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					TIM MORSE
CHIEF FINANCIAL OFFICER
FINANCIAL
OVERVIEW
Value Creation
Progress Since October 2009

             Accelerate	
  Revenue	
  Growth	
                                                                Improve	
  OM%	
  &	
  ROIC	
  to	
  15-­‐20%	
  
                Grew	
  1Q10	
  revenue	
  vs.	
  1Q09	
                                                            Expanded	
  1Q	
  margins	
  to	
  9%	
  
          Outgrew	
  display	
  market	
  4Q	
  &	
  1Q	
  	
                                                      2Q	
  margin	
  guidance	
  10-­‐12%*	
  
            Increased	
  RPS	
  qoq	
  4Q	
  &	
  1Q	
                                                            Began	
  realizing	
  alliance	
  savings	
  
         Stabilized	
  search	
  query	
  share	
                                                                  Reduced	
  SBC/D&A	
  run-­‐rate	
  
          Improved	
  social	
  integraFon	
                                                                         Improved	
  tax	
  structure	
  
      Signed	
  Zynga	
  &	
  Nokia	
  partnerships	
                                                            Repurchased	
  ~$0.4B	
  stock	
  in	
  1Q	
  
                       Acquired	
  CiFzen	
  Sports	
                                                             Completed	
  Zimbra	
  divesFture	
  	
  
                     Signed	
  Associated	
  Content	
                                                        Announced	
  proposed	
  sale	
  of	
  HotJobs	
  

*	
  Based	
  on	
  revenue	
  and	
  operaFng	
  income	
  outlook	
  provided	
  April	
  20,	
  2010	
  
2012 Financial Objectives Unchanged

            Revenue	
                      Accelerate	
  
                                        Accelerate	
  
                                           Revenue	
  Growth	
  
                                        Revenue	
  Growth	
  


         Margins	
                 18-­‐24%	
  
                                   15-­‐20%	
  OperaCng	
  	
       ~3x	
  	
  
                                   Margin	
  Rate	
  	
              2009




                          ~20%	
  Return	
  on	
  	
  n	
  	
  
                          18-­‐24%	
  Return	
  o                  3-­‐4x	
  	
  
    Returns	
                                                           9
                          Invested	
  Capital	
                      200
Updating Objectives for 2010-2013

            Revenue	
                    Accelerate	
  
                                      Accelerate	
                        	
  
                                                                 7-­‐10%	
  
                                      Revenue	
  Growth	
  
                                         Revenue	
  Growth	
        cagr



                                                                          	
  
                                  18-­‐24%	
  OperaCng	
  	
      4	
  pts 	
  
         Margins	
                                                abov 	
  
                                                                           e
                                  Margin	
  Rate	
  	
              prior



                                                                          	
  
                          18-­‐24%	
  Return	
  on	
  	
          4	
  pts 	
  
    Returns	
                                                     abov 	
  
                                                                           e
                          Invested	
  Capital	
                     prior
Financial Framework


                                            Total	
  ValuaCon	
  


           Cash	
                          Core	
  Business	
                                Asian	
  Assets	
  

Disciplined	
  M&A	
  funding	
     Grow	
  revenue	
  7-­‐10%	
  	
  thru	
  ‘13	
              OperaFonal:	
  
                                                                                                 OperaConal:	
  
                                                                                        ~35%	
  ownership	
  of	
  Yahoo!	
  
                                                                                           ~35%	
  ownership	
  of	
  
  Improved	
  integraFon	
               Limit	
  cost	
  to	
  2-­‐3%	
  cagr	
                     Japan	
  
                                                                                                Yahoo!	
  Japan	
  
process…	
  ROIC	
  emphasis	
  
                                         Reduce	
  capital	
  intensity	
                          Strategic:	
  	
  
   OpportunisFc	
  share	
                                                                 ~40%	
  ownership	
  in	
  
      repurchases	
                                                                             Alibaba	
  Group	
  
Yahoo! Japan - Illustration
                        Overview	
  –	
  Key	
  Data	
  Points	
  
                    Share	
  price	
  (5/21/10)                                                            	
  $355	
  
