We Value... Excellence We are committed to winning with integrity. We know leadership is hard won and should never be taken for granted. We aspire to flawless execution and don’t take shortcuts on quality. We seek the best talent and promote its development. We are flexible and learn from our mistakes. Innovation We thrive on creativity and ingenuity. We seek the innovations and ideas that can change the world. We anticipate market trends and move quickly to embrace them. We are not afraid to take informed, responsible risk. Customer Fixation We respect our customers above all else and never forget that they come to us by choice. We share a personal responsibility to maintain our customers’ loyalty and trust. We listen and respond to our customers and seek to exceed their expectations. Teamwork We treat one another with respect and communicate openly. We foster collaboration while maintaining individual accountability. We encourage the best ideas to surface from anywhere within the organization. We appreciate the value of multiple perspectives and diverse expertise. Community We share an infectious sense of mission to make an impact on society and empower consumers in ways never before possible. We are committed to serving both the Internet community and our own communities. Fun We believe humor is essential to success. We applaud irreverence and don’t take ourselves too seriously. We celebrate achievement. We yodel. Terry Semel To Yahoo!’s Shareholders, and using a greater variety of Full year 2003 revenue was $1.6 Users, Partners, Customers services. This accomplishment billion, a 71 percent increase over and Employees: supports my belief that great 2002. We delivered record revenue When reviewing Yahoo!’s progress products equal great business. from one quarter to the next over the past three years since I throughout the year, reflecting the joined, it’s clear that 2001 was our Our Company provides a growing diversity of our business and transition year, 2002 the year in comprehensive marketing solutions the contributions from these newer, which we started to plant the seeds platform for advertisers as well as more sustainable revenue sources. for growth, and 2003 the year premium products and services for Yahoo!’s balance sheet also grew in which we began to reap the users and businesses. Within that throughout the year to almost initial results of our efforts, while framework, Yahoo! has evolved from $2.6 billion in cash and marketable continuing to reinvest in the future. an organization that relied on a securities, after including the single revenue source dominated $733 million raised through our I am very proud of the hard work, by dot com advertisers, to an convertible debt offering, and despite dedication, and accomplishments organization with more diverse and cash expenditures used for the that Yahoo! employees throughout sustainable sources of revenue. acquisitions of Inktomi Corporation the world have delivered. Through our premium services, we (“Inktomi”) and Overture Services, have established direct paying Inc. (“Overture”). I encourage you to While we made tremendous progress relationships with millions of users. read more about our financial results in many financial metrics that are By establishing the world’s largest in the materials which accompany, extremely gratifying, what excites me engaged online audience and and are a part of, this letter. most about this past year is our providing a full range of services along deepening relationships with our the online marketing continuum, Great Products Equal users. Our No. 1 priority is to Yahoo! is supported by hundreds of Great Business provide the best experience on the blue chip traditional advertisers and Let’s spend some more time on that Internet. As the quality of our thousands of small- and medium-sized one simple philosophy that has products and services continues to businesses who want to reach our always guided my approach: the improve, the more relevant Yahoo! global audience. This well distributed more we invest in what our users becomes to our hundreds of foundation helped contribute to make want, the more they will invest in us. millions of users, who in turn are 2003 Yahoo!’s greatest revenue In 2003, we spent the majority of our spending more time on our network producing year in its history. investment dollars improving the quality and breadth of our services. put us in a much better position announced our first cable alliance As we made across-the-board to develop an innovative, high with Rogers Cable in Canada. improvements in Yahoo!’s business, quality search experience that In addition, we experienced solid we were rewarded with more users, benefits both users and businesses. contributions from Yahoo! Mail, who visited more frequently, In 2003, we also began the process our suite of Yahoo! Small Business consumed more pages, and used of integrating search throughout services, Yahoo! Personals, and our more services, both free and fee- vertical areas of Yahoo!’s network, Yahoo! Fantasy Sports offerings in based. Additionally, these