Yahoo 2014 Annual Report Download - page 102

Download and view the complete annual report

Please find page 102 of the 2014 Yahoo annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 178

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172
  • 173
  • 174
  • 175
  • 176
  • 177
  • 178

In non-transitioned markets during 2012 and 2013, the Company paid Affiliates TAC for the revenue
generated from the search advertisements on the Affiliates’ Websites. The revenue derived from
these arrangements was reported on a gross basis (before deducting the TAC paid to Affiliates,
which is recorded as cost of revenue—TAC), as the Company continued to be the primary obligor to
the advertisers.
The Company recognizes search revenue generated from mobile ads served through Yahoo Gemini
from Yahoo Properties and Affiliate sites. The search revenue generated from mobile ads served
through Yahoo Gemini that involve traffic supplied by Affiliates is reported gross of the TAC paid to
Affiliates (reported as cost of revenue—TAC) as the Company performs the search service.
Accordingly, the Company is considered the primary obligor to the advertisers who are the
customers of the search advertising service. The Company also generates search revenue from a
revenue sharing arrangement with Yahoo Japan for search technology and services and records the
related revenue as reported.
The Company recognizes revenue from display advertising on Yahoo Properties and Affiliate sites as
impressions of or clicks on display advertisements are delivered. Impressions are delivered when a
sold advertisement appears in pages viewed by users. Clicks are delivered when a user clicks on a
native advertisement. 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, the
Company pays Affiliates for the revenue generated from the display of these advertisements on the
Affiliate sites. Traffic acquisition costs (“TAC”) are payments made to third-party entities that have
integrated the Company’s advertising offerings into their Websites or other offerings and payments
made to companies that direct consumer and business traffic to Yahoo Properties. The display
revenue derived from these arrangements that involve traffic supplied by Affiliates is reported gross
of the TAC paid to Affiliates (reported as cost of revenue—TAC) when the Company is the primary
obligor to the advertisers who are the customers of the display advertising service.
From time-to-time, the Company may offer customized display advertising solutions to advertisers.
These customized display advertising solutions combine the Company’s standard display advertising
with customized content, customer insights, and campaign analysis which are separate units of
accounting. Due to the unique nature of these products, the Company may not be able to establish
selling prices based on historical stand-alone sales or third-party evidence; therefore, the Company
may use its best estimate to establish selling prices. The Company establishes best estimates within a
range of selling prices considering multiple factors including, but not limited to, class of advertiser,
size of transaction, seasonality, margin objectives, observed pricing trends, available online inventory,
industry pricing strategies, and market conditions. The Company believes the use of the best
estimates of selling price allows revenue recognition in a manner consistent with the underlying
economics of the transaction.
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 Local and other services. The
Company recognizes 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. The Company recognizes transaction
revenue when there is evidence that qualifying transactions have occurred. We also receive royalties
from Yahoo Japan and Alibaba Group 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. The Company recognizes fees revenue when the services are performed.
98