UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 1997

[ ] 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 0-28018

YAHOO! INC.
(Exact name of registrant as specified in its charter)

CALIFORNIA 77-0398689
---------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

3400 CENTRAL EXPRESSWAY, SUITE 201
SANTA CLARA, CALIFORNIA 95051
----------------------------------------
(Address of principal executive offices)

Registrant's telephone number, including area code: (408) 731-3300
------------------

Indicate by check mark whether the Registrant (1) has filed all reports
required 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[X] No[ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

CLASS OUTSTANDING AT JULY 31, 1997
------------------------------ ----------------------------
Common Stock, $0.001 par value 28,597,274

YAHOO! INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION PAGE NO.

Item 1. Consolidated Financial Statements (unaudited)

Condensed Consolidated Balance Sheets
at June 30, 1997 and December 31, 1996 3

Condensed Consolidated Statements of Operations
for the three months ended June 30, 1997 and 1996;
and the six months ended June 30, 1997 and 1996 4

Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1997 and 1996 5

Notes to Condensed Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 18

Item 2. Changes in Securities 18

Item 3. Defaults Upon Senior Securities 18

Item 4. Submission of Matters to a Vote of Security Holders 18

Item 5. Other Information 18

Item 6. Exhibits and Reports on Form 8-K 18

Signatures 19

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

YAHOO! INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, December 31,
1997 1996
------------------ ------------------
ASSETS (unaudited)

Current assets:
Cash and cash equivalents $ 61,587,000 $ 31,865,000
Short-term investments in marketable securities 37,268,000 60,689,000
Accounts receivable, net 6,716,000 4,648,000
Prepaid expenses 3,912,000 353,000
---------------- ----------------
Total current assets 109,483,000 97,555,000

Long-term investments in marketable securities - 9,748,000
Property and equipment, net 3,286,000 2,223,000
Investment in unconsolidated joint venture 879,000 729,000
Other assets 2,083,000 -
---------------- ----------------
$ 115,731,000 $ 110,255,000
---------------- ----------------
---------------- ----------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 803,000 $ 992,000
Accrued expenses and other current liabilities 6,505,000 4,367,000
Deferred revenue 1,752,000 1,229,000
Due to related parties 1,049,000 1,082,000
---------------- ----------------
Total current liabilities 10,109,000 7,670,000
---------------- ----------------

Minority interests in consolidated subsidiaries 660,000 510,000

Shareholders' equity:
Common Stock 18,000 17,000
Additional paid-in capital 128,246,000 105,026,000
Accumulated deficit (23,302,000) (2,968,000)
---------------- ----------------
Total shareholders' equity 104,962,000 102,075,000
---------------- ----------------
$ 115,731,000 $ 110,255,000
---------------- ----------------
---------------- ----------------

The accompanying notes are an integral part of these condensed consolidated
financial statements.

YAHOO! INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

Three Months Ended Six Months Ended
------------------------------ -------------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------------- ------------- ------------- -------------

Net revenues $ 13,520,000 $ 3,274,000 $ 23,035,000 $ 5,007,000
Cost of revenues 2,049,000 520,000 3,276,000 687,000
-------------- ------------- ------------- -------------
Gross profit 11,471,000 2,754,000 19,759,000 4,320,000
-------------- ------------- ------------- -------------
Operating expenses:
Sales and marketing 8,673,000 3,290,000 15,257,000 4,150,000
Product development 2,103,000 1,037,000 4,005,000 1,367,000
General and administrative 1,459,000 762,000 2,619,000 1,249,000
Other - nonrecurring costs 21,245,000 - 21,245,000 -
-------------- ------------- ------------- -------------
Total operating expenses 33,480,000 5,089,000 43,126,000 6,766,000
-------------- ------------- ------------- -------------

Loss from operations (22,009,000) (2,335,000) (23,367,000) (2,446,000)
Investment income, net 1,260,000 969,000 2,649,000 1,161,000
Minority interests in losses from operations
of consolidated subsidiaries 182,000 - 384,000 -
-------------- ------------- ------------- -------------
Loss before income taxes (20,567,000) (1,366,000) (20,334,000) (1,285,000)

Benefit for income taxes (23,000) - - -
-------------- ------------- ------------- -------------
Net loss $ (20,544,000) $ (1,366,000) $ (20,334,000) $ (1,285,000)
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
Net loss per share ($0.74) ($0.05) ($0.74) ($0.06)
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
Weighted average common shares 27,792,000 26,456,000 27,493,000 22,887,000

