Yahoo 2008 Annual Report Download - page 28

Interruptions, delays, or failures in the provision of our services could harm our operating results.
Delays or disruptions to our service could result from a variety of causes, including the following:
• Our operations are susceptible to outages and interruptions due to fire, flood, earthquake, power loss,
telecommunications failures, cyber attacks, terrorist attacks, and similar events.
• Despite our implementation of network security measures, our servers are vulnerable to computer viruses,
worms, physical and electronic break-ins, sabotage, and similar disruptions from unauthorized tampering, as
well as coordinated denial-of-service attacks. We are distributing servers among additional data centers around
the world to create redundancies; however, we do not have multiple site capacity for all of our services and
some of our systems are not fully redundant in the event of delays or disruptions to service.
• We rely on third-party providers for our principal Internet connections and co-location of a significant portion
of our data servers, as well as for key components of our e-mail and VOIP services, news and stock quote
delivery, chat services, mapping, streaming, and other services. We have little or no control over these third-
party providers. Any disruption of the services they provide us or any failure of these third-party providers to
handle higher volumes of use could, in turn, cause delays or disruptions in our services.
Prolonged delays or disruptions to our service could result in a loss of users, damage our brand and harm our
operating results. In addition, users’ ability or willingness to access our services might be impaired by spam,
viruses, worms, spyware, phishing, and other acts of malice by third parties affecting the user generally or the
user’s use of our services in particular.
If we fail to prevent click fraud or if we choose to manage traffic quality in a way that advertisers find
unsatisfactory, our profitability might decline.
A portion of our marketing services revenues arises from advertisers that pay for advertising on a price-per-click
basis, meaning that the advertisers pay a fee every time a user clicks on their advertising. This pricing model can
be vulnerable to so-called “click fraud,” which occurs when clicks are submitted on ads by a user who is
motivated by reasons other than genuine interest in the subject of the ad. On Yahoo! Properties and Affiliate
sites, we are exposed to the risk of click fraud or other clicks or conversions that advertisers may perceive as
undesirable. If fraudulent or other malicious activity is perpetrated by others and we are unable to detect and
prevent it, or if we choose to manage traffic quality in a way that advertisers find unsatisfactory, the affected
advertisers may experience or perceive a reduced return on their investment in our advertising programs which
could lead the advertisers to become dissatisfied with our advertising programs and they might refuse to pay or
demand refunds. This could damage our brand and lead to a loss of advertisers and revenues. Advertiser
dissatisfaction has led to litigation alleging click fraud and other types of traffic quality-related claims and could
potentially lead to further litigation or government regulation of advertising. We may also issue refunds or credits
as a result of such activity. Any increase in costs due to any such litigation, government regulation or legislation,
refunds or credits could negatively impact our profitability.
Fluctuations in foreign currency exchange rates affect our operating results in U.S. dollar terms.
A portion of our revenues arises from international operations. Revenues generated and expenses incurred by our
international subsidiaries are often denominated in the currencies of the local countries. As a result, our
consolidated U.S. dollar financial statements are subject to fluctuations due to changes in exchange rates as the
financial results of our international subsidiaries are translated from local currencies into U.S. dollars. In
addition, our financial results are subject to changes in exchange rates that impact the settlement of transactions
in non-local currencies.
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