Yahoo 2008 Annual Report Download - page 3

I joined Yahoo! in January because I wasI joined Yahoo! in January because I was
energized by the Company’s formidableenergized by the Company’s formidable
assets and vast potential. Yahoo! had beenassets and vast potential. Yahoo! had been
through an unprecedented year marked bythrough an unprecedented year marked by
Microsoft’s various proposals, a proxy contest,Microsoft’s various proposals, a proxy contest,
the consideration of several strategic alterna-the consideration of several strategic alterna-
tives, and a worsening economy. It would betives, and a worsening economy. It would be
easy to assume that the Company had beeneasy to assume that the Company had been
focused solely on these issues at the expensefocused solely on these issues at the expense
of the business. But what I’ve learned since Iof the business. But what I’ve learned since I
first rolled up my sleeves here is just thefirst rolled up my sleeves here is just the
opposite: the innovation engine is strong; theopposite: the innovation engine is strong; the
product pipeline is full; and there’s an intenseproduct pipeline is full; and there’s an intense
focus on delivering the best products andfocus on delivering the best products and
services for our users and deepening ourservices for our users and deepening our
relationships with partners and advertisers.relationships with partners and advertisers.
Without question, there were importantWithout question, there were important
issues to address when I arrived. I found anissues to address when I arrived. I found an
overly complex organization and a strategyoverly complex organization and a strategy
that required greater clarity. Decision-makingthat required greater clarity. Decision-making
needed to happen faster, accountability had toneeded to happen faster, accountability had to
be clearer, and we needed to concentrate evenbe clearer, and we needed to concentrate even
more intently on our customers—both usersmore intently on our customers —both users
and advertisers.and advertisers.
My first task was to simplify our organization,My first task was to simplify our organization,
priming us to make big improvements inpriming us to make big improvements in
product quality and operational efficiencyproduct quality and operational efficiency
while also better supporting our customers.while also better supporting our customers.
This started in February with streamlining theThis started in February with streamlining the
senior leadership team and creating newsenior leadership team and creating new
positions focused on customer advocacy,positions focused on customer advocacy,
marketing and international operations. Wemarketing and international operations. We
will continue to simplify Yahoo! throughoutwill continue to simplify Yahoo! throughout
the year.the year.
Like other companies, we face a tough exter-Like other companies, we face a tough exter-
nal environment, but the good news is this: ournal environment, but the good news is this: our
business model doesn’t require fundamentalbusiness model doesn’t require fundamental
changes. Users love our products, and we arechanges. Users love our products, and we are
one of the “go-to” places for advertisers on-one of the “go-to” places for advertisers on-
line. Despite the challenges Yahoo! has faced,line. Despite the challenges Yahoo! has faced,
our users are engaged—more than 500 millionour users are engaged—more than 500 million
rely on Yahoo! each month for critical informa-rely on Yahoo! each month for critical informa-
tion and services—and user engagement con-tion and services—and user engagement con-
tinues to grow. Advertisers want to connecttinues to grow. Advertisers want to connect
with those users, and I believe the financialwith those users, and I believe the financial
opportunity is significant. To capitalize on thisopportunity is significant. To capitalize on this
opportunity, we must rapidly evolve our useropportunity, we must rapidly evolve our user
products and advertiser services to be best inproducts and advertiser services to be best in
class and make it easier for advertisers to buyclass and make it easier for advertisers to buy
from us, both on and off the Yahoo! network.from us, both on and off the Yahoo! network.
This will be our focus going forward. UsersThis will be our focus going forward. Users
and advertisers create a virtuous circle—and advertisers create a virtuous circle—
the more satisfied they are, the more engage-the more satisfied they are, the more engage-
ment and monetization will flow.ment and monetization will flow.
We must work harder and smarter to maximizeWe must work harder and smarter to maximize
long-term revenue and profitability. My job islong-term revenue and profitability. My job is
to ensure we’re capitalizing on our highest re-to ensure we’re capitalizing on our highest re-
turn assets and increasing our share of the ad-turn assets and increasing our share of the ad-
vertising pie, so we’re even better positionedvertising pie, so we’re even better positioned
to deliver shareholder value now and when theto deliver shareholder value now and when the
economy improves.economy improves.
FINANCIAL RESULTSFINANCIAL RESULTS
In 2008, Yahoo! performed well in anIn 2008, Yahoo! performed well in an
incredibly difficult environment. Despiteincredibly difficult environment. Despite
extraordinary company-specific events andextraordinary company-specific events and
the beginning of a worldwide recession, thethe beginning of a worldwide recession, the
Company delivered revenues of $7.2 billion.Company delivered revenues of $7.2 billion.
Revenues in both our core owned and oper-Revenues in both our core owned and oper-
ated (O&O) advertising businesses grew, withated (O&O) advertising businesses grew, with
O&O search up 17% and O&O display up 7%.O&O search up 17% and O&O display up 7%.
While the rapid changes in the macroeconomicWhile the rapid changes in the macroeconomic
climate slowed growth beginning in the backclimate slowed growth beginning in the back
half of 2008, I believe our core businesses arehalf of 2008, I believe our core businesses are
poised for success as the economy recovers.poised for success as the economy recovers.
When the going gets tough, companies mustWhen the going gets tough, companies must
concentrate on what they can control, and theconcentrate on what they can control, and the
Company’s focus on streamlining operationsCompany’s focus on streamlining operations
and managing costs intensified during 2008.and managing costs intensified during 2008.
Difficult decisions were necessary, includingDifficult decisions were necessary, including
reducing headcount by approximately 10% latereducing headcount by approximately 10% late
in the year. The result was profitability in linein the year. The result was profitability in line
with our 2008 outlook. Looking forward, I willwith our 2008 outlook. Looking forward, I will
be emphasizing accountability for results andbe emphasizing accountability for results and
even greater cost efficiency, particularly giveneven greater cost efficiency, particularly given
the economic environment. At the same time,the economic environment. At the same time,
I will not sacrifice investment in the significantI will not sacrifice investment in the significant
opportunities ahead of us.opportunities ahead of us.
In 2008, we generated cash flow fromIn 2008, we generated cash flow from
operating activities of $1.9 billion and freeoperating activities of $1.9 billion and free
cash flow of $1.3 billion, including a $350cash flow of $1.3 billion, including a $350
million one time up-front payment frommillion one time up-front payment from
AT&T. With uncertainties in the credit market,AT&T. With uncertainties in the credit market,
we were very focused on managing our cashwe were very focused on managing our cash
conservatively so our balance sheet remainedconservatively so our balance sheet remained
strong, giving us plenty of flexibility. Our cashstrong, giving us plenty of flexibility. Our cash
and marketable securities balance at the endand marketable securities balance at the end
of 2008 stood at $3.5 billion, up from $2.4of 2008 stood at $3.5 billion, up from $2.4
billion at the end of 2007. This does notbillion at the end of 2007. This does not
include the value of our direct and indirectinclude the value of our direct and indirect
interests in publicly traded securities, suchinterests in publicly traded securities, such
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DEAR SHAREHOLDERS,DEAR SHAREHOLDERS,