Yahoo 2012 Annual Report Download - page 27

• 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 and mobile
products;
• effectively monetizing mobile and other 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, growth rate of the online advertising market, and
availability of capital has impacted and could further impact the advertising spending patterns of our 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.
If we do not manage our operating expenses effectively, our profitability could decline.
We plan to continue to manage costs to better and more efficiently manage our business. However, our operating
expenses might 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 cost cutting measures.
If our expenses increase at a greater pace than our revenue, or if we fail to effectively manage costs, our
profitability will decline.
If we are unable to provide innovative search experiences and other products and services that generate
significant traffic to our Websites, our business could be harmed, causing our revenue to decline.
Internet search is characterized by rapidly changing technology, significant competition, evolving industry
standards, and frequent product and service enhancements. We currently deploy our own technology to provide
paid search results on our network, except in markets where we have transitioned those services to Microsoft’s
platform. Even after we complete the transition to Microsoft’s platform in all markets, we will need to continue
to invest and innovate to improve our users’ search experience to continue to attract, retain, and expand our user
base and paid search advertiser base.
We also generate revenue through other online products and services, such as Yahoo! Mail, and continue to
innovate the products and services that we offer. The research and development of new, technologically
advanced products is a complex process that requires significant levels of innovation and investment, as well as
accurate anticipation of technology, market and consumer trends. If we are unable to provide innovative products
and services which generate significant traffic to our Websites, our business could be harmed, causing our
revenue to decline.
13