Yahoo 2010 Annual Report Download - page 39

We expect search revenue for the first quarter of 2011 to decrease compared to the first quarter of 2010. The
decrease is primarily attributable to several factors associated with the transition of algorithmic and paid search
results to Microsoft’s platform in the transitioned markets, including the required change in revenue presentation
for transitioned markets from a gross to a net basis and the revenue share with Microsoft in transitioned markets.
Other Revenue. Other revenue includes listings-based services revenue, transaction revenue and fees revenue.
Other revenue for the year ended December 31, 2010 decreased by 16 percent, compared to 2009. The decrease
can be attributable to changes in certain of our broadband access partnerships, our shift from a fee-paying user
structure to other fee structures, and to the divestiture of certain business lines during the year ended
December 31, 2010. In addition, revenue from other premium services declined year-over-year as we continue to
outsource various offerings.
Other revenue for the year ended December 31, 2009 decreased by 15 percent, compared to 2008. The decrease
can be primarily attributed to changes in certain of our broadband access partnerships, our shift from a fee-paying
user structure to other fee structures, as well as the outsourcing of various offerings. In addition, the sale of
Kelkoo SAS during the year ended December 31, 2008 contributed to the decline in revenue year-over-year.
We expect other revenue to decline for the first quarter of 2011, compared to the first quarter of 2010. The
divestitures and outsourcing of non-core businesses and offerings, as well as changes in certain of our broadband
access partnerships from a fee-paying user structure to other fee structures such as fixed fee, are among the
factors expected to contribute to the decrease in other revenue.
Costs and Expenses. Operating costs and expenses consist of cost of revenue, sales and marketing, product
development, general and administrative, amortization of intangible assets, and restructuring charges, net. In
addition, in 2008, we incurred a goodwill impairment charge. Cost of revenue consists of TAC, Internet
connection charges, and other expenses associated with the production and usage of Yahoo! Properties, including
amortization of acquired intellectual property rights and developed technology.
Operating costs and expenses were as follows (dollars in thousands):
Years Ended December 31,
2008-2009 2009-2010
Dollar
Change
Percent
Change
Dollar
Change
Percent
Change2008 (1) 2009 (1) 2010 (1)
Cost of revenue (2) ..... $3,023,362 42% $2,871,746 44% $2,627,545 42% $(151,616) (5)% $(244,201) (9)%
Sales and marketing . . . $1,563,313 22% $1,245,350 19% $1,264,491 20% $(317,963) (20)% $ 19,141 2%
Product development . . $1,221,787 17% $1,210,168 19% $1,082,176 17% $ (11,619) (1)% $(127,992) (11)%
General and
administrative ...... $ 705,136 10% $ 580,352 9% $ 488,332 8% $(124,784) (18)% $ (92,020) (16)%
Amortization of
intangibles(2) ....... $ 87,550 1% $ 39,106 1% $ 31,626 1% $ (48,444) (55)% $ (7,480) (19)%
Restructuring charges,
net............... $ 106,854 1% $ 126,901 2% $ 57,957 1% $ 20,047 19% $ (68,944) (54)%
Goodwill impairment
charge ............ $ 487,537 7% $ — — $ — — $(487,537) N/M(3) $— —
(1) Percent of total revenue.
(2) For the years ended December 31, 2010, 2009, and 2008, cost of revenue included amortization expense of
$96 million, $145 million, and $194 million, respectively, relating to acquired intellectual property rights and
developed technology.
(3) N/M = not meaningful.
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