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 March 31, 1999

[ ] 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)

3420 Central Expressway
Santa Clara, California 95051
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(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 April 30, 1999
- -------------------------------- -----------------------------
Common Stock, $0.00017 par value 204,372,850

YAHOO! INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

PAGE NO.

Item 1. Condensed Consolidated Financial Statements (unaudited)

Condensed Consolidated Balance Sheets
at March 31, 1999 and December 31, 1998 3

Condensed Consolidated Statements of Operations
for the three months ended March 31, 1999 and 1998 4

Condensed Consolidated Statements of Cash Flows
for the three months ended March 31, 1999 and 1998 5

Notes to Condensed Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10

Item 3. Quantitative and Qualitative Disclosures About Market Risk 39

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 41

Item 2. Changes in Securities 41

Item 3. Defaults Upon Senior Securities 41

Item 4. Submission of Matters to a Vote of Security Holders 41

Item 5. Other Information 42

Item 6. Exhibits and Reports on Form 8-K 42

Signatures 43

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

YAHOO! INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

March 31, December 31,
1999 1998
---------- ------------
(unaudited) (audited)

ASSETS
Current assets:
Cash and cash equivalents $ 184,463 $ 125,474
Short-term investments in marketable securities 251,858 308,025
Accounts receivable, net 26,876 24,831
Prepaid expenses 9,124 8,909
---------- ------------
Total current assets 472,321 467,239

Long-term investments in marketable debt securities 88,030 48,927
Long-term investments in marketable equity securities 130,493 41,339
Property and equipment, net 19,925 15,189
Other assets 80,910 49,190
---------- ------------
Total assets $ 791,679 $ 621,884
---------- ------------
---------- ------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 7,335 $ 6,302
Note payable 9,000 -
Accrued expenses and other current liabilities 38,077 34,419
Deferred revenue 45,498 38,301
Due to related parties 2,184 961
---------- ------------
Total current liabilities 102,094 79,983
---------- ------------

Deferred tax liability 4,443 4,443
Minority interests in consolidated subsidiaries 1,573 1,248

Shareholders' equity:
Common Stock 24 23
Additional paid-in capital 598,233 522,997
Retained earnings (accumulated deficit) 7,993 (8,442)
Accumulated other comprehensive income 77,319 21,632
---------- ------------
Total shareholders' equity 683,569 536,210
---------- ------------
Total liabilities and shareholders' equity $ 791,679 $ 621,884
---------- ------------
---------- ------------

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

YAHOO! INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

Three Months Ended
------------------------------
March 31, March 31,
1999 1998
--------- ------------

Net revenues $ 86,064 $ 30,596
Cost of revenues 9,697 4,294
--------- ------------
Gross profit 76,367 26,302
--------- ------------

Operating expenses:
Sales and marketing 32,299 16,653
Product development 8,964 4,764
General and administrative 3,456 2,227
Amortization of intangibles 1,220 -
Other - nonrecurring costs 9,775 -
--------- ------------
Total operating expenses 55,714 23,644
--------- ------------

Income from operations 20,653 2,658
Investment income, net 6,615 1,440
Minority interests in operations
of consolidated subsidiaries (325) 243
--------- ------------

Income before income taxes 26,943 4,341

Provision for income taxes 10,508 1,071
--------- ------------

Net income $ 16,435 $ 3,270
--------- ------------
--------- ------------

Net income per share - basic $0.08 $0.02
--------- ------------
--------- ------------
Net income per share - diluted $0.07 $0.02
--------- ------------
--------- ------------

Shares used in per share calculation - basic 201,531 172,578
--------- ------------
--------- ------------
Shares used in per share calculation - diluted 237,111 213,866
--------- ------------
--------- ------------