- -----------------------------------------------------------------------------------------------------------------------------------

Pro forma net loss per share
reflecting 3-for-2 stock split (Note 4) ($0.49) ($0.03) ($0.49) ($0.04)
-------------- ------------- ------------- -------------
-------------- ------------- ------------- -------------
Pro forma weighted average common shares
reflecting 3-for-2 stock split (Note 4) 41,688,000 39,684,000 41,239,500 34,330,500

The accompanying notes are an integral part of these condensed consolidated
financial statements.

YAHOO! INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

Six Months Ended
-------------------------------
June 30, June 30,
1997 1996
------------- --------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (20,334,000) $ (1,285,000)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 621,000 229,000
Minority interests in losses from operations of consolidated
subsidiaries (384,000) -
Non-cash charge 21,245,000 -
Changes in assets and liabilities:
Accounts receivable, net (2,068,000) (1,184,000)
Prepaid expenses and other assets (5,792,000) (910,000)
Accounts payable (189,000) 417,000
Accrued expenses and other current liabilities 1,877,000 1,377,000
Deferred revenue 523,000 227,000
Due to related parties (33,000) (2,000)
------------- --------------
Net cash used in operating activities (4,534,000) (1,131,000)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (1,606,000) (643,000)
(Purchases) sales and maturites of investments in marketable
securities, net 33,169,000 (39,226,000)
------------- --------------
Net cash provided by (used in) investing activities 31,563,000 (39,869,000)
------------- --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of capital stock, net 2,093,000 98,785,000
Proceeds from minority investor 600,000 -
Repayment of lease obligations - (128,000)
------------- --------------
Net cash provided by financing activities 2,693,000 98,657,000
------------- --------------
Net change in cash and cash equivalents 29,722,000 57,657,000
Cash and cash equivalents at beginning of period 31,865,000 5,297,000
------------- --------------
Cash and cash equivalents at end of period $ 61,587,000 $ 62,954,000
------------- --------------
------------- --------------

The accompanying notes are an integral part of these condensed consolidated
financial statements.

YAHOO! INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION

Yahoo! Inc. (the "Company") is an Internet media company that offers a
network of globally-branded properties, specialty programming, and aggregated
content distributed primarily on the World Wide Web (the "Web") serving
business professionals and consumers, and is among the most widely used
guides for information and discovery on the Web. The Company was
incorporated in California on March 5, 1995 and commenced operations on that
date. The Company conducts its business within one industry segment.

The accompanying unaudited condensed consolidated financial statements
reflect all adjustments which, in the opinion of management, are necessary
for a fair presentation of the results for the periods shown. The results of
operations for such periods are not necessarily indicative of the results
expected for the full fiscal year or for any future period.

These financial statements should be read in conjunction with the
financial statements and related notes included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. Certain prior
period balances have been reclassified to conform with current period
presentation.

NOTE 2 - COMMITMENTS

NETSCAPE GUIDE BY YAHOO!

During March 1997, the Company entered into certain agreements with
Netscape Communications Corporation (Netscape) under which the Company has
developed and operates an Internet information navigation service called
"NETSCAPE GUIDE BY YAHOO!" (the GUIDE). The Co-Marketing agreement provides
that revenue from advertising on the GUIDE, which is managed by the Company,
is to be shared between the Company and Netscape. Under the terms of the
Trademark License agreement, the Company made a one-time non-refundable
trademark license fee payment of $5,000,000 in March 1997 which is being
amortized over the initial two-year term, which commenced in May 1997. The
Company also provided Netscape with a minimum of $10,000,000 in guarantees
against shared advertising revenues in the first year of the Co-Marketing
agreement and up to $15,000,000 in the second year of the agreement, subject
in the second year to certain minimum levels of impressions being reached on
the GUIDE. In June 1997, an amendment to this agreement was signed whereby
the first year shared advertising revenue guarantee was reduced to
$4,660,000. Actual payments may be higher and will relate directly to the
overall revenue recognized from the GUIDE.

