Yahoo 2009 Annual Report Download - page 41

Microsoft has agreed to reimburse us for certain specified expenses up to an aggregate total of $150 million
during the first three years of the Search Agreement. The expense reimbursement payments by Microsoft are not
limited (other than by the $150 million total) during the period from February 23, 2010 through June 30, 2010,
but will be limited thereafter to not more than $50 million in each of the three subsequent 12-month periods
running from July 1 through June 30. From February 23, 2010 until the applicable services are fully transitioned
to Microsoft, Microsoft will also reimburse us for the costs of running our algorithmic and paid search services
subject to specified exclusions and limitations. These reimbursements are separate from and in addition to the
$150 million of reimbursement payments.
The global transition of Yahoo!’s algorithmic and paid search platforms to Microsoft and migration of Yahoo!’s
paid search advertisers and publishers is expected to take up to 24 months and will be done on a market by
market basis. We do not expect any material revenue sharing to begin in 2010, but we expect to receive
reimbursements from Microsoft for the cost of running our algorithmic and paid search services following
implementation. We expect search revenue sharing with Microsoft under the Search Agreement to increase in
2011 and 2012 as we migrate our paid search advertisers and publishers to Microsoft’s platforms by market.
Based on our current levels of revenue and operating expenses, we expect the Search Agreement, when fully
implemented, to have a positive impact on our operating income and to result in capital expenditures savings.
Summary
In the following Management’s Discussion and Analysis, we discuss the following areas of our financial results:
• Results of Operations;
• Business Segment Results;
• Transactions;
• Liquidity and Capital Resources;
• Critical Accounting Policies and Estimates; and
• Recent Accounting Pronouncements.
Results of Operations
Revenues. Revenues by groups of similar services were as follows (dollars in thousands):
Years Ended December 31, 2007-2008
% Change
2008-2009
% Change2007 (*) 2008 (*) 2009 (*)
Marketing services:
Owned and Operated sites ..... $3,669,724 52% $4,046,001 56% $3,552,695 55% 10% (12)%
Affiliate sites ............... 2,418,515 35% 2,270,205 32% 2,120,973 33% (6)% (7)%
Marketing services ........... 6,088,239 87% 6,316,206 88% 5,673,668 88% 4% (10)%
Fees ...................... 881,035 13% 892,296 12% 786,647 12% 1% (12)%
Total revenues .......... $6,969,274 100% $7,208,502 100% $6,460,315 100% 3% (10)%
(*) Percent of total revenues.
We currently generate marketing services revenues principally from display advertising on Owned and Operated
sites and from search advertising. “Searches” is defined as online search queries that may yield Internet search
results ranked and sorted based on relevance to the user’s search query. “Sponsored search results” are a subset
of the overall search results, and provide links to paying advertisers’ Web pages.
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