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

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

Three Months Ended
-----------------------------
March 31, March 31,
1999 1998
---------- ----------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,435 $ 3,270
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 4,782 922
Tax benefits from stock options 10,467 -
Non-cash charges related to stock option grants and warrant issuances 190 157
Minority interests in operations of consolidated subsidiaries 325 (243)
Purchased in-process research and development 9,775 -
Changes in assets and liabilities:
Accounts receivable, net (2,045) (1,995)
Prepaid expenses and other assets (491) 1,839
Accounts payable (479) (435)
Accrued expenses and other current liabilities 3,458 5,370
Deferred revenue 7,197 5,358
Due to related parties 1,223 (383)
---------- ----------
Net cash provided by operating activities 50,837 13,860
---------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (6,762) (1,740)
Purchases of marketable securities (165,015) (42,226)
Proceeds from sales and maturities of marketable securities 181,382 7,133
Other investments (15,867) -
Acquisition of Yahoo! Canada (9,200) -
---------- ----------
Net cash used in investing activities (15,462) (36,833)
---------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Common Stock, net 23,655 4,467
---------- ----------
Net cash provided by financing activities 23,655 4,467
---------- ----------

Effect of exchange rate changes on cash and cash equivalents (41) 65
---------- ----------

Net change in cash and cash equivalents 58,989 (18,441)
Cash and cash equivalents at beginning of period 125,474 63,571
---------- ----------

Cash and cash equivalents at end of period $184,463 $45,130
---------- ----------
---------- ----------

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. ("Yahoo!" or the "Company") is a global Internet media company
that offers a branded network of comprehensive information, communication, and
shopping services to millions of users daily. 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 of operations 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
consolidated financial statements and related notes included in the Company's
Annual Report on Form 10-K, as amended on April 29, 1999, for the year ended
December 31, 1998. Certain prior period balances have been reclassified to
conform to current period presentation. The condensed consolidated financial
statements for the period ended March 31, 1998 have been restated to reflect the
October 1998 acquisition of Yoyodyne Entertainment, Inc. ("Yoyodyne"), which was
accounted for as a pooling of interests.

NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes methods of accounting
for derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities, and is effective for fiscal
years beginning after June 15, 1999. The Company is currently determining the
additional disclosures, if any, that may be required under this pronouncement.

NOTE 3 - STOCK SPLIT

During January 1999, the Company's Board of Directors approved a
two-for-one Common Stock split. Shareholders of record on January 22, 1999 (the
record date) received one additional share for every share held on that date.
The shares were distributed on February 5, 1999 and the stock split was
effective on February 8, 1999. All share numbers in these condensed
consolidated financial statements and notes thereto for all periods presented
have been adjusted to reflect the two-for-one common stock split.

NOTE 4 - OTHER ASSETS (IN THOUSANDS)

Mar. 31, 1999 Dec. 31, 1998
------------- -------------

Intangible assets $56,344 $40,731
Investments in privately-held companies 15,445 5,445
Investment in Yahoo! Japan and other 9,121 3,014
------- -------
$80,910 $49,190
------- -------
------- -------

NOTE 5 - BASIC AND DILUTED NET INCOME PER SHARE

Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common and common equivalent
shares outstanding during the period. Common equivalent shares consist of the
incremental common shares issuable upon conversion of the convertible preferred
stock (using the if-converted method) and shares issuable upon the exercise of
stock options and warrants (using the treasury stock method). For the three
month periods ended March 31, 1999 and 1998, common share equivalents
approximated 35.6 and 41.3 million shares, respectively, and were primarily
related to shares issuable upon the exercise of stock options.

NOTE 6 - COMPREHENSIVE INCOME

The components of comprehensive income, net of tax, are as follows (in
thousands):

Three Months Ended
March 31,
1999 1998
------- ------

Net income $16,435 $3,270
Unrealized gains on available-for-sale securities 55,728 -
Foreign currency translation gains (losses) (41) 65
------- ------
Comprehensive income $72,122 $3,335
------- ------
------- ------

Unrealized gains on available-for-sale securities for the three months ended
March 31, 1999 consist primarily of a net gain of $32.2 million from an
investment in GeoCities common stock and a net gain of $24.1 million from an
investment in broadcast.com common stock.

Accumulated other comprehensive income consists of the unrealized gains on
available-for-sale securities, net of tax and the cumulative translation
adjustment, as presented on the accompanying condensed consolidated balance
sheets.

NOTE 7 - ACQUISITIONS

On January 15, 1999, the Company completed the acquisition of
Log-Me-On.Com LLC ("Log-Me-On"), a development stage entity, through the
issuance of 50,000 shares of Yahoo!