                    Ownership	
  (shares)                                                                           	
  20M	
  
                    	
  	
  	
  Gross	
  value                                                               	
  $7.1B	
  
                    Tax	
  (40%)                                                            	
  	
  	
  	
  	
  	
  	
  (2.8)	
  
                    	
  	
  	
  Net	
  value                                                                 	
  $4.3B	
  
                    EPS	
  contribuFon                                                              	
  ~20¢	
  
                    ‘09	
  dividend	
  to	
  YHOO                                               	
  $26M	
  
                    Book	
  carrying	
  value                                                    	
  $1.4B	
  
                                                                                                                                    10¢	
  eps	
  gap...	
  at	
  best	
  
                    $4.3B:	
  YHOO	
  equivalents	
  	
                                                                                       -­‐ 	
  Hold	
  current	
  22.5	
  p/e*	
  =	
  $13.05	
  share	
  price	
  
                    Shares	
  (@	
  $15.30)      	
  ~280M	
                                                                                  -­‐ 	
  Expand	
  to	
  >26	
  p/e	
  =	
  $15.30	
  share	
  price	
  

                    Repurchase	
  uplik	
  (EPS) 	
  	
  ~10¢	
  
*$15.30	
  share	
  price,	
  consensus	
  68¢	
  eps	
  =	
  22	
  .5	
  p/e	
  raFo	
  
Yahoo! Japan - Illustration
                        Overview	
  –	
  Key	
  Data	
  Points	
  
                    Share	
  price	
  (5/21/10)                                                            	
  $355	
  
                    Ownership	
  (shares)                                                                           	
  20M	
  
                    	
  	
  	
  Gross	
  value                                                               	
  $7.1B	
  
                    Tax	
  (40%)                                                            	
  	
  	
  	
  	
  	
  	
  (2.8)	
  
                    	
  	
  	
  Net	
  value                                                                 	
  $4.3B	
  
                                                                                                                                    Short-­‐term	
  plan…	
  more	
  than	
  double	
  2010	
  dividend	
  
                                                                                                                                             -­‐ 	
  $60M	
  dividend	
  =	
  ~4%	
  return	
  
                    EPS	
  contribuFon                                                              	
  ~20¢	
                               -­‐ 	
  ConFnue	
  to	
  push	
  higher	
  returns	
  in	
  2011+	
  
                    ‘09	
  dividend	
  to	
  YHOO                                               	
  $26M	
  
                    Book	
  carrying	
  value                                                    	
  $1.4B	
  

                    $4.3B:	
  YHOO	
  equivalents	
  	
  
                    Shares	
  (@	
  $15.30)      	
  ~280M	
  
                    Repurchase	
  uplik	
  (EPS) 	
  	
  ~10¢	
  
*$15.30	
  share	
  price,	
  consensus	
  68¢	
  eps	
  =	
  22	
  .5	
  p/e	
  raFo	
  
          	
  
  7-­‐10% 3	
  
         01
2010-­‐2 	
  
     CAGR

                  Revenue
2009 Revenue Profile


                                            Other	
                             O&O	
  Search	
                                                                                                        Search	
  
                                            ~$1.2B	
                              ~$1.5B	
                                                                                                             ~$1.9B	
  
                                                                                                                                                                                    Other	
  
                                                                                                                                                                                    ~$1.2B	
  

                                                                                O&O	
  Display	
  
                                           Affiliates	
                                                                                                                                                Display	
  
                                                                                  ~$1.7B	
  
                                            ~$2.1B	
                                                                                                                                                 ~$1.6B	
  




                                                  ~$6.5B	
  GAAP	
                                                                                                                      ~$4.7B	
  Ex-­‐TAC*	
  

*	
  Revenue	
  ex-­‐TAC	
  is	
  a	
  Non-­‐GAAP	
  measure	
  defined	
  as	
  GAAP	
  revenue	
  less	
  traffic	
  acquisiFon	
  (TAC).	
  TAC	
  was	
  $1.8B	
  in	
  2009	
  
2010-2013 Revenue Dynamics
                           HEADWINDS	
                                  TAILWINDS	
                        Revenue	
  Ex-­‐TAC	
  
