2014 Annual Report Dear Yahoo Shareholder Yahoo is driving toward a dramatic business transformation. Yahoo’s Board of Directors and executive team are 575 million users, one of the largest mobile committed to delivering shareholder value through audiences globally. In terms of mobile monetization, sustained growth. In 2012, our leadership team we reported $768 million in mobile GAAP revenue began a multiyear transformation to return an iconic in 2014. company to greatness, shifting from a declining desktop strategy to a mobile-first strategy that has • Video: Through partnerships with Good Morning already yielded significant results. Our strategy to America and Live Nation, as well as Yahoo original reinvent our business has made Yahoo one of the top shows, we continue to offer top-tier video content three players in mobile, and we’re just getting started. that deeply engages our users. Additionally, we are reinventing our large legacy display business In 2014, our global user base across search, to better connect marketers with users. Our Q4 communications, and digital content grew to more acquisition of BrightRoll instantly lets us serve more than 1 billion monthly active users—more than video ads and reach more users than any other 575 million of whom visited us on a mobile device. platform. BrightRoll revenue exceeded $100 million As an advertising-driven business, we’ve continued in 2014, with solid growth expected this year. to build and modernize our ad offerings with Yahoo Gemini, Yahoo Ad Manager Plus, BrightRoll and Flurry. • Native: Yahoo Gemini’s native ads have become These strategic investments, a mixture of organic essential to Yahoo’s transformation in digital growth and acquisitions, have created a strong advertising. We saw nearly $300 million of GAAP foundation for growth. They not only bring us to revenue in 2014 on Yahoo Gemini native ads, with parity with the competition, but propel us to industry- solid growth of more than 32% quarter-over-quarter leading positions in areas including mobile analytics in Q4. and video advertising. • Social: Tumblr continues to grow faster than almost An Update on Our Progress any other social network, with an audience of more than 460 million people each month. And mobile app Yahoo is driving toward a dramatic business usage continues to drive growth, with mobile app transformation. Online advertising technology moves users up 32% year-over-year. As a result, 75 of the incredibly quickly. Our strategy has focused on mobile, Ad Age top 100 already have a presence on Tumblr. video, native and social (aka Mavens), the fastest- growing areas of digital advertising. Before 2012, Our search business has shown strong growth. Mavens offerings did not contribute meaningfully We signed a five-year strategic partnership with to Yahoo. In 2014, however, our Mavens offerings Mozilla in November 2014 that made Yahoo the generated more than $1.1 billion of GAAP revenue. In default search provider for Firefox in the U.S. In Q4 just two years, we created more than a billion dollars 2014, we saw an 18% search-click-driven revenue of new annual revenue, with robust further growth growth, 10% year-over-year increase in paid clicks, expected in 2015. We are keenly focused on revenue and a 7% year-over-year price-per-click growth. growth, both new and mature. Our approach has been Overall in 2014, we delivered $3.382 billion of gross to stabilize our legacy businesses while offsetting their search revenue, which maps to $1.793 billion in GAAP natural maturation and declines with growth from revenue and $1.784 billion in ex-TAC revenue. these areas of new investment. YHOO shares have outperformed peers and the • Mobile: In 2014, mobile monthly active users S&P 500. Yahoo’s shareholder return since July 2012 continued to show strong growth and reached has been 182%, exceeding the shareholder returns of many of our Internet peers. During this time, Yahoo’s We believe Yahoo is on the path toward a successful share price has nearly tripled, from $15.65 on July 16, transformation—one in which improved products 2012, to $44.13 as of April 1, 2015. and operations, prudent investments, and thoughtful allocation of capital drive growth for all our investors. We have a strong track record of creating We are determined to press forward with purpose, shareholder value. In early 2015, the board authorized with vigor, and with determination to bring Yahoo a tax-efficient plan to pursue a spin-off of all of back to iconic greatness and generate strong returns our remaining holdings in Alibaba Group, valued for you. at $32 billion based on the closing price of Alibaba on April 1, 2015, into a newly formed company. The We’re confident we are on that path, and we spin-off, expected to be completed in Q4 of 2015, thank you for your continued support and belief in maximizes value and tax-efficiency exclusively for Yahoo’s renaissance. Yahoo’s shareholders. This spin-off is in addition to the $9.1 billion of shares repurchased from July 2012 through the end of 2014. Our board and management team will have returned, post-spin, more than $40 billion of value to Marissa A. Mayer David Filo our shareholders, a historic amount for a company of CEO & President, Yahoo Co-founder & Chief Yahoo any size. Ultimately, including a total of $9.8 billion of shares repurchased by Yahoo from Q2 2012 through Q1 2015, more than 97% of the value from our Alibaba investment will have been returned to shareholders post-spin. We continue to deliver operational excellence. Our leadership team continues to reprioritize resources, shutter older products and businesses, and consolidate locations. Over the past two years alone, we closed 15 offices and sunset more than 75 products and services. Operational excellence is critical, and we will continue to execute on efficiencies we find on an ongoing basis, especially those that fuel growth and enhance profitability. We take a disciplined, focused approach to M&A. The Internet sector is incredibly competitive and acquisitive; that said, we’ve been prudent in our approach. Over the past 30 months, we allocated $2.1 billion to M&A compared with the $9.1 billion in capital returned to shareholders through share repurchases; it is noteworthy that we have funded all our M&A activity to date through organic means. Our M&A strategy focuses on three principal categories— talent acquisitions, building-block acquisitions, and larger strategic acquisitions—and our strategy is working. UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K Í ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2014 OR ‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 000-28018 Yahoo! Inc. (Exact name of Registrant as specified in its charter) Delaware 77-0398689 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 701 First Avenue Sunnyvale, California 94089 (Address of principal executive offices, including zip code) Registrant’s telephone number, including area code: (408) 349-3300 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Common stock, $.001 par value The NASDAQ Stock Market LLC (NASDAQ Global Select Market) Securities registered pursuant to Section 12(g) of the Act: None (Title of Class) Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes Í No ‘ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ‘ No Í Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes Í No ‘ Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes Í No ‘ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Í Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer Í Accelerated filer ‘ Non-accelerated filer ‘ (Do not check if a smaller reporting company) Smaller reporting company ‘ Indicate by check mark whether the Registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes ‘ No Í As of June 30, 2014, the last business day of the Registrant’s most recently completed second fiscal quarter, the aggregate market value of voting stock held by non-affiliates of the Registrant, based upon the closing sales price for the Registrant’s common stock, as reported on the NASDAQ Global Select Market was $32,432,060,475.