Common Stock and $1.5 million in cash for a total purchase price of
approximately $9.9 million, including acquisition costs. Additional
consideration of $1 million is payable contingent on the continued employment of
certain employees for one year from the acquisition date. Such amount is being
amortized as compensation expense over the one-year period. The acquisition was
accounted for as a purchase in accordance with the provisions of Accounting
Principles Board Opinion ("APB") No. 16. Under the purchase method of
accounting, the purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair values at the date of
acquisition. Results of operations for Log-Me-On for periods prior to the
acquisition were not material to the Company. Results of operations for
Log-Me-On have been included with those of the Company for periods subsequent to
the acquisition date.

Log-Me-On, founded in 1998, was a development stage entity with limited
operations, no revenues, and four developers. As of the acquisition date, the
Company's efforts were focused solely on developing a browser technology that
was approximately 30% complete and there was no other technology developed or in
process at such date. Approximately $9.8 million was allocated to in-process
research and development. This in-process research and development had not
reached technological feasibility and had no alternative future use. Additional
development subsequent to the acquisition date principally relates to
development of browser and toolbar technology that would allow users into Yahoo!
sites without typing URLs or retrieving bookmarks, creation of the user
interface, development of customization screens and procedures, and
establishment of data links. The Company expects the development of this
technology to be completed in the third quarter of 2000. Future research and
development costs are not expected to be material to Yahoo!'s financial position
or results of operations. In addition, if this technology is not successfully
developed, Yahoo!'s revenues and profitability would not be materially adversely
affected. The remaining purchase price of approximately $100,000 was allocated
to the work force in place and is being amortized over the employment contract
period. Tangible assets acquired and liabilities assumed were not material to
the Company's financial statements.

In February 1996, the Company and Rogers Media Inc. ("Rogers") signed
the Yahoo! Canada Affiliation Agreement whereby Yahoo! licensed certain
intellectual property and development rights to Rogers, which Rogers utilized
to operate Yahoo! Canada. On March 1, 1999, this agreement was terminated,
as were all licenses and other rights and obligations granted under the
agreement. As part of this agreement, Yahoo! acquired the Yahoo! Canada
business including the URL, www.yahoo.ca.com, and existing advertising
relationships from Rogers. Total consideration was $9 million in cash and
the issuance of a note payable for $9 million due in April 1999. The
acquisition was recorded using the purchase method of accounting. The
Company recorded an intangible asset of approximately $18 million which is
being amortized over 10 years. The results of operations of Yahoo! Canada
are included in the statement of operations of Yahoo! beginning March 1,
1999. Results of operations for the current period and the year ago period
would not have been materially different had the companies combined at the
beginning of the respective periods.

exchange approximately 21,545,000 shares of Yahoo! Common Stock for
approximately 31,834,000 shares of GeoCities common stock. Additionally, the
Company will convert approximately 8,603,000 GeoCities stock options into
approximately 5,822,000 Yahoo! stock options. The acquisition is expected to be
completed in the second quarter of 1999 and is subject to certain conditions and
approval by GeoCities shareholders. The Company expects to record a one-time
charge of approximately $66 million in the second quarter of 1999 relating to
expenses incurred in connection with this transaction. At March 31, 1999, the
fair value of Yahoo!'s investment in GeoCities was $73.8 million which is
included in the condensed consolidated balance sheet under long-term investments
in marketable equity securities.

GeoCities' operating results for the quarters ended March 31, 1999 and 1998
included revenues of approximately $7.8 million and $2.2 million, respectively,
and net losses of approximately $10.0 million and $2.9 million, respectively.

NOTE 8 - INVESTMENT IN YAHOO! JAPAN

During March 1999, Yahoo! Japan Corporation ("Yahoo! Japan") completed a
secondary public offering. The Company invested an additional $5.9 million in
Yahoo! Japan common stock in order to maintain its 34% ownership. At March 31,
1999, the carrying value of the investment was $9.0 million and is recorded in
other assets. The fair value of the Company's investment, based on the quoted
trading price, was approximately $491 million at March 31, 1999.

