Yahoo 2013 Annual Report Download - page 29

Any failure to manage expansion and changes to our business could adversely affect our operating results.
If we are unable to effectively manage a large and geographically dispersed group of employees or to anticipate
our future growth and personnel needs, our business may be adversely affected. As we expand our business, we
must also expand and adapt our operational infrastructure. Our business relies on data systems, billing systems,
and financial reporting and control systems, among others. All of these systems have become increasingly
complex in the recent past due to the growing complexity of our business, acquisitions of new businesses with
different systems, and increased regulation over controls and procedures. To manage our business in a cost-
effective manner, we will need to continue to upgrade and improve our data systems, billing systems, and other
operational and financial systems, procedures, and controls. In some cases, we are outsourcing administrative
functions to lower-cost providers. These upgrades, improvements and outsourcing changes will require a
dedication of resources and in some cases are likely to be complex. If we are unable to adapt our systems and put
adequate controls in place in a timely manner, our business may be adversely affected. In particular, sustained
failures of our billing systems to accommodate increasing numbers of transactions, to accurately bill users and
advertisers, or to accurately compensate Affiliates could adversely affect the viability of our business model.
Proprietary document formats may limit the effectiveness of our search technology by preventing our
technology from accessing the content of documents in such formats, which could limit the effectiveness of
our products and services.
A large amount of information on the Internet is provided in proprietary document formats. These proprietary
document formats may limit the effectiveness of search technology by preventing the technology from accessing
the content of such documents. The providers of the software applications used to create these documents could
engineer the document format to prevent or interfere with the process of indexing the document contents with
search technology. This would mean that the document contents would not be included in search results even if
the contents were directly relevant to a search. The software providers may also seek to require us to pay them
royalties in exchange for giving us the ability to search documents in their format. If the search platform
technology we employ is unable to index proprietary format Web documents as effectively as our competitors’
technology, usage of our search services might decline, which could cause our revenue to fall.
We have dedicated resources to provide a variety of premium enhancements to our products and services,
which might not prove to be successful in generating significant revenue for us.
We offer fee-based enhancements for many of our free services. The development cycles for these technologies
are long and generally require investment by us. We have invested and will continue to invest in premium
products and services. Some of these premium products and services might not generate anticipated revenue or
might not meet anticipated user adoption rates. We have previously discontinued some non-profitable premium
services and may discontinue others. General economic conditions as well as the rapidly evolving competitive
landscape may affect users’ willingness to pay for such premium services. If we cannot generate revenue from
our premium services that are greater than the cost of providing such services, our operating results could be
harmed.
We may have exposure to additional tax liabilities which could negatively impact our income tax provision, net
income, and cash flow.
We are subject to income taxes and other taxes in both the U.S. and the foreign jurisdictions in which we
currently operate or have historically operated. The determination of our worldwide provision for income taxes
and current and deferred tax assets and liabilities requires judgment and estimation. In the ordinary course of our
business, there are many transactions and calculations where the ultimate tax determination is uncertain. As a
U.S. multinational corporation, we are subject to changing tax laws both within and outside of the U.S. We
cannot predict the form or timing of potential legislative changes, but any newly enacted tax law could have a
material adverse impact on our tax expense and cash flow. For example, several jurisdictions have sought to
increase revenues by imposing new taxes on internet advertising or increasing general business taxes.
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