Yahoo 2014 Annual Report Download - page 20

and device manufacturers and to generate and grow mobile revenue, our operating and financial
results will be adversely impacted. We are dependent on the interoperability of our products and
services with mobile operating systems we do not control and we may not be successful in
maintaining relationships with the key participants in the mobile industry that control such mobile
operating systems. The manufacturer or access provider might promote a competitor’s or its own
products and services, impair users’ access to our services by blocking access through their devices,
make it hard for users to readily discover, install, update or access our products on their devices, or
charge us for delivery of ads, or limit our ability to deliver ads or measure their effectiveness. If
distributors impair access to or refuse to distribute our services or apps, or charge for or limit our
ability to deliver ads or measure the effectiveness of our ads, then our user engagement and revenue
could decline.
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 as we expand our operations in areas of desired growth,
continue to develop and extend the Yahoo brand, fund product development, expand data centers,
acquire additional office space, and acquire and integrate complementary businesses and
technologies. 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. Even though we have
substantially completed the transition of paid search to Microsoft’s platform, we still 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 need to continue to invest in and
innovate on the mobile search experience. Pursuant to the Search Agreement with Microsoft, we are
also dependent on Microsoft to continue to invest and innovate to maintain and improve its
algorithmic and paid search services.
We generate revenue through other online products, services and apps, and continue to innovate the
products, services and apps 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 gain user acceptance and generate significant traffic
to our Websites, or if we are unable to effectively monetize the traffic from new products and
services, our business could be harmed, causing our revenue to decline.
Risks associated with our Search Agreement with Microsoft may adversely affect our business and
operating results.
Under our Search Agreement with Microsoft, Microsoft is the exclusive algorithmic and paid search
services provider on Yahoo Properties on PCs and non-exclusive provider of such services on Affiliate
sites and for mobile devices for the transitioned markets. Approximately 35 percent, 31 percent, and
25 percent of our revenue for 2014, 2013 and 2012, respectively, were attributable to the Search
Agreement. Our business and operating results would be adversely affected by a significant decline
in or loss of this revenue.
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