NOTE 9 - SUBSEQUENT EVENT

On April 1, 1999, the Company announced the signing of a definitive
agreement to acquire broadcast.com inc. ("broadcast.com"), a publicly traded
Internet company and a leading aggregator and broadcaster of streaming media
programming on the Web. Under the terms of the acquisition, which will be
accounted for as a pooling of interests, the Company will exchange approximately
28,334,000 shares of Yahoo! Common Stock for approximately 36,692,000 shares of
broadcast.com common stock. Additionally, the Company will convert
approximately 7,131,000 broadcast.com stock options into approximately 5,507,000
Yahoo! stock options. The acquisition is expected to be completed in the third
quarter of 1999 and is subject to certain conditions, regulatory approval, and
approval by broadcast.com shareholders. The Company expects to record a
one-time charge in the third quarter of 1999 relating to expenses incurred with
this transaction. At March 31, 1999, the fair value of Yahoo!'s investment in
broadcast.com was $55.0 million which is included in the condensed consolidated
balance sheet under long-term investments in marketable equity securities.

Broadcast.com's operating results for the quarters ended March 31, 1999 and
1998 included revenues of approximately $10.3 million and $4.5 million,
respectively, and net losses of approximately $3.8 million and $2.6 million,
respectively.

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

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, INCLUDING, WITHOUT LIMITATION, STATEMENTS REGARDING THE
COMPANY'S EXPECTATIONS, BELIEFS, INTENTIONS OR FUTURE STRATEGIES THAT ARE
SIGNIFIED BY THE WORDS "EXPECTS", "ANTICIPATES", "INTENDS", "BELIEVES", OR
SIMILAR LANGUAGE. ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS DOCUMENT ARE
BASED ON INFORMATION AVAILABLE TO THE COMPANY ON THE DATE HEREOF, AND THE
COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS. IN EVALUATING THE COMPANY'S BUSINESS, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH BELOW UNDER THE
CAPTION "RISK FACTORS" AND SPECIFICALLY "RISKS RELATED TO THE PENDING GEOCITIES
AND BROADCAST.COM MERGERS" IN ADDITION TO THE OTHER INFORMATION SET FORTH
HEREIN. THE COMPANY CAUTIONS INVESTORS THAT ITS BUSINESS AND FINANCIAL
PERFORMANCE ARE SUBJECT TO SUBSTANTIAL RISKS AND UNCERTAINTIES.

OVERVIEW

Yahoo! Inc. is a global Internet media company that offers a branded
network of comprehensive information, communication, and shopping services to
millions of users daily. As the first online navigational guide to the World
Wide Web (the "Web"), www.yahoo.com is a leading guide in terms of traffic,
advertising, household and business user reach, and is one of the most
recognized brands associated with the Internet. 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.

On January 15, 1999, the Company completed the acquisition of Log-Me-On, a
development stage entity, through the issuance of 50,000 shares of Yahoo! Common
Stock and $1.5 million in cash for a total purchase price of approximately $9.9
million, including acquisition costs. Additional consideration of $1 million is
payable contingent on the continued employment of certain employees for one year
from the acquisition date. Such amount is being amortized as compensation
expense over the one-year period. The acquisition was accounted for as a
purchase in accordance with the provisions of APB No. 16. Under the purchase
method of accounting, the purchase price was allocated to the assets acquired
and liabilities assumed based on their estimated fair values at the date of
acquisition. Results of operations for Log-Me-On for periods prior to the
acquisition were not material to the Company. Results of operations for
Log-Me-On have been included with those of the Company for periods subsequent to
the acquisition date.

users into Yahoo! sites without typing URLs or retrieving bookmarks, creation of
the user interface, development of customization screens and procedures, and
establishment of data links. The Company expects the development of this
technology to be completed in the third quarter of 2000. Future research and
development costs are not expected to be material to Yahoo!'s financial position
or results of operations. In addition, if this technology is not successfully
developed, Yahoo!'s revenues and profitability would not be materially adversely
affected. The remaining purchase price of approximately $100,000 was allocated
to the work force in place and is being amortized over the employment contract
period. Tangible assets acquired and liabilities assumed were not material to
the Company's financial statements.