                                                                                                           2010-­‐2013	
  CAGR	
  

                                                         •  Offline→online	
  shik	
  
 Display	
     • 	
  Web	
  fragmentaFon	
               •  Yield	
  opFmizaFon	
                                13-­‐16%	
  
                                                         •  SoluFon	
  selling	
  

               •  12%	
  SA	
  rev	
  share	
            •  High	
  single	
  digit	
  vol	
  growth	
  
 Search	
      •  Y!J	
  search	
  fee	
  $(50)M	
       •  Search	
  Alliance	
  RPS	
  uplik	
  
                                                                                                                  3-­‐6%	
  


               •  Broadband	
  roll-­‐off	
  $(85)M	
  
  Other	
      •  Hot	
  Jobs	
  $(35)M	
  
                                                         •  LisFngs/leads	
  re-­‐investment	
                    2-­‐4%	
  


                                                                                                                          	
  
                                                                                                                  7-­‐10%
Revenue Bridge (2010E-2013E)


                                                                                                                          7-­‐10%	
  
                                                                                            +6-­‐7%	
  

                                                                                   	
  AnalyFcs	
  &	
  insights	
  
                        (2-­‐3)%	
                        +4-­‐5%	
                	
  OpFmizaFon	
  tools	
  
                                                                                   	
  TargeFng	
  
               	
  Search	
  rev	
  share	
      	
  User	
  experience	
        	
  Rich	
  ads	
  
               	
  Broadband	
                   	
  Social	
  integraFon	
      	
  New	
  ad	
  formats	
  
               	
  Hotjobs	
                     	
  Mobile	
  
                                                  	
  Local	
  
                                                  	
  Video	
  

  2010E	
           Headwinds	
                          Volume	
                            Yield	
                    3	
  year	
  CAGR	
  
Investing for Revenue Growth
                                                                      GROWTH	
  DRIVERS	
  
                                     USER	
  BASE	
         ENGAGEMENT	
           ONLINE	
  SHIFT	
         MONETIZATION	
  

                        Social	
  

                      Mobile	
  

                        Video	
  

                         Local	
  

   Content	
  OpCmizaCon	
  

       Integrated	
  Search	
  

       Emerging	
  Markets	
  

     Insights	
  &	
  AnalyCcs	
  

      Yield	
  Management	
  
                                              VOLUME	
  +4-­‐5%	
                               YIELD	
  +6-­‐7%	
  
           	
  
  2-­‐3% 3	
  
       -­‐201
2010 R	
  
   CAG

                  Cost Structure
   2008-2010 Cost Evolution (Excluding TAC)
                                                                                                                                                                                      Highlights	
  
                               $4.9B*	
                                                                                                  2008	
  –	
  2010E	
                          ReposiFoning	
  cost	
  structure	
  vs.	
  ’08	
  
           D&A	
  
 Stock	
  Comp	
                                                        $4.3B	
                                                                       (21)%	
                                      •  Product	
  Development…	
  flat	
  
                                                                                                                ~$3.9B	
  
Restructuring	
   $1.3	
  
                                                                                                                                                                                                   •  Sales	
  &	
  MarkeFng…	
  (20)%	
  
                                                                       $1.3	
                                                                         (31)%	
  
                                                                                                              ~	
  $0.9	
                                                                          •  	
  G&A…	
  (30)%	
  
                                                                                                                                                                                                   •  Bandwidth/Content…	
  (25)%	
  
                                                                                                                                                      (16)%	
                          2010	
  Search	
  Alliance	
  cost	
  benefit	
  
               Core	
   $3.6	
  
     Spending	
                                                       $3.0	
                                  ~	
  $3.0	
                                                               acceleraFng	
  Yahoo!	
  transformaFon…	
  