NETSCAPE PREMIER PROVIDER

Also during March 1997, the Company entered into an agreement with
Netscape whereby it was designated as one of four "Premier Providers" of
domestic navigational services within the Netscape Web Site. Under the terms
of the agreement, the Company is required to make minimum payments of
$3,200,000 in cash and is obligated to provide $1,500,000 in the Company's
advertising services in return for certain minimum guaranteed exposures over
the course of the one-year term of the agreement, which commenced in May
1997. As of June 30, 1997, the Company had paid $1,000,000 in cash and an
additional $637,000 was paid in July under the terms of the agreement. To
the extent that the minimum guaranteed exposures are exceeded, the Company is
obligated to remit to Netscape additional payments of cash and the Company's
advertising services. The Company amortizes the total cost of the Premier
Provider agreement over its one year term.

During June 1997, the Company entered into certain agreements with
Netscape whereby it was designated as a Premier Provider of international
search and navigational guide services for the Netscape Net Search program.
Under the terms of the agreements, the Company will provide services in 12
countries, including Australia, Denmark, France, Germany, Italy, Japan,
Korea, The Netherlands, Portugal, Spain, Sweden, and the United Kingdom.
Under the terms of the agreements, the Company is required to make a cash
payment of $2,900,000 in July 1997 and is obligated to provide $100,000 in
the Company's advertising services in return for certain minimum guaranteed
exposures over the course of the one-year term of the agreements, which
commenced in July 1997. The Company amortizes the total cost of these
agreements over their one year term.

MARKETPLACE RESTRUCTURING

In August 1996, the Company entered into a joint venture arrangement with
Visa Marketplace, Inc. and another party (the "Visa Group") for the
development of an online property relating to electronic commerce. The
arrangements included the creation of a limited liability company (Yahoo!
Marketplace L.L.C.) owned by the Company and the Visa Group, to which the
Company licensed certain trademarks and other intellectual property, and
included other contractual commitments by the Company to Visa. In July 1997,
prior to the completion of significant business activities and public launch
of the property, the Company and Visa entered into an agreement under which
the Visa Group released the Company from certain obligations and claims, and
the Company returned the Visa Group's original equity contribution to the
L.L.C. In connection with this agreement, Yahoo! has issued 466,321 shares
of Yahoo! Common Stock to the Visa Group, for which the Company recorded a
one-time, non-cash, pre-tax charge of $21,245,000 in the second quarter ended
June 30, 1997. On August 4, 1997, the Company filed a Registration Statement
on Form S-3 with respect to the resale of 259,069 Visa Group shares. The
Visa Group has agreed to refrain from the sale of 103,626 shares until July
1998 and the remaining 103,626 shares until July 1999.

NOTE 3 - NET LOSS PER SHARE

Net loss per share is computed using the weighted average number of
common shares outstanding during the period. Common equivalent shares are
excluded from the computation as their effect is antidilutive, except that
for the periods ended June 30, 1996, pursuant to the Securities and Exchange
Commission Staff Accounting Bulletin, the convertible preferred stock (using
the if-converted method) and common equivalent shares (using the treasury
stock method and the assumed public offering price) issued subsequent to
March 5, 1995 through April 11, 1996 have been included in the computation as
if they were outstanding for all periods presented.

In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, "Earnings per Share."
This Statement is effective for the Company's fiscal year ending December 31,
1997. The Statement redefines earnings per share under generally accepted
accounting principles. Under the new standard, primary earnings per share is
replaced by basic earnings per share and fully diluted earnings per share is
replaced by diluted earnings per share. The impact of this Statement for the
three and six month periods ended June 30, 1997 and 1996 on the calculation
of primary and fully diluted earnings per share is not material.

NOTE 4 - STOCK SPLIT

During July 1997, the Company's Board of Directors approved a
three-for-two Common Stock split. Shareholders of record on August 11, 1997
(the record date) will be entitled to one additional share for every two
shares held on that date. In accordance with SAB Topic 4-C, the Company has
presented a pro forma earnings per share and weighted average shares on the
face of the statement of operations for all periods presented which reflect
the effect of the split.

