Yahoo 1998 Annual Report Download - page 28

standard banner advertising contracts and also involve more integration with
Yahoo! services, such as the placement of buttons that provide users with direct
links to the advertiser’s Web site. Advertising revenues on both banner and spon-
sorship contracts are recognized ratably over the period in which the
advertisement is displayed, provided that no significant Company obligations
remain at the end of a period and collection of the resulting receivable is probable.
Company obligations typically include guarantees of minimum number of “impres-
sions,” or times that an advertisement appears in pages viewed by users of the
Company’s online properties. To the extent minimum guaranteed impressions are
not met, the Company defers recognition of the corresponding revenues until the
remaining guaranteed impression levels are achieved. The Company also earns rev-
enue on sponsorship contracts from fees relating to the design, coordination, and
integration of customers’ content and links into Yahoo! online media properties.
These development fees are recognized as revenue once the related activities have
been performed and the customer’s Web links are available on Yahoo! online media
properties. A number of the Company’s agreements provide that Yahoo! receive
revenues from electronic commerce transactions. Currently, these revenues are rec-
ognized by the Company upon notification from the advertiser of revenues earned
by Yahoo!. Revenues from barter transactions are recognized during the period in
which the advertisements are displayed in Yahoo! properties. Barter transactions
are recorded at the fair value of the goods or services provided or received,
whichever is more readily determinable in the circumstances. To date, revenues
from development fees, electronic commerce transactions, and barter transactions
have each been less than 10% of net revenues.
In August 1996, the Company entered into agreements with Visa International
Service Association (“VISA”) and another party (together, the “Visa Group”) to estab-
lish a limited liability company, Yahoo! Marketplace L.L.C., to develop and operate
a navigational service focused on information and resources for the purchase of
consumer products and services over the Internet. During July 1997, prior to the
completion of significant business activities and public launch of the property, the
Company and VISA entered into an agreement under which the Visa Group released
the Company from certain obligations and claims. In connection with this agree-
ment, Yahoo! issued 2,797,924 shares of Yahoo! Common Stock to the Visa Group,
for which the Company recorded a one-time, non-cash, pre-tax charge of $21.2
million in the second quarter ended June 30, 1997.
RESULTS OF OPERATIONS
Net Revenues. Net revenues were $203.3 million, $70.5 million, and $21.5 million
for the years ended December 31, 1998, 1997, and 1996, respectively. The increases
from year to year are due primarily to the increasing number of advertisers pur-
chasing space on the Company’s online media properties as well as larger and
longer-term purchases by certain advertisers. Approximately 3,800 customers
advertised on the Company’s online media properties during 1998 as compared to
approximately 2,600 and 700 in 1997 and 1996, respectively. No one customer
accounted for 10% or more of net revenues during the years ended December 31,
1998 and 1997, and SOFTBANK and its related companies (“SOFTBANK”) accounted
for 11% of net revenues during 1996. Advertising purchases by SOFTBANK, a 30%
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