                                                                                                                                                                                                   •  Social	
  integraFon	
  
                                                                                                                                                                                                   •  Search	
  experience	
  
                                                                                                                                                                                                   •  Insights	
  capabiliFes	
  
                                2008	
                                 2009	
                                   2010E	
  
                                                                                                                                                                                                   •  Plazorm	
  modernizaFon	
  

   *	
  Excluding	
  $0.5B	
  goodwill	
  impairment.	
  Including	
  this	
  goodwill	
  impairment	
  charge,	
  total	
  expenses,	
  excluding	
  TAC,	
  for	
  2008	
  were	
  $5.4B.	
  On	
  a	
  GAAP	
  basis,	
  total	
  expenses	
  (GAAP	
  cost	
  of	
  revenues	
  +	
  GAAP	
  total	
  
   operaFng	
  expenses)	
  were	
  $7.2B	
  and	
  $6.1B	
  for	
  2008	
  and	
  2009	
  respecFvely.	
  TAC	
  was	
  $1.8B	
  for	
  both	
  2008	
  and	
  2009.	
  
Why Does Transformation Require Investment?

    Engineering	
  Resource	
  AllocaCon	
       55%	
  Maintenance	
  way	
  too	
  high…	
  
                                                  30%	
  innovaFon	
  way	
  too	
  low	
  
           ~30%	
  InnovaFon	
                      •  ModernizaFon	
  key	
  to	
  future	
  
                                                       efficiency…	
  but	
  requires	
  short-­‐term	
  
                                                       resources	
  
        ~15%	
  ModernizaFon	
                   2010	
  resource	
  addiFons	
  consistent	
  
                                                  with	
  innovaFon	
  &	
  modernizaFon	
  
                                                  objecFves	
  
                                                    •  Product	
  Development	
  ~45%	
  
  ~55%	
  Maintenance	
  &	
  Support	
             •  Data	
  Center	
  Engineering	
  ~25%	
  
                                                    •  Go-­‐to-­‐market	
  ~20%	
  
                                                    •  Customer/AdverFser	
  Support	
  ~10%	
  
Yahoo! Must Change Its Model

                             2010	
  


                     ~30%	
  InnovaFon	
  

                  ~15%	
  ModernizaFon	
  



             ~55%	
  Maintenance	
  &	
  Support	
  
Yahoo! Must Change Its Model

                             2013	
  




                     ~60%	
  InnovaFon	
  




             ~40%	
  Maintenance	
  &	
  Support	
  
Cost Management Timeline


            Phase	
  I	
                Phase	
  II	
                     Phase	
  III	
  

Budget	
  Discipline	
        Self-­‐funding	
  Mentality	
      Simplify	
  and	
  Streamline	
        P&L	
  
DifferenFaFon	
                Right-­‐sourcing	
                 Structural	
  Changes	
              Impacts	
  
Plan	
  for	
  Efficiency	
     Invest	
  for	
  ProducFvity	
     ConFnuous	
  Improvement	
          Over	
  Time	
  




             2009	
                   2010-­‐2011	
                     2011-­‐2013	
  
Cost Strategy
                                                                                                                                                                    ReposiConing	
  to	
  Self-­‐fund	
  Growth	
  
                                                          AnalyC
                                     Comp



                                                                 cs	
                                                                              2009	
                                                   2010E	
                                                   2013E	
  
                                         liance
                                                	
  




                                                                                                                                                   ~$1B	
                                                   ~$1.5B	
                                                    ~$2B	
  




                      TransacConal	
  Cost	
  


                                                                                                                                                   ~$2B	
                                                   ~$1.5B	
                                                    ~$1B	
  


                                        2009	
  ~$3B*	
  

*	
  Based	
  on	
  2009	
  core	
  spending.	
  Core	
  spending	
  represents	
  total	
  expenses	
  (GAAP	
  cost	
  of	
  revenues	
  +	
  GAAP	
  total	
  operaFng	
  expenses),	
  which	
  was	
  $6.1B	
  in	
  2009	
  less	
  TAC,	
  depreciaFon	
  and	
  amorFzaFon,	
  
stock-­‐based	
  compensaFon,	
  and	
  restructuring	
  charges,	
  which	
  were	
  $1.8B,	
  $0.7B,	
  $0.4B	
  and	
  $0.1B,	
  respecFvely,	
  in	
  2009.	
  
