Yahoo 2015 Annual Report Download - page 18

• maintaining and expanding our Affiliate program for search and display advertising services; and
• deriving better demographic and other information about our users to enable us to offer better,
more personalized and targeted experiences to both our users and advertisers.
In most cases, our agreements with advertisers have a term of one year or less, and may be
terminated at any time by the advertiser or by us. Payments under our agreements with advertisers
are often dependent upon performance and click-through levels. Accordingly, it is difficult to forecast
search and display revenue accurately. In addition, our expense levels are based in part on
expectations of future revenue, including any guaranteed minimum payments to our Affiliates in
connection with search and/or display advertising, and in some cases, the expenses could exceed the
revenue that we generate. The state of the global economy, growth rate of the online advertising
market, and availability of capital impacts the advertising spending patterns of our existing and
potential advertisers. Any reduction in spending by, or loss of, existing or potential advertisers would
negatively impact our revenue and operating results. Further, we may be unable to adjust our
expenses and capital expenditures quickly enough to compensate for any unexpected revenue
shortfall.
As more people access our products via mobile devices rather than PCs and mobile advertising
continues to evolve, if we do not continue to attract and retain mobile users and grow mobile
revenue, our financial results will be adversely impacted.
The number of people who access the Internet through mobile devices rather than a PC, including
mobile telephones, smartphones and tablets, is increasing and will likely continue to increase
dramatically. More than 600 million of our monthly users are now joining us (including Tumblr) on
mobile devices. In addition, search queries are increasingly being undertaken through mobile devices.
As a result, our ability to grow advertising revenue is increasingly dependent on our ability to
generate revenue from ads displayed on mobile devices.
A key element of our strategy is focusing on mobile devices, and we expect to continue to devote
significant resources to the creation and support of developing new and innovative mobile products,
services and apps. However, if our new mobile products, services and apps, including new forms of
Internet advertising for mobile devices, do not continue to attract and retain mobile users, advertisers
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 fail to improve and
could decline.
We have implemented cost reduction initiatives to reduce our operating expenses, including
reducing our headcount, closing offices and exiting certain products and verticals. However, we may
not realize the cost savings expected from these initiatives or the revenue impact from our exit of
certain regions and products may be greater than we expect. We plan to seek to operate efficiently
14