NOTE 5 - SUBSEQUENT EVENT

On July 31, 1997, the Company entered into a stock purchase agreement to
acquire all of the outstanding capital stock of NetControls, Inc. for 24,778
shares of the Company's Common Stock. The acquisition will be recorded as a
purchase for accounting purposes and the majority of the purchase price of
approximately $1,400,000 will be amortized over the estimated useful life of
the technology acquired. To date, the financial results of NetControls, Inc.
have been deminimis.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

THE DISCUSSION IN THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR
CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED BELOW, AND THE RISKS DISCUSSED UNDER THE CAPTION, "RISK FACTORS" IN
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996
AND IN THE REGISTRATION STATEMENT FILED ON FORM S-3 ON AUGUST 4, 1997 (COPIES
OF WHICH ARE AVAILABLE AT BIZ.YAHOO.COM/PROFILES/YHOO.HTML OR UPON REQUEST
FROM THE COMPANY).

OVERVIEW

Yahoo! Inc. is an Internet media company that offers a network of
globally-branded properties, specialty programming, and aggregated content
distributed primarily on the World Wide Web serving business professionals
and consumers, and is among the most widely used guides for information and
discovery on the Web. The Company was incorporated in California on March 5,
1995 and commenced operations on that date. In August 1995, the Company
commenced selling advertisements on its Web pages and recognized its initial
revenues. In April 1996, the Company completed its initial public offering.

The Company's revenues are derived principally from the sale of
advertisements on short-term contracts. The Company's standard rates for
advertising currently range from $0.02 per impression for general rotation to
$0.08 per impression for highly targeted audiences and properties. To date,
the duration of the Company's advertising commitments has ranged from one
week to one year. Advertising revenues are recognized ratably in the period
in which the advertisement is displayed, provided that no significant Company
obligations remain and collection of the resulting receivable is probable.
Company obligations typically include guarantees of minimum number of
"impressions," or times that an advertisement appears in pages viewed by
users of the Company's online properties. To the extent minimum guaranteed
impressions are not met, the Company defers recognition of the corresponding
revenues until the remaining guaranteed impression levels are achieved.
Deferred revenue is comprised of billings in excess of recognized revenue
relating to advertising contracts.

During March 1997, the Company entered into certain agreements with
Netscape under which the Company has developed and operates an Internet
information navigation service called "NETSCAPE GUIDE BY YAHOO!" (the GUIDE).
The personalized guide has been designed to provide Internet users with a
central comprehensive source of sites, news, and other valuable services on
the Web. NETSCAPE GUIDE BY YAHOO! is accessible through the Netscape Internet
site and from the tool bar of Netscape Communicator. The navigational
service provides users with central access to eight of the most popular
information categories on the Web. The Co-Marketing agreement provides that
revenue from advertising on the GUIDE, which is managed by the Company, is to
be shared between the Company and Netscape. The Company plans to sell the
advertising space on the GUIDE by hiring a significant number of direct sales
personnel. Under the terms of the Trademark License agreement, the Company
made a one-time non-refundable trademark license fee payment

of $5,000,000 in March 1997 which is being amortized over the initial
two-year term, which commenced in May 1997. The Company also provided
Netscape with a minimum of $10,000,000 in guarantees against shared
advertising revenues in the first year of the Co-Marketing agreement and up
to $15,000,000 in the second year of the agreement, subject in the second
year to certain minimum levels of advertising impressions being reached on
the GUIDE. In June 1997, an amendment to this agreement was signed whereby
the first year shared advertising revenue guarantee was reduced to
$4,660,000. Actual payments may be higher and will relate directly to the
overall revenue recognized from the GUIDE.

Yahoo! has a limited operating history and its prospects are subject to
the risks, expenses and uncertainties frequently encountered by companies in
the new and rapidly evolving markets for Internet products and services,
including the Web-based advertising market. Specifically, such risks
include, without limitation, the failure to continue to

develop and extend the "Yahoo!" brand, the failure to develop new media
properties, the rejection of the Company's services by Web consumers and/or
advertisers, the inability of the Company to maintain and increase the levels
of traffic on YAHOO! properties, the development of equal or superior
services or products by competitors, the failure of the market to adopt the
Web as an advertising medium, the failure to successfully sell Web-based
advertising through the Company's recently developed internal sales force,
potential reductions in market prices for Web-based advertising as a result
of competition or other factors, the inability of the Company to effectively
integrate the technology and operations or any other acquired businesses or
technologies with its operations, and the inability to identify, attract,
retain and motivate qualified personnel. There can be no assurance that the
Company will be successful in addressing such risks.

