Yahoo 2012 Annual Report Download - page 38

adapting our architectures, platforms and infrastructure to accommodate increased traffic, to store user data, and
track user preferences, together with the associated costs and potential loss of traffic, could harm our operating
results, cash flows from operations, and financial condition.
We rely on third parties to provide the technologies necessary to deliver content, advertising, and services to
our users, and any change in the licensing terms, costs, availability, or acceptance of these formats and
technologies could adversely affect our business.
We rely on third parties to provide the technologies that we use to deliver content, advertising, and services to
our users. There can be no assurance that these providers will continue to license their technologies or intellectual
property to us on reasonable terms, or at all. Providers may change the fees they charge users or otherwise
change their business model in a manner that slows the widespread acceptance of their technologies. In order for
our services to be successful, there must be a large base of users of the technologies necessary to deliver our
content, advertising, and services. We have limited or no control over the availability or acceptance of those
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, Internet service providers 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.
• We enter into agreements with mobile, tablet, netbook, television, and other device manufacturers, electronics
companies and carriers 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, reduce our revenue. In some cases, device manufacturers may be unwilling to pay fees to
Yahoo! in order to distribute Yahoo! services.
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.
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