On January 28, 1999, the Company announced the signing of a definitive
agreement to acquire GeoCities, a publicly traded Internet company. Under the
terms of the acquisition, which will be accounted for as a pooling of interests,
the Company will exchange approximately 21,545,000 shares of Yahoo! Common Stock
for approximately 31,834,000 shares of GeoCities common stock. Additionally,
the Company will convert approximately 8,603,000 GeoCities stock options into
approximately 5,822,000 Yahoo! stock options. The acquisition is expected to be
completed in the second quarter of 1999 and is subject to certain conditions and
approval by GeoCities shareholders. The Company expects to record a one-time
charge of approximately $66 million in the second quarter of 1999 relating to
expenses incurred in connection with this transaction. At March 31, 1999, the
fair value of Yahoo!'s investment in GeoCities was $73.8 million which is
included in the condensed consolidated balance sheet under long-term investments
in marketable equity securities.

In February 1996, the Company and Rogers signed the Yahoo! Canada
Affiliation Agreement whereby Yahoo! licensed certain intellectual property
and development rights to Rogers, which Rogers utilized to operate Yahoo!
Canada. On March 1, 1999, this agreement was terminated, as were all licenses
and other rights and obligations granted under the agreement. As part of
this agreement, Yahoo! acquired the Yahoo! Canada business including the URL,
www.yahoo.ca.com, and existing advertising relationships from Rogers. Total
consideration was $9 million in cash and the issuance of a note payable for
$9 million due in April 1999. The acquisition was recorded using the
purchase method of accounting. The Company recorded an intangible asset of
approximately $18 million which is being amortized over 10 years. The
results of operations of Yahoo! Canada are included in the statement of
operations of Yahoo! beginning March 1, 1999. Results of operations for the
current period and the year ago period would not have been materially
different had the companies combined at the beginning of the respective
periods.

On April 1, 1999, the Company announced the signing of a definitive
agreement to acquire broadcast.com, a publicly traded Internet company and a
leading aggregator and broadcaster of streaming media programming on the Web.
Under the terms of the acquisition, which will be accounted for as a pooling of
interests, the Company will exchange approximately 28,334,000 shares of Yahoo!
Common Stock for approximately 36,692,000 shares of broadcast.com common stock.
Additionally, the Company will convert approximately 7,131,000 broadcast.com
stock options into approximately 5,507,000 Yahoo! stock options. The
acquisition is expected to be completed in the third

quarter of 1999 and is subject to certain conditions, regulatory approval, and
approval by broadcast.com shareholders. The Company expects to record a
one-time charge in the third quarter of 1999 relating to expenses incurred with
this transaction. At March 31, 1999, the fair value of Yahoo!'s investment in
broadcast.com was $55.0 million which is included in the condensed consolidated
balance sheet under long-term investments in marketable equity securities.

The results of operations for GeoCities and broadcast.com are not included
in the Yahoo! results of operations as the acquisitions have not yet been
consummated.

RESULTS OF OPERATIONS

NET REVENUES

Net revenues were $86.1 million for the quarter ended March 31, 1999, a
181% increase from $30.6 million during the first quarter in 1998. The increase
was due primarily to the increasing number of advertisers purchasing space on
the Company's online media properties as well as larger and longer-term
purchases by certain advertisers. Approximately 2,125 customers advertised on
the Company's online media properties during the quarter ended March 31, 1999 as
compared to approximately 1,600 during the first quarter of 1998. No one
customer accounted for 10% or more of net revenues during the quarters ended
March 31, 1999 and 1998. Advertising purchases by SOFTBANK and its related
companies, a 28% shareholder of the Company at March 31, 1999, accounted for
approximately 8% and 1% of net revenues during the quarters ended March 31, 1999
and 1998, respectively. Contracted prices on these orders are comparable to
those given to other similarly situated customers of the Company. International
revenues have accounted for less than 10% of net revenues during the quarters
ended March 31, 1999 and 1998. Barter revenues also represented less than 10%
of net revenues during those periods. There can be no assurance that customers
will continue to purchase advertising on the Company's Web pages, that
advertisers will not make smaller and shorter-term purchases, or that market
prices for Web-based advertising will not decrease due to competitive or other
factors. Additionally, while the Company has experienced strong revenue growth
during the last three years, management does not believe that this level of
revenue growth will be sustained in future periods.