As of June 30, 1997, the Company had an accumulated deficit of
$23,302,000. The extremely limited operating history of the Company and the
uncertain nature of the markets addressed by the Company make the prediction
of future results of operations difficult or impossible and, therefore, the
recent revenue growth experienced by the Company should not be taken as
indicative of the rate of revenue growth, if any, that can be expected in the
future. The Company believes that period to period comparisons of its
operating results are not meaningful and that the results for any period
should not be relied upon as an indication of future performance. The
Company currently expects to significantly increase its operating expenses to
expand its sales and marketing operations, to fund greater levels of product
development and to develop and commercialize additional media properties.
The Company also has remaining guaranteed payments of up to $19,660,000 in
advertising revenue guarantees to Netscape over the next two years in
connection with the NETSCAPE GUIDE BY YAHOO! agreement. As a result of these
factors, there can be no assurance that the Company will not incur
significant losses on a quarterly and annual basis for the foreseeable future.

As a result of the Company's limited operating history, the Company does
not have historical financial data for a significant number of periods on
which to base planned operating expenses. The Company derives substantially
all of its revenues from the sale of advertisements under short-term
contracts, which are difficult to forecast accurately. The Company's expense
levels are based in part on its expectations concerning future revenue and to
a large extent are fixed. The Company also has fixed expenses in the form of
advertising revenue guarantees of up to $19,660,000 over the next two years
relating to the NETSCAPE GUIDE BY YAHOO!, which subject the Company to
additional risk in the event that advertising revenues from this property are
not sufficient to offset guaranteed payments and related operating expenses.
Quarterly revenues and operating results depend substantially upon the
advertising revenues received within the quarter, which are difficult to
forecast accurately. Accordingly, the cancellation or deferral of a small
number of advertising contracts could have a material adverse effect on the
Company's business, results of operations and financial condition. The
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall, and any significant shortfall in revenue in
relation to the Company's expectations would have an immediate adverse effect
on the Company's business, operating results and financial condition. In
addition, the Company plans to continue to significantly increase its
operating expenses to expand its sales and marketing operations,

to continue to develop and extend the "Yahoo!" brand, to implement and
operate the NETSCAPE GUIDE BY YAHOO!, to fund greater levels of product
development and to develop and commercialize additional media properties. To
the extent that such expenses precede or are not subsequently followed by
increased revenues, the Company's business, operating results and financial
condition will be materially and adversely affected.

The Company's operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside the Company's
control. These factors include the level of usage of the Internet, demand
for Internet advertising, seasonal trends in Internet usage and advertising
placements, the addition or loss of advertisers, the level of user traffic on
YAHOO! and the Company's other online media properties, the advertising
budgeting cycles of individual advertisers, the amount and timing of capital
expenditures and other costs relating to the expansion of the Company's
operations, the introduction of new products or services by the Company or
its competitors, pricing changes for Web-based advertising, the timing of
initial set-up, engineering or development fees that may be paid in
connection with larger advertising and distribution arrangements, technical
difficulties with respect to the use of YAHOO! or other media properties
developed by the Company, incurrence of costs relating to acquisitions,
general economic conditions, and economic conditions specific to the Internet
and online media. As a strategic response to changes in the competitive
environment, the Company may from time to time make certain pricing, service
or marketing decisions or business combinations that could have a material
adverse effect on the Company's business, results of operations and financial
condition. The Company also has experienced, and expects to continue to
experience, seasonality in its business, with user traffic on YAHOO! and the
Company's other online media properties being lower during the summer and
year-end vacation and holiday periods, when usage of the Web and the
Company's services typically experience slower growth or decline.
Additionally, seasonality may also affect the amount of customer advertising
dollars placed with the Company in the first and third calendar quarters as
advertisers historically spend less during these quarters.

From time to time, the Company enters into agreements with sponsors and
content providers under which the Company is entitled to receive a share of
revenue received from the purchasers of goods and services from users of the
Company's online properties. Such revenue arrangements, if significant,
would expose the Company to additional risks and uncertainties, including
(without limitation) seasonal variations associated with the markets for such
products and services, competitive and other business factors relating to
such markets, and potential liabilities to consumers of such products and
services.

Due to all of the foregoing factors, in some future quarter the Company's
operating results may fall below the expectations of securities analysts and
investors. In such event, the trading price of the Company's Common Stock
would likely be materially and adversely affected.

