Yahoo 2005 Annual Report Download - page 24

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• deriving better demographic and other information from our users; and
• driving continued acceptance of the web by advertisers as an advertising medium.
In many cases, our agreements with advertisers have terms of one year or less, or, in the case of search
marketing, may be terminated at any time by the advertiser. Search marketing agreements often have
payments contingent upon usage or click-through levels. Accordingly, it is difficult to forecast marketing
services revenues accurately. However, our expense levels are based in part on expectations of future
revenues, including occasional guaranteed minimum payments to our affiliates in connection with search
marketing, and are fixed over the short-term with respect to certain categories. Any reduction in spending
by or loss of existing or potential future advertisers would cause our revenues to decline. Further, we may
be unable to adjust spending quickly enough to compensate for any unexpected revenue shortfall.
In certain markets, we depend on a limited number of sources to direct a significant percentage of users and
businesses to our service to conduct searches and a loss of any of these sources could harm our operating results.
A significant percentage of users and businesses that conduct searches and access our search marketing
listings comes from a limited number of sources in certain markets. In addition to the Yahoo! Properties,
sources for users are members of our affiliate network, including portals, browsers and other affiliates.
Our agreements with affiliates vary in duration, and depending on the agreement, provide varying levels of
discretion to the affiliate in the implementation of search marketing, including the degree to which
affiliates can modify the presentation of the search marketing listings on their websites or integrate search
marketing with their own services. The agreements may be terminable upon the occurrence of certain
events, including failure to meet certain service levels, material breaches of agreement terms, changes in
control or in some instances, at will. We may not be successful in renewing our affiliate agreements on as
favorable terms or at all. The loss of affiliates providing significant users or businesses or an adverse
change in implementation of search marketing by any of these affiliates could harm our ability to generate
revenue, our operating results and cash flows from operations.
We may not be able to generate substantial revenues from our alliances with Internet access providers.
Through alliances with Internet access providers, we offer access services that combine customized content
and services from Yahoo! (including browser and other communications services) and Internet access from
the third party access providers. We may not be able to retain the alliances with our existing Internet
access providers or to obtain new alliances with Internet access providers on terms that are reasonable. In
addition, these Internet access services compete with many large companies such as AOL, Microsoft,
Comcast Corporation and other established Internet access providers. In certain of these cases, our
competition has substantially greater market presence (including an existing user base) and greater
financial, technical, marketing or other resources. As a result of these and other competitive factors, the
Internet access providers with which we have formed alliances may not be able to attract, grow or retain
their customer bases, which would negatively impact our ability to sell customized content and services
through this channel and, in turn, reduce our anticipated revenues from our alliances.
Some of our shared revenue arrangements may not generate anticipated revenues.
We typically receive co-branded revenue through revenue sharing arrangements or a portion of
transactions revenue. In some cases, our revenue arrangements require that minimum levels of user
impressions be provided by us. These arrangements expose us to potentially significant financial risks in
the event our usage levels decrease, including the following:
• the revenue we are entitled to receive may be adjusted downwards;