Cost Tactics
Cost Bridge (2009-2013E)*

                                                                                                                                                                $0.9B	
                                       $(1.5)B	
  


                                                                                                                $0.2B	
  
                                                               $0.3B	
  
              $4.3B	
  
                                                                                                                                                                                                                                 ~$4.2B	
  
                                                                                                                                                                                                                              2009→2010E	
  	
  
                                                                                                                                                                                                                                 (10)%	
  
                                                                                                                                                                                                                              2010E→2013E	
  	
  
                                                                                                                                                                                                                               ~2-­‐3%	
  cagr	
  



                 2009	
                                        Wages	
                                        Volume	
                                  Investments	
                                 Efficiencies	
  &	
            2013E	
  
                                                                                                                                                                                                     Search	
  Alliance	
  

*	
  Excludes	
  TAC.	
  On	
  a	
  GAAP	
  basis,	
  Total	
  Expenses	
  (GAAP	
  cost	
  of	
  revenues	
  +	
  GAAP	
  Total	
  OperaFng	
  Expenses)	
  were	
  $6.1B	
  and	
  TAC	
  was	
  $1.8B	
  for	
  2009	
  
Cost Initiative Overview
                                                                    Investment	
     Cost	
  ReducCon	
  
                            Volume	
  &	
  Yield	
  IniCaCves	
  

                            Search	
  Alliance	
  
  $0.9B	
     $(1.5)B	
  
                            Planorm	
  ModernizaCon	
  

                            Data	
  Center	
  ModernizaCon	
  

                            Right	
  Sourcing	
  

                            Other	
  Efficiency	
  AcCons	
  

                            SBC,	
  D&A,	
  Restructuring	
  

                                                                      $0.9B	
             $1.5B	
  
                                                                                                                                                                               $0.9B	
     $(1.5)B	
  

Search Alliance Savings
                                                                                                                CumulaCve	
  Savings	
  

                               	
  Impact	
  Summary*	
                                                                                                        $650	
  M	
  
                           Rev	
  Share                      	
  $(250)
                           M	
  
                           RPS
                                                                	
  0Mt	
  vs
                                                               10CsSn            i
                                                                          	
  o ag
                                                               6Meg	
   e	
  
                                                               5OFn
                                                                	
  0	
  pnc
                                                                         ao
                                                                          r Im              ~	
  $300	
  M	
  
                           $500M	
  
                                                                                                    2010E	
                                                       2013E	
  

                                 2010	
  savings	
  primarily	
  search	
  plazorm	
  infrastructure	
  reimbursements	
  
                                 Yahoo!	
  operaFng	
  costs	
  permanently	
  removed	
  as	
  plazorms	
  transiFon	
  
                                 Other	
  search	
  and	
  related	
  costs	
  to	
  be	
  reduced	
  2011-­‐2013	
  
                                 Data	
  center	
  decommissioning	
  begins	
  2011	
  and	
  expected	
  to	
  be	
  complete	
  by	
  2013	
  
                                 12%	
  rev	
  share	
  begins	
  as	
  each	
  individual	
  geography	
  transiFons	
  to	
  AdCenter	
  
*	
  Represents	
  expected	
  impact	
  following	
  full	
  implementaFon.	
  Rev	
  share	
  and	
  RPS	
  esFmates	
  are	
  based	
  on	
  2009	
  results	
  
                                                                                              $0.9B	
     $(1.5)B	
  

Platform Modernization

   Data	
  plazorms	
                      65%	
     Maintenance	
  &	
  Support	
  Resources	
  

   Ad	
  Systems	
                         67%	
  
   Development/QA	
  
    infrastructure	
                        60%	
  

   Cloud	
  efficiencies	
                                                                   30%	
  
      •  InnovaFon	
  &	
  flexibility	
                                                   ReducCon	
  

      •  Content	
  grid	
  
      •  Development	
  Fme	
  
                                                         2010E	
              2013E	
  
                                                                                                                         $0.9B	
     $(1.5)B	
  

Data Center Modernization

  Leased	
  	
                                                                                                      Owned	
  
Data	
  Centers	
                                                                                                 Data	
  Centers	
  