RESULTS OF OPERATIONS

NET REVENUES

Net revenues increased 313% and 360% in the second quarter and first half
of fiscal 1997, respectively, as compared to the corresponding periods in
fiscal 1996. The increases were due primarily to an increase in the number
of advertisers, from 230 during the quarter ended June 30, 1996 to over 900
in the quarter ended June 30, 1997. Most of the Company's customers purchase
advertisements on a short-term basis. There can be no assurance that
customers will continue to purchase advertising on the Company's Web pages.
Advertising purchases by SOFTBANK, a 34% shareholder of the Company at June
30, 1997, and its related companies accounted for approximately 5% and 7% of
net revenues in the second quarter and first half of fiscal 1997,
respectively, as compared to 2% and 1% in the corresponding periods in fiscal
1996. Contracted prices on these orders are comparable to those given to
other major customers of the Company. No one customer accounted for 10% or
more of revenues during the three or six month periods ended June 30, 1997
and 1996. International revenues were not significant during the three and
six month periods ended June 30, 1997 and 1996. Barter revenues represented
less than 10% of net revenues during those periods.

COST OF REVENUES

Cost of revenues consists of the expenses associated with the production
and usage of the Company's online navigational guides. These costs primarily
consist of fees paid to third parties for content included in the guides,
Internet connection charges, equipment depreciation, and compensation. Cost
of revenues were 15% and 14% of net revenues in the second quarter and first
half of fiscal 1997, respectively, as compared to 16% and 14% in the
corresponding periods in fiscal 1996. The absolute dollar increase in cost
of revenues from the year ago periods was primarily attributable to increases
in the quantity and quality of content available on the Company's online
navigational guide YAHOO! and its other Internet navigational services, and
increased usage of YAHOO! branded properties and the Company's other Internet
navigational services. The Company anticipates that its content and Internet
connection expenses will continue to increase with the quantity and quality
of content available on the Company's Internet navigational services, and
increased usage of Company's Internet navigational services. As measured in
page views (defined as electronic page displays), the Company delivered an
average of 38 million page views per day in June 1997, compared to an average
of approximately 9 million page views per day in June 1996.

OPERATING EXPENSES

The Company's operating expenses have increased significantly since the
Company's inception. This trend reflects the costs associated with the
formation of the Company, the development of the corporate infrastructure,
the marketing and promotion of the Company's brand name, and increased
efforts to develop and commercialize the Company's products and services.
The Company believes that continued expansion of its operations is essential
to enhance and extend the YAHOO! main site, establish branded properties in
targeted markets, and expand the Company's user and advertising base. As a
consequence, the Company intends to continue to significantly increase
expenditures in all operating areas.

SALES AND MARKETING

Sales and marketing expenses were $8,673,000 for the quarter ended June
30, 1997, or 64% of net revenues as compared to $3,290,000, or 100% of net
revenues for the quarter ended June 30, 1996. For the six months ended June
30, 1997, sales and marketing expenses were $15,257,000, or 66% of net
revenues as compared to $4,150,000, or 83% of net revenues for the six months
ended June 30, 1996. The absolute dollar increase from the year ago periods
is primarily attributable to an increase in commissions associated with the
increase in revenues, costs associated with the NETSCAPE GUIDE BY YAHOO!, an
increase in advertising costs associated with the Company's aggressive brand
building strategy, and additional compensation expense associated with an
increase in sales and marketing personnel related to the addition of a direct
sales force which the Company began building in the fourth quarter of 1996.
The Company anticipates that sales and marketing expenses will increase in
future periods in absolute dollars as it continues to pursue an aggressive
brand building strategy and continues to build a direct sales organization.

PRODUCT DEVELOPMENT

Product development expenses were $2,103,000 for the quarter ended June
30, 1997, or 16% of net revenues as compared to $1,037,000, or 32% of net
revenues for the quarter ended June 30, 1996. For the six months ended June
30, 1997, product development expenses were $4,005,000, or 17% of net
revenues as compared to $1,367,000, or 27% of net revenues for the six months
ended June 30, 1996. The increase in absolute dollars from the year ago
periods is primarily attributable to the development of new online media
properties and the addition of engineers. Product development expenses
consist primarily of employee compensation relating to developing and
enhancing the features and functionality of YAHOO! and other online media
properties. To date, all product development costs have been expensed as
incurred. The Company believes that significant investments in product
development are required to remain competitive. As a consequence, the
Company intends to incur increased product development expenditures in
absolute dollars in future periods.

