Yahoo 2010 Annual Report Download - page 24

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acceptance of their technologies. In order for our rich media services to be successful, there must be a large base
of users of these rich media technologies. We have limited or no control over the availability or acceptance of
rich media technologies, and any change in the licensing terms, costs, availability, or user acceptance of these
technologies could adversely affect our business.
If we are unable to attract, sustain and renew distribution arrangements on favorable terms, our revenue may
decline.
We enter into distribution arrangements with third parties such as operators of third-party Websites, online
networks, software companies, electronics companies, computer manufacturers and others to promote or supply
our services to their users. For example:
• We maintain search and display advertising relationships with Affiliate sites, which integrate our advertising
offerings into their Websites;
• We enter into distribution alliances with Internet service providers (including providers of cable and
broadband Internet access) and software distributors to promote our services to their users; and
• We enter into agreements with mobile, tablet, netbook, and other device manufacturers and carriers as well as
Internet-enabled television manufacturers and other electronics companies to promote our software and
services on their devices.
In some markets, we depend on a limited number of distribution arrangements for a significant percentage of our
user activity. A failure by our distributors to attract or retain their user bases would negatively impact our user
activity and, in turn, would reduce our revenue.
Distribution agreements often involve revenue sharing. Over time, competition to enter into distribution
arrangements may cause our traffic acquisition costs to increase. In some cases, we guarantee distributors a
minimum level of revenue and, as a result, run a risk that the distributors’ performance (in terms of ad
impressions, toolbar installations, etc.) might not be sufficient to otherwise earn their minimum payments. In
other cases, we agree that if the distributor does not realize specified minimum revenue we will adjust the
distributor’s revenue-share percentage or provide make-whole arrangements.
Some of our distribution agreements are not exclusive, have a short term, are terminable at will, or are subject to
early termination provisions. The loss of distributors, increased distribution costs, or the renewal of distribution
agreements on significantly less favorable terms may cause our revenue to decline.
More individuals are utilizing non-PC devices to access the Internet, and versions of our services developed
for these devices might not gain widespread adoption by the devices’ users, manufacturers, or distributors or
might fail to function as intended on some devices.
The number of individuals who access the Internet through devices other than a PC, such as mobile telephones,
personal digital assistants, handheld computers, tablets, netbooks, televisions, and set-top box devices, has
increased dramatically, and the trend is likely to continue. Our services were originally designed for rich,
graphical environments such as those available on PCs. The different hardware and software, memory, operating
systems, resolution, and other functionality associated with alternative devices currently available may make our
PC services unusable or difficult to use on such devices. Similarly, the licenses we have negotiated to present
third-party content to PC users may not extend to users of alternative devices. In those cases, we may need to
enter into new or amended agreements with the content providers in order to present a similar user-experience on
the new devices. The content providers may not be willing to enter into such new or amended agreements on
reasonable terms or at all.
We offer versions of many of our popular services (such as sports, finance, and news) designed to be accessed on
a number of models of alternative devices. We also offer versions of some of our services (such as instant
messaging) designed for specific popular devices. As new devices are introduced, it is difficult to predict the
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