Yahoo 2007 Annual Report Download - page 16

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We compete with companies to attract users and developers to Yahoo! Properties as well as attract advertisers and
publishers to our marketing services. We expect the market to become increasingly competitive as online marketing
continues to grow and gain acceptance on a global basis. The principal competitive factors relating to attracting and
retaining users include the usefulness, accessibility, integration, and personalization of the online services that we
offer, the quality and relevance of our search results, and the overall user experience on Yahoo! Properties.
The principal competitive factors relating to attracting advertisers and publishers are the reach, effectiveness, and
efficiency of our marketing services as well as the creativity of the marketing solutions that we offer. Reach is the
audience and/or demographic that the Yahoo! network can access. Effectiveness for advertisers is delivering
against advertisers targets, measuring those achievements against those targets and optimizing for these across the
Yahoo! network. Effectiveness for publishers is our advertising technology platforms and the monetization we are
able to offer through our marketing services. Efficiency is simplifying the buying and reporting process across our
entire network of Yahoo! and Partner properties for our advertisers and publishers.
Our most significant competition is from Google, Microsoft Corporation (“Microsoft”), and Time Warner’s
America Online business (“AOL” or “America Online”). In addition, we compete with Facebook and News Corp.,
owner of MySpace, for users, developers, and advertisers. We also compete with many large traditional media
companies such as Disney, CBS, and NBC as they increasingly focus on capturing advertising dollars from their
online properties.
In international markets, we also compete with local portals that are predominantly supported by local telecom-
munication providers or local providers of specific locally designed and marketed Internet services, some of which
may have a potential competitive advantage due to an existing direct billing relationship with their users.
Additional information regarding competition is included in Part I, Item 1A “Risk Factors” of this Annual Report on
Form 10-K.
PRODUCT DEVELOPMENT
Yahoo! continually enhances, expands, and launches products and features to meet evolving user, advertiser, and
publisher needs for technological innovation and a deeper, more integrated experience.
Most of our software products and features are developed internally. However, we purchase technology and license
intellectual property rights when the opportunity is strategically aligned, operationally compatible and econom-
ically advantageous. We believe that Yahoo! is not materially dependent upon licenses and other agreements with
third parties relating to product development.
Yahoo! launched its new search marketing system, known as Project Panama, in the fourth quarter of 2006. This
system provides advertisers with additional tools for budgeting, testing, and optimizing their marketing campaigns.
This new system also provides a new ranking model launched in early February 2007 as the second phase of Project
Panama that ranks ads by relevance in addition to keyword bid price. We believe the new search marketing system
provides a more relevant search experience to users, more valuable customer leads to advertisers, and additional
opportunities to our distribution partners. We have completed the global roll-out of the technology across all
relevant geographies.
In order to encourage a broad spirit of openness and innovation on the Yahoo! network of Websites, we sponsor
programs such as the Yahoo! Developer network which makes Yahoo!’s infrastructure, platform, and communities
accessible to third-parties via APIs. This has established a mutually beneficial environment, in which thousands of
developers have used and built upon technology from Yahoo! services, including Yahoo! Search, Yahoo! Photos,
and Yahoo! Maps to further increase the relevance of Yahoo! products and services for individual users and the
greater community. Another example of this effort is the Hack Yahoo! Program, which is designed to encourage
and empower employee and third-party innovation. This global program consists of a speaker series, an intranet site
and blog, workshops, and quarterly “Hack Days” that are an ongoing opportunity to foster and celebrate the
creativity of our employees and third parties.
As a complement to our core engineering and production teams, we also have scientists working in our Yahoo!
Research Labs dedicated to developing novel algorithms and technology that empower users, businesses, and
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