GENERAL AND ADMINISTRATIVE

General and administrative expenses were $1,459,000 for the quarter ended
June 30, 1997, or 11% of net revenues as compared to $762,000, or 23% of net
revenues for the quarter ended June 30, 1996. For the six months ended June
30, 1997, general and administrative expenses were $2,619,000, or 11% of net
revenues as compared to $1,249,000, or 25% of net revenues for the six months
ended June 30, 1996. The increase in absolute dollars from the year ago
periods is primarily attributable to increases in personnel and professional
services. The Company believes that the absolute dollar level of general and
administrative expenses will increase in future periods, as a result of
increased staffing, fees for professional services, and costs associated with
registering the Company's trademarks in various countries.

OTHER - NONRECURRING COSTS

In July 1997, the Company and Visa entered into an agreement under which
the Visa Group released the Company from certain obligations and claims, and
the Company returned the Visa Group's original equity contribution to Yahoo!
Marketplace L.L.C. In connection with this agreement, Yahoo! has issued
466,321 shares of Yahoo! Common Stock to the Visa Group, for which the
Company recorded a one-time, non-cash, pre-tax charge of $21,245,000 in the
second quarter ended June 30, 1997.

INVESTMENT INCOME, NET

Investment income, net of investment expense, was $1,260,000 for the
quarter ended June 30, 1997. For the quarter ended June 30, 1996, investment
income was $969,000. Investment income for the six months ended June 30,
1997 was $2,649,000 as compared to $1,161,000 for the six months ended June
30, 1996. The increase in investment income from the year ago periods was
attributable to a higher average investment balance as a result of private
and public offering proceeds received during March and April of 1996.
Investment income in future periods may fluctuate as a result of fluctuations
in average cash balances maintained by the Company and changes in the market
rates of its investments.

MINORITY INTERESTS IN OPERATIONS OF CONSOLIDATED SUBSIDIARIES

During the second half of 1996, the Company entered into joint venture
agreements whereby the Company holds a majority interest in the subsidiaries
under the agreements. Minority interests in losses from operations of these
consolidated subsidiaries were $182,000 for the quarter ended June 30, 1997
and $384,000 for the first half of fiscal 1997. The joint venture agreement
for Yahoo! Marketplace was been terminated and the Yahoo! Europe subsidiaries
are still in the early stages of development, therefore, minority interests
in operations of consolidated subsidiaries will continue to fluctuate in
future periods as a function of the results from consolidated subsidiaries.

INCOME TAXES

Based on the current estimate of expected operating results and certain
other factors, the Company currently expects its effective tax rate to be 0%
through fiscal year 1997. The Company believes sufficient uncertainty exists
regarding the realizability of its deferred tax assets such that a valuation
allowance continues to be required.

NET LOSS

The Company recorded a net loss of $20,544,000 or $0.74 per share for the
quarter ended June 30, 1997. Excluding the effect of the one-time, non-cash,
pre-tax charge of $21,245,000, the Company earned $610,000 or $0.02 per
share. For the year ago quarter ended June 30, 1996, the Company recorded a
net loss of $1,366,000 or $0.05 per share. For the six month period ended
June 30, 1997, the Company recorded a net loss of $20,334,000 or $0.74 per
share. Excluding the effect of the one-time, non-cash, pre-tax charge of
$21,245,000, the Company earned $820,000 or $0.03 per share. For the year ago
six month period ended June 30, 1996, the Company recorded a net loss of
$1,285,000 or $0.06 per share.

LIQUIDITY AND CAPITAL RESOURCES

Yahoo! invests predominantly in instruments that are highly liquid, of
high quality investment grade, and predominantly have maturities of less than
one year with the intent to make such funds readily available for operating
purposes. At June 30, 1997, the Company had cash and cash equivalents and
investments totaling $98,855,000 comprised of $61,587,000 in cash and cash
equivalents, and $37,268,000 in short-term investments.

For the six months ended June 30, 1997, cash used in operating activities
of $4,534,000 was primarily due to increases in prepaid expenses and other
assets, which resulted primarily from a $5,000,000 one-time non-refundable
license payment to Netscape under the NETSCAPE GUIDE BY YAHOO! agreement and
a $1,000,000 payment to Netscape under the Premier Provider agreement. For
the six months ended June 30, 1996, $1,131,000 of cash was used in operating
activities.