                      2007	
                      2010E	
                               2013E	
  


                                                              New	
  Footprint	
  
                        Power	
  Efficiency                             	
  2X	
  +	
  
                        Power	
  Cost	
  (/kwh)                  	
  70%	
  lower	
                 ~35%	
  Lower	
  
                        Scale	
  (MW)                            	
  ~3X	
  bigger	
                Data	
  Center	
  
                        LocaCons                                 	
  55%	
  fewer	
                 Costs	
  by	
  2014	
  
                        Edge	
  Infrastructure                   	
  30%	
  faster	
  
                                                                                                  $0.9B	
     $(1.5)B	
  



Other Efficiencies
Right	
  Sourcing	
                                      Other	
  AcCons	
  
  	
  Centers	
  of	
  excellence	
                       Capital	
  expenditure	
  efficiency	
  
  	
  Standardized	
  &	
  automated	
  processes	
       Content/partnership	
  cost	
  opFmizaFon	
  
  	
  LocaFon	
  opFmizaFon	
                             Purchasing	
  improvements/leverage	
  
                                                                       CumulaCve	
  Savings	
  
                                                                                             $225M	
  
Low	
  Cost	
      30%	
            40%	
  
LocaCons	
                                                                     $160M	
  
                                                                  $110M	
  
High	
  Cost	
  
LocaCons	
         70%	
  
                                    60%	
  



                   2010E	
          2013E	
                       2011E	
       2012E	
      2013E	
  
                                                                                                         $0.9B	
     $(1.5)B	
  

Capital Expenditures Declining

            2007-­‐2008	
                        2009-­‐2012E	
                           2013-­‐2014E+	
  

          Other	
                                   Other	
  
                                                                                      Other	
  
            25%	
                                      25%	
  
                       Servers/	
                                                      25%	
          Servers/	
  
                                                                 Servers/	
  
                       Storage	
                                 Storage	
                            Storage	
  
                                      Data	
  Centers	
                                               50%	
  
Data	
  Centers	
       45%	
                                     40%	
  
                                             35%	
                              Data	
  Centers	
  
      30%	
                                                                            25%	
  




            ~$640M	
                               ~$570M	
                               ~$470M	
  
         Average	
  Spend	
                     Average	
  Spend	
  	
                 Average	
  Spend	
  
Investing for Revenue Growth
                                                                      GROWTH	
  DRIVERS	
  
                                     USER	
  BASE	
         ENGAGEMENT	
           ONLINE	
  SHIFT	
         MONETIZATION	
  

                        Social	
  

                      Mobile	
  

                        Video	
  

                         Local	
  

   Content	
  OpCmizaCon	
  

       Integrated	
  Search	
  

       Emerging	
  Markets	
  

     Insights	
  &	
  AnalyCcs	
  

      Yield	
  Management	
  
                                              VOLUME	
  +4-­‐5%	
                               YIELD	
  +6-­‐7%	
  
Investment & Return Summary*
                                                          Investment	
                                         Return	
  
                                                             $0.9B	
                                           $1.5B	
  
                                                              $275M	
                                           $500M	
  
                                                             Efficiency	
                                   Cost	
  ReducFon	
  
                                                                                                           &	
  Scalability	
  
                                                                 $625M	
  
                                                                                                              $650M	
  
                                                                               	
  
                                                                       7-­‐10% 	
  
                                                                              th
                                                                                                          Search	
  Alliance	
  
                                                                       Grow


                                                                                                            $350M	
  
                                                                                                          D&A,	
  SBC,	
  etc.	
  

*	
  Represents	
  esFmates	
  of	
  anFcipated	
  investments	
  and	
  returns	
  through	
  2013	
  
Wrap-up

            Making	
  progress…	
  execuFng	
  	
  
             on	
  a	
  clear	
  &	
  disciplined	
  plan	
  
            HarvesFng	
  inefficiencies	
  	
  
             to	
  self-­‐fund	
  growth	
  
            Strong	
  balance	
  sheet…	
  	
  
             working	
  to	
  improve	
  returns	
  
            InvesFng	
  in	
  innovaFon…	
  	
  
             to	
  improve	
  engagement	
  	
  
             and	
  grow	
  revenue	
  

				
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