COST OF REVENUES

Cost of revenues consists of the expenses associated with the production
and usage of Yahoo! and the Company's other online media properties. These
costs primarily consist of fees paid to third parties for content included on
the Company's online media properties, Internet connection charges, amortization
of purchased technology, equipment depreciation, and compensation. Cost of
revenues were $9.7 million for the quarter ended March 31, 1999, or 11% of net
revenues, as compared to $4.3 million, or 14% of net revenues for the quarter
ended March 31, 1998. The absolute dollar increase in cost of revenues from
quarter to quarter is primarily attributable to an increase in the quantity of
content available on the Company's online media properties, the increased usage
of these properties, and the amortization of purchased technology. The Company
anticipates that its content and Internet connection expenses will increase with
the quantity and quality of

content available on Yahoo! online media properties, and increased usage of
these properties. As measured in page views (defined as electronic page
displays), the Company delivered an average of approximately 235 million page
views per day in March 1999 compared with an average of approximately 95 million
page views per day in March 1998. Yahoo! Japan, an unconsolidated joint venture
of the Company which began operations in April 1996, is included in these page
views figures and accounted for an average of more than 17 million per day in
March 1999 and an average of approximately 6 million per day in March 1998. The
Company anticipates that its content and Internet connection expenses will
continue to increase in absolute dollars for the foreseeable future.

SALES AND MARKETING

Sales and marketing expenses were $32.3 million, or 38% of net revenues for
the quarter ended March 31, 1999 as compared to $16.7 million, or 54% of net
revenues for the quarter ended March 31, 1998. Sales and marketing expenses
consist primarily of advertising and other marketing related expenses (which
include distribution costs), compensation and employee-related expenses, sales
commissions, and travel costs. The increase in absolute dollars is primarily
attributable to an increase in advertising and distribution costs associated
with the Company's aggressive brand-building strategy, increases in compensation
expense associated with growth in its direct sales force and marketing
personnel, expansion in the international subsidiaries with the addition of
subsidiaries in Italy, Hong Kong, Singapore, Spain, and Taiwan as well as Yahoo!
guides in Spanish and Mandarin Chinese languages subsequent to March 1998, and
an increase in sales commissions associated with the increase in revenues. The
Company anticipates that sales and marketing expenses in absolute dollars will
increase in future periods as it continues to pursue an aggressive
brand-building strategy through advertising and distribution, continues to
expand its international operations, and continues to build its global direct
sales organization.

PRODUCT DEVELOPMENT

Product development expenses were $9.0 million, or 10% of net revenues for
the quarter ended March 31, 1999 as compared to $4.8, or 16% of net revenues for
the quarter ended March 31, 1998. Product development expenses consist
primarily of employee compensation relating to developing and enhancing the
features and functionality of Yahoo! online media properties. The increase in
absolute dollars is primarily attributable to increases in the number of
engineers that develop and enhance Yahoo! online media properties. The Company
believes that significant investments in product development are required to
remain competitive. Consequently, the Company expects to incur increased
product development expenditures in absolute dollars in future periods.

GENERAL AND ADMINISTRATIVE

General and administrative expenses were $3.5 million, or 4% of net
revenues for the quarter ended March 31, 1999 as compared to $2.2 million, or 7%
of net revenues for the quarter ended March 31, 1998. General and
administrative expenses consist primarily of compensation and fees for
professional services, and the increase in absolute dollars is primarily
attributable to increases in these areas. The Company believes that the
absolute

dollar level of general and administrative expenses will increase in future
periods, as a result of an increase in personnel and increased fees for
professional services.

AMORTIZATION OF INTANGIBLES

As part of the June 1998 Viaweb Inc. ("Viaweb") acquisition and December
1998 HyperParallel, Inc. ("HyperParallel") acquisition, the Company has recorded
intangible assets related to goodwill of $24.3 million and $4.6 million,
respectively, which are being amortized over seven years. Additionally, as part
of the January 1999 Yahoo! Canada acquisition, the