Cash provided by investing activities was $31,563,000 for the six months
ended June 30, 1997. Sales and maturities (net of purchases) of investments
in marketable securities during the period were $33,169,000 and capital
expenditures totaled $1,606,000. Capital expenditures have generally been
comprised of purchases of computer hardware and software as well as leasehold
improvements related to leased facilities, and are expected to increase in
future periods. For the six months June 30, 1996, $39,869,000 was used in
investing activities. Purchases (net of sales and maturities) of investments
in marketable securities during the period were $39,226,000 and capital
expenditures totaled $643,000.

For the six months ended June 30, 1997, cash provided by financing
activities of $2,693,000 was due to $2,093,000 from the issuance of Common
Stock pursuant to the exercise of stock options and $600,000 of proceeds
received from a minority investor. For the six months ended June 30, 1996,
cash provided by financing activities of $98,785,000 was primarily due to the
March 1996 issuance of 5,100,000 shares of Mandatorily Redeemable Convertible
Series C Preferred Stock for aggregate proceeds of $63,750,000 and the April
1996 initial public offering of 2,990,000 shares of Common Stock for net
proceeds of $35,043,000.

The Company currently has no material commitments other than those under
the Netscape Co-Marketing agreement, the Netscape Premier Provider
agreements, and operating lease agreements. Under the terms of the amended
Co-Marketing agreement, the Company has provided Netscape with $4,660,000 in
guarantees against shared advertising revenues in the first year of the
agreement and up to $15,000,000 in the

second year of the agreement, subject in the second year to certain minimum
levels of advertising impressions being reached on the GUIDE. Under the terms
of the Premier Provider agreements, the Company has remaining minimum
payments to Netscape at June 30, 1997 of $5,100,000 in cash and $1,225,000 in
the Company's advertising services which are due during the one-year terms of
the agreements, of which $3,537,000 in cash was paid in July 1997. The
Company experienced a substantial increase in its capital expenditures and
operating lease arrangements in 1996 and the first half of 1997 consistent
with increased staffing and anticipates that this will continue in the
future. Additionally, the Company will continue to evaluate possible
acquisitions of or investments (including through joint ventures) in
businesses, products, and technologies that are complementary to those of the
Company, which may require the use of cash. Management believes existing
cash and investments will be sufficient to meet the Company's operating
requirements for at least the next twelve months. Thereafter, the Company
may sell additional equity or debt securities or obtain credit facilities.
The sale of additional equity or convertible debt securities could result in
additional dilution to the Company's shareholders.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time the Company has been, and expects to continue to be,
subject to legal proceedings and claims in the ordinary course of its
business, including, among others, contractual disputes with advertisers and
content or distribution providers, and claims of alleged infringement of the
trademarks and other intellectual property rights of third parties by the
Company and its licensees. Such claims, even if not meritorious, could result
in the expenditure of significant financial and managerial resources.
Although the Company cannot predict the outcome of any proceeding, the
Company is not currently aware of any legal proceedings or claims that the
Company believes will have, individually or in the aggregate, a material
adverse effect on the Company's financial position or results of operations.

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. The exhibits listed in the accompanying Index to Exhibits are
filed as part of this Report on Form 10-Q.

b. No reports on Form 8-K were filed by the Company during the
period covered by this Report on Form 10-Q.

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

YAHOO! INC.

Dated: August 6, 1997 By: /s/ GARY VALENZUELA
---------------------------------
Senior Vice President, Finance
and Administration, and Chief
Financial Officer
(Principal Financial Officer)

Dated: August 6, 1997 By: /s/ JAMES J. NELSON
---------------------------------
Vice President, Finance
(Principal Accounting Officer)

YAHOO! INC.

INDEX TO EXHIBITS

TITLE EXHIBIT NO.
- ----- -----------

Amended and Restated Articles of Incorporation (to be effective
August 11, 1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1

Amendment One to the Co-Marketing Agreement, dated June 30,
1997 between Yahoo! Inc. and Netscape Communications Corporation. . . . . . 10.1

International Net Search Program Services Agreement, dated June 30,
1997 between Yahoo! Inc. and Netscape Communications Corporation. . . . . . 10.2

Trademark License Agreement, dated June 30, 1997 between
Yahoo! Inc. and Netscape Communications Corporation . . . . . . . . . . . . 10.3

Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . 27