in the number
of paying users for our fee-based services, which were 8.4 million at December 31, 2004 compared to 4.9 million at
December 31, 2003. Our increasing base of fee paying users is due to a greater penetration of our services with our
existing users as well as our continued expansion of service offerings including new business relationships with BT and
Rogers for fee based services. These fee-based services include Internet broadband and dial-up services, our premium
mail, music and personals offerings as well as our services for small businesses. Average revenue per paying user per
month declined to approximately $4 in 2004 from $5 in 2003 as a result of faster subscriber growth in some of the
lower priced offerings, and the introduction of lower priced fee-based services.
For the year ended December 31, 2003, fees revenue increased approximately $90 million, or 43 percent, as compared to
the prior year. Approximately $100 million was associated with an increase in the number of paying users for our
fee-based services, which were 4.9 million at December 31, 2003 compared to 2.2 million at December 31, 2002.
Average revenue per paying user per month declined to approximately $5 in 2003 from $7 in 2002 as a result of faster
subscriber growth in some of the lower priced offerings, and the introduction of lower priced fee-based services in 2003.
We currently expect combined revenues for marketing services and fees to increase in absolute dollars for 2005 compared
to 2004 as we seek to increase users and traffic on our Yahoo! Network and benefit from expected growth in the on-line
advertising market.
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