user starting with product search, which football and baseball to our total relationships are key to building a resulted in a dramatic increase in paying subscriber number. powerful and high impact the year-over-year growth rate of advertising environment. referrals to Yahoo! Shopping, and Communications products: an early version of news search We created a better experience for In 2003, our global audience grew within Yahoo! News. Yahoo! Mail users by improving its to approximately 263 million functionality, adding new features, unique users, up 23 percent from Premium and fee-based services: reducing spam, and providing more approximately 213 million at the We ended the year approaching aggressive anti-virus tools. As a end of 2002. Approximately 5 million unique paying relationships, result, Yahoo! Mail has become 133 million, or about half, were a 123 percent increase from the No.1 Web-based email in active registered users (those approximately 2.2 million the United States according to that log in with a username and unique paying users at the end of Nielsen//NetRatings. We have also password at least once per month), 2002. This is the fastest growing seen positive results in our other up more than 30 percent from subset of users on the Yahoo! communications products. For 101 million in 2002. network. Access bundled with example, after a dramatic overhaul Yahoo! content, through our of Yahoo! Photos in December, we In pursuing our philosophy of great relationships with SBC witnessed a surge in new Photos products equal great business, we Communications Inc. (“SBC”) and accounts, up 136 percent over the targeted four key user product areas British Telecommunications plc previous three months. Look out for focus and investment in 2003: (“BT”), remains the largest for more upgrades to our other contributor to our paying communications products, such as Web search and commerce: relationships. SBC Yahoo! DSL is Yahoo! Messenger, in 2004. Yahoo! has deployed its Yahoo! the only broadband service in the Search Technology across our United States to experience five Media and Content: We invested network, which now relies consecutive quarters of double-digit in our media and content sites by predominantly on Yahoo! subscriber growth. Our alliance with making them more relevant and technology to deliver search results, SBC continues to lead the industry comprehensive, and through the and is the culmination of our as a truly integrated access and introduction of features such as ongoing commitment to build the content relationship. In 2003, community and broadband best search experience on the Web. our two companies launched an content. Many of our media and Key to this implementation was our enhanced version of SBC Yahoo! content offerings experienced March 2003 acquisition of Inktomi DSL, providing our members with increases in users and time spent, and our October 2003 acquisition of one of the most innovative and Yahoo! Finance, Yahoo! Games, Overture, through which we gained broadband experiences available. and Yahoo! Movies are all ranked a portfolio of algorithmic and We also extended our broadband No.1 in audience reach according sponsored search technology and strategy globally, through the launch to Nielsen//NetRatings. Since its patents and an outstanding team of of BT Yahoo! Broadband in the UK redesign in 2003, Yahoo! Sports leads talented employees. These assets in September 2003, and recently we in page views and has the largest base of Fantasy Sports users on the Web marketing commitments through search, vertical integration of paid and LAUNCH leads in streaming lead generation services such as search into parts of Yahoo!, as well music videos. Finally, we’ve spent pay-for-performance search. as the incremental contribution the last 12 months significantly from our Overture acquisition, improving our HotJobs offering and Yahoo!’s share gains and revenue were the most significant factors growing our share with job seekers, growth in 2003 were the direct contributing to our success in this so that HotJobs is well positioned result of focused execution of our large area of opportunity. to benefit from the eventual customer-centric selling strategy. turnaround in the jobs market. For example, we further developed The integration of the Yahoo! and vertical category expertise, which Overture operations has proceeded By building a fantastic user creates and provides solutions to fit well, and the combination seems environment and attracting the advertisers’ needs across categories even more compelling than we world’s largest engaged online such as entertainment, automotive, initially thought. We’re excited audience, we have also created an and financial services. We also about our progress in testing and environment that is extremely localized service and support, and implementing Overture’s Content appealing to advertisers. conducted thought leadership Match product into Yahoo! seminars on critical issues in the properties, such as Entertainment, Largest & Most industry, such as creativity.