Yahoo! Inc., together with its consolidated subsidiaries, is a leading provider
of comprehensive Internet products and services to consumers and businesses through
our worldwide network of online properties (the "Yahoo! network"). Yahoo!
was developed and first made available in 1994 by our founders, David Filo and
Jerry Yang, while they were graduate students at Stanford University. Yahoo! was
incorporated in 1995 and is a Delaware corporation.
Headquartered in Sunnyvale, California, we have offices in North America, Europe,
Asia, Latin America and Australia. We manage our business geographically; our
principal areas of measurement and decision-making are the United States and
International. Our properties and services for consumers and businesses currently
reside in four areas: Search and Marketplace; Information and Content; Communications
and Consumer Services; and Affiliate Services.
Our basic products and service offerings are available without charge to our
users. We also offer a variety of fee-based premium services that provide our
users access to value-added content or services. In addition, we sell marketing
and advertising services to businesses across the majority of our properties
and services.
Our properties and service offerings are generally available without charge
to our users. We generate revenues from marketing and listing services, and
also offer fee-based premium services that provide our users access to additional
content or services.
REVENUE CLASSIFICATIONS
Marketing services revenue is primarily generated from the sale of rich media
advertisements (banner and other media advertisements), sponsorship and text-link
advertisements, (including pay-for-performance search advertisements), paid
inclusion, algorithmic searches and transactions revenue. Banner and other media
agreements typically consist of targeted and non-targeted advertising that appears
on or around pages within the Yahoo! network. Sponsorship agreements take many
forms including: high profile promotions that are typically focused on a particular
event, such as a sweepstakes; third party branded content integration into our
properties allowing marketers to provide information about their products to
consumers; and merchant sponsorship opportunities on targeted Yahoo! properties
encouraging users to purchase the goods and services of our advertisers.
Text-links and hypertext links are links that are embedded in certain words,
advertisements, sponsorships or directed emails, which provide the user with
instant access to the advertiser's Website, to obtain additional information
or to purchase products and services. Additionally, we offer online research
and data services, enabling marketers to better understand their customers profiles
and behaviors. Transactions revenue includes service fees for facilitating transactions
through the Yahoo! network.
Although a significant amount of advertising purchases on our properties are
for general rotation on pages within the Yahoo! network, we also offer highly-targeted
marketing opportunities that are designed to deliver greater value to advertisers
through more focused audiences. By developing an extended family of Yahoo!-branded
properties, we seek to offer advertisers a wide range of placement options and
promotional opportunities. For example, through our pay-for-performance search
advertisements, advertisers can bid for priority placement in search results.
We also offer an integrated set of sales and marketing tools built on the Yahoo!
network and delivered in an integrated manner to our global audience. They consist
of innovative, interactive marketing programs designed to provide one-stop shopping
for companies seeking to secure a measurable Internet presence.
We maintain three primary channels for selling our marketing services: online,
telephone and direct. Our Sponsored Matches service, which provides enhanced
visibility for Websites within Yahoo!'s search results, is primarily sold through
our online and direct channels. Under this program, search results pages feature
up to the top six pay-for-performance search listings sold to advertisers. Our
telemarketing channel focuses on sales of online marketing services to small
and medium-size businesses.
Our direct advertising sales team focuses on selling our marketing services
and solutions to leading agencies and marketers in the United States. We employed
advertising sales professionals in 10 locations across the U.S., including:
Atlanta, Boston, Chicago, Dallas, Detroit, the Los Angeles Area, Miami, New
York, the San Francisco Bay Area and Washington D.C. Our advertising sales organization
consults regularly with agencies and advertisers on design and placement of
Web-based advertising, and provides clients with measurements and analyses of
advertising effectiveness.
In addition to our geographic sales structure, we have advertising sales teams
for automotive, consumer packaged goods, entertainment, finance, retail, pharmaceuticals,
sports, technology, telecommunications, travel and advertising agencies. In
international markets, our own internal sales representatives handle our advertising
sales. In some countries, where we have not established full operational capacity,
we have established sales agency relationships.
Fees revenue consists of revenues generated from a variety of consumer and
business fee-based services, including SBC Yahoo! DSL and SBC Yahoo! Dial, Yahoo!
Personals, Small Business Services, Yahoo! Mail and Yahoo! Enterprise Solutions.
Listings revenue consists of revenues generated from a variety of consumer
and business listings-based services, including access to the HotJobs database
and classifieds, such as Yahoo! Autos, Yahoo! Real Estate and other search services.
HotJobs career offerings are handled by a designated sales team.
COMPETITION
We operate in the market for Internet products and services, which is a highly
competitive market characterized by rapid change, converging technologies, and
increased competition from companies offering communication, information and
entertainment integrated into other products and media properties.
Globally, our most significant competition is from Time Warner and Microsoft
("Microsoft" or "MSN"). Time Warner is an integrated media
and communications company engaged in online services, cable, filmed entertainment,
television network, music and publishing.
Time Warner has access to a large potential customer base through its America
Online ("AOL"), cable and publishing business units. Microsoft is
the largest software company in the world and through its MSN network provides
numerous Internet products and services and has alliances with companies involved
with broadband access and various forms of digital interactivity. Microsoft's
presence on computer desktops through packaged software products and their strategy
to sell software through online subscriptions provides them a competitive advantage
over us in providing software and services to online users.
Both AOL and MSN have a direct billing relationship with a greater number of
their users through access and other services than we have with our users through
certain of our premium services. This gives them a potential advantage over
us in targeting the sale of enhanced services to their user base.
As a result of our recent acquisitions of Inktomi and Overture, we compete
directly with other providers of Web search and related search services, including,
among others, Ask Jeeves, Inc., Google Inc. and Looksmart, Ltd.
We also face competition from companies focused on markets where expertise
in a particular segment of the market may provide them a competitive advantage
over us. Two of these competitors, Amazon.com, Inc. and eBay Inc., are expanding
their positions as e-commerce merchants to leverage advantages from the scale
of their commerce platforms to offer informational and community features that
are competitive with the services we provide.
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