Yahoo 2012 Annual Report Download - page 56

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assets; and restructuring charges, net. Cost of revenue—other consists of bandwidth costs and other expenses
associated with the production and usage of Yahoo! Properties, including amortization of acquired
intellectual property rights and developed technology.
Revenue
We generate revenue principally from display advertising on Yahoo! Properties and some Affiliate sites and from
search advertising on Yahoo! Properties and Affiliate sites. Additionally, we generate revenue from other sources
including listings-based services, facilitating commercial transactions, royalties, and consumer and business fee-
based services.
Display revenue is generated from the display of graphical advertisements (“display advertising”). We earn
revenue from guaranteed or “premium” display advertising by delivering advertisements according to
advertisers’ specified criteria, such as number of impressions during a fixed period on a specific placement. Also,
we earn revenue from non-guaranteed or “non-premium” display advertising by delivering advertisements for
advertisers purchasing inventory on a preemptible basis, which means that the advertisement may or may not
appear, inventory is not reserved and position placement is not assured. Generally, we make our non-guaranteed
display inventory available through the Right Media Exchange.
We recognize revenue from display advertising on Yahoo! Properties and Affiliate sites as impressions are
delivered. Impressions are delivered when a sold advertisement appears in pages viewed by users. Arrangements
for these services generally have terms of up to one year, and in some cases the terms may be up to three years.
For display advertising on Affiliate sites, we pay TAC to Affiliates for the revenue generated from the display of
these advertisements on the Affiliate sites. The display revenue derived from these arrangements that involve
traffic supplied by Affiliates is reported on a gross basis including TAC paid to Affiliates as we are the primary
obligor to the advertisers who are the customers of the display advertising service.
Search revenue is generated from the placement of links to advertisers’ Websites (“search advertising”). We
recognize revenue from search advertising on Yahoo! Properties and Affiliate sites. Search revenue is recognized
based on Paid Clicks. A Paid Click occurs when an end-user clicks on a sponsored listing on Yahoo! Properties
or Affiliate sites for which an advertiser pays on a per click basis. Under the Search Agreement with Microsoft,
in the transitioned markets, we report as revenue our 88 percent revenue share as we are not the primary obligor
in the arrangement with the advertisers. See “Significant Transactions—Search Agreement with Microsoft
Corporation” above for a description of our Search Agreement with Microsoft. In non-transitioned markets, we
pay Affiliates TAC for the revenue generated from the search advertisements on the Affiliates’ Websites. The
revenue derived from these arrangements is reported on a gross basis including TAC paid to Affiliates, as we
continue to be the primary obligor to the advertisers in non-transitioned markets and record the related revenue as
it is earned. We also generate search revenue from a revenue sharing arrangement with Yahoo Japan for search
technology and services.
Other revenue includes listings-based services revenue, transaction revenue, royalties, and fees revenue. Listings-
based services revenue is generated from a variety of consumer and business listings-based services, including
classified advertising such as Yahoo! Autos and other services. We recognize listings-based services revenue
when the services are performed. Transaction revenue is generated from facilitating commercial transactions
through Yahoo! Properties, principally from Yahoo! Small Business, Yahoo! Travel, and Yahoo! Shopping. We
recognize transaction revenue when there is evidence that qualifying transactions have occurred. We also receive
royalties from joint venture partners that are recognized when earned. Fees revenue consists of revenue generated
from a variety of consumer and business fee-based services as well as services for small businesses. We
recognize fees revenue when the services are performed.
Display and Search Metrics. We present information below regarding the “Number of Ads Sold” and “Price-per-
Ad” for display and the number of “Paid Clicks” and “Price-per-Click” for search. This information is derived
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