Yahoo! Financial Statement Analysis

Yahoo! (YHOO) Financial Analysis

Part A

Economic Characteristics

I Demand

Price Sensitivity

In the Internet Software & Services sub-industry, consumers of online advertising are relatively price insensitive due to the global growth in internet usage and easy accessibility to the company’s website, allowing for an immense user-population. More people every year are purchasing computers and Internet usage is constantly increasing, as well as due to the increase usage of smart phones. Even in an unstable economy, Internet usage continues to increase. U.S. advertising alone rose 11% in 2008 (S&P pg. 4). Although advertising only rose 3% in 2009, projections for 2010 are at 14% (pg. 4). The S&P report also stated a noticed commitment increase of advertising budgets being switched over to Internet advertising compared to traditional advertising due to increased usage as well as “notable targeting and data-focused return-on-investment capabilities.” (pg. 4)

Due to the unstable market and recent financial crisis, demand for online advertising had slowed in growth in 2009. Though demand did not decrease, the growth had slowed considerably compared to 2008 growth. This is due to the recent financial crisis, which severely affected many corporations and individuals across the country. When firms are in weaker economic positions, they tend to tighten their advertising budget slightly in order to avert profit losses. However, demand will continue to rise, being that more people globally are purchasing computers, and average internet usage time is increasing as well.

Growth Profile

As global usage in computers thus the internet increases, demand for online advertising space continues to grow as well. Revenue in 2009 did decrease 10.3% (pg. 3), compared to a growth in 2008 of 3.4%. This does show that demand for online advertising does move with the economic cycle, since companies do tend to tighten advertising budgets in bearish economies. However, in 2009,...