Yahoo 2007 Annual Report Download - page 19

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We face significant competition from traditional media companies which could adversely affect our future
operating results.
We also compete with traditional media companies for advertising, both offline as well as increasingly with their
online assets as media companies offer more content directly from their own Websites. 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 increase their spending with us and if we fail to persuade new advertisers to spend a portion
of their budget on advertising with us, our revenues could decline and our future operating results could be adversely
affected.
If we are unable to provide search technologies and other services which generate significant traffic to our
Websites, or we are unable to enter into or continue distribution relationships that drive significant traffic to
our Websites, our business could be harmed, causing our revenues to decline.
We have deployed our own Internet search technology to provide search results on our network. We have more
limited experience in operating our own search service than do some of our competitors. Internet search is
characterized by rapidly changing technology, significant competition, evolving industry standards and frequent
product and service enhancements. We must continually invest in improving our users’ experience, including
search relevance, speed, and services responsive to users’ needs and preferences, to continue to attract, retain and
expand our user base. If we are unable to provide search technologies and other services which generate significant
traffic to our Websites, or if we are unable to enter into distribution relationships that continue to drive significant
traffic to our Websites, our business could be harmed, causing our revenues to decline.
The majority of our revenues are derived from marketing services, and the reduction in spending by or loss
of current or potential advertisers would cause our revenues and operating results to decline.
For the year ended December 31, 2007, 87 percent of our total revenues came from marketing services. Our ability
to continue to retain and grow marketing services revenue depends upon:
• maintaining our user base;
• maintaining our popularity as an Internet destination site;
• broadening our relationships with advertisers to small-and medium-sized businesses;
• attracting advertisers to our user base;
• increasing demand for our services by advertisers, users, businesses and Affiliates, including prices paid by
advertisers, the number of searches performed by users, the rate at which users click-through to commercial
search results and advertiser perception of the quality of leads generated by our marketing services;
• the successful implementation and acceptance of our advertising exchange by advertisers, networks, Affiliates,
and publishers;
• the successful development and deployment of technology improvements to our advertising platform;
• maintaining our Affiliate program for our search marketing;
• deriving better demographic and other information from our users; and
• driving acceptance of the Web in general and of Yahoo! in particular 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 dependent
upon usage or click-through levels. Accordingly, it is difficult to forecast marketing services revenues accurately.
In addition, our expense levels are based in part on expectations of future revenues, including occasional guaranteed
minimum payments to our Affiliates in connection with search and/or display advertising, 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.
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