Yahoo 2010 Annual Report Download - page 13

COMPETITION
We operate in the Internet products, services, communications, media, and content markets, which are highly
competitive and characterized by rapid change, converging technologies, and increasing competition. Our most
significant competition is from Facebook, Google, Inc. (“Google”), Microsoft, and AOL, Inc. (“AOL”), which each
offer an integrated variety of Internet products, advertising services, technologies, online services and content. We
compete with these and other companies for users, advertisers, publishers, and developers. We also compete with
these companies to obtain agreements with software publishers, Internet access providers, mobile carriers, device
manufacturers and others to promote or distribute our services to their users. We compete with advertising
networks, exchanges and other platforms, such as Google AdSense, DoubleClick Ad Exchange, AOL’s Ad.com,
and Microsoft Media Network, as well as traditional media companies for a share of advertisers’ marketing budgets
and in the development of the tools and systems for managing and optimizing advertising campaigns.
Under the Search Agreement with Microsoft we have become the exclusive worldwide relationship sales force
for both companies’ premium search advertisers and Microsoft has become the exclusive algorithmic and paid
search services provider on Yahoo! Properties and non-exclusive provider of such services on Affiliate sites in
transitioned markets. However, Microsoft will still continue to compete with us on its own sites and on its
partners’ sites for users, advertisers, publishers, developers, and distribution partners.
We believe our principal competitive strengths relating to attracting and retaining users include the usefulness,
accessibility, integration, and personalization of the online services that we offer; the quality, personalization,
and presentation of our search results; and the overall user experience on Yahoo! Properties. Our principal
competitive strengths 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 size of
the audience and/or demographic that can be accessed through the Yahoo! network. “Effectiveness” for
advertisers is the achievement of marketing objectives, which we support by developing campaigns, measuring
the performance of these campaigns against their objectives, and optimizing their objectives across the Yahoo!
network. “Effectiveness” for publishers is the monetization of their online audiences. “Efficiency” is the
simplicity and ease of use of the services we offer advertisers and publishers.
In international markets, we also compete with local portals that are predominantly supported by local
telecommunication 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, dominant market share in their territories, greater brand recognition, focus on a single market, familiarity
with local tastes and preferences, or greater regulatory and operational flexibility.
Additional information regarding competition is included in Part I, Item 1A “Risk Factors” of this Annual Report
on Form 10-K and is incorporated herein by reference.
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 by our employees. In some instances,
however, we might purchase technology and license intellectual property rights if the opportunity is strategically
aligned, operationally compatible, and economically advantageous. We believe that we are not materially
dependent upon licenses or other agreements with third parties relating to product development.
Our Product Development organization includes Yahoo! Labs. This organization includes our industry-leading
Yahoo! Research group, our Applied Sciences group and our Academic Relations team, which has spearheaded
key relationships with some of the world’s most influential universities and institutions. Yahoo! Labs is designed
to foster the long-term scientific competitiveness of Yahoo! as a world leader on the Internet through cutting-
edge, multi-disciplinary research in a variety of fields, including economic theory, computer science, artificial
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