Yahoo 2011 Annual Report Download - page 17

• successfully acquiring, investing in, and implementing new technologies and strategic partnerships;
• successfully implementing changes in our sales force, sales development teams, and sales strategy;
• continuing to innovate and improve the monetization capabilities of our display advertising products;
• effectively monetizing search queries;
• continuing to innovate and improve users’ search experiences;
• maintaining and expanding our Affiliate program for search and display advertising services; and
• deriving better demographic and other information about our users to enable us to offer better experiences to
both our users and advertisers.
In most cases, our agreements with advertisers have a term of one year or less, and may be terminated at any time
by the advertiser or by us. Search marketing agreements often have payments dependent upon usage or click-
through levels. Accordingly, it is difficult to forecast display and search revenue accurately. In addition, our
expense levels are based in part on expectations of future revenue, including occasional guaranteed minimum
payments to our Affiliates in connection with search and/or display advertising, and are fixed over the short-term
in some categories. The state of the global economy and availability of capital has impacted and could further
impact the advertising spending patterns of existing and potential advertisers. Any reduction in spending by, or
loss of, existing or potential advertisers would negatively impact our revenue and operating results. Further, we
may be unable to adjust our expenses and capital expenditures quickly enough to compensate for any unexpected
revenue shortfall.
Adverse general economic conditions have caused and could cause decreases or delays in display and search
services spending by our advertisers and could harm our ability to generate display and search revenue and
our results of operations.
Display and search expenditures tend to be cyclical, reflecting overall economic conditions and budgeting and
buying patterns. Since we derive most of our revenue from display and search, adverse economic conditions have
caused, and a continuation of adverse economic conditions could cause, additional decreases or delays in
advertising spending, a reduction in our display and search revenue and a negative impact on our short-term
ability to grow our revenue. Further, any decreased collectability of accounts receivable or early termination of
agreements, whether resulting from customer bankruptcies or otherwise due to the current economic conditions,
could negatively impact our results of operations.
If we do not manage our operating expenses effectively, our profitability could decline.
We have implemented cost reduction initiatives to better align our operating expenses with our revenue,
including reducing our headcount, outsourcing some administrative functions, consolidating space and
terminating leases or entering into subleases. We plan to continue to manage costs to better and more efficiently
manage our business. However, our operating expenses might also increase from their reduced levels as we
expand our operations in areas of desired growth, continue to develop and extend the Yahoo! brand, fund product
development, build data centers or acquire real property, and acquire and integrate complementary businesses
and technologies. Our operating costs might also increase if we do not effectively manage costs as we transition
markets under the Search Agreement and reimbursements from Microsoft under the Search Agreement decline or
cease. In addition, weak economic conditions or other factors could cause our business to contract, requiring us
to implement additional cost cutting measures. If our expenses increase at a greater pace than our revenue, or if
we fail to implement additional cost cutting if required in a timely manner, our profitability will decline.
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