Yahoo 1998 Annual Report Download - page 43

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.
No one customer accounted for 10% or more of net revenues during 1998 and 1997,
and SOFTBANK and its related companies (“SOFTBANK”), a holder of approximately
30% of the Company’s Common Stock at December 31, 1998, accounted for 11% of
net revenues during 1996 (see Note 4).
Deferred revenue is primarily comprised of billings in excess of recognized revenue
relating to advertising contracts and payments received pursuant to sponsorship
advertising contracts in advance of revenue recognition.
Product Development. Costs incurred in the classification and organization of listings
within Yahoo! properties and the development of new products and enhancements
to existing products are charged to expense as incurred. Material software develop-
ment costs subsequent to the establishment of technological feasibility are
capitalized. Based upon the Company’s product development process, technological
feasibility is established upon completion of a working model. Costs incurred by
the Company between completion of the working model and the point at which the
product is ready for general release have been insignificant.
Advertising Costs. Advertising production costs are recorded as expense the first
time an advertisement appears. All other advertising costs are expensed as
incurred. The Company does not incur any direct-response advertising costs.
Advertising expense totaled approximately $32.7 million, $10.9 million, and $4.2
million for 1998, 1997, and 1996, respectively.
Benefit Plan. The Company maintains a 401(k) Profit Sharing Plan (the “Plan”) for its
full-time employees. Each participant in the Plan may elect to contribute from 1% to
17% of his or her annual compensation to the Plan. The Company matches employee
contributions at a rate of 25%. Employee contributions are fully vested, whereas
vesting in matching Company contributions occurs at a rate of 33.3% per year of
employment. During 1998, 1997 and 1996, the Company’s contributions amounted
to $584,000, $263,000, and $81,000, respectively.
Cash and Cash Equivalents, Short and Long-Term Investments. The Company invests
its excess cash in debt instruments of the U.S. Government and its agencies, and in
high-quality corporate issuers. All highly liquid instruments with an original
maturity of three months or less are considered cash equivalents, those with original
maturities greater than three months and current maturities less than twelve
months from the balance sheet date are considered short-term investments, and
those with maturities greater than twelve months from the balance sheet date are
considered long-term investments.
The Company’s marketable securities are classified as available-for-sale as of the
balance sheet date and are reported at fair value, with unrealized gains and losses,
net of tax, recorded in shareholders’ equity. Realized gains or losses and permanent
declines in value, if any, on available-for-sale securities will be reported in other
56 57
54
52
55
50
53
48
51
46
49
44
47
42
45
40
43
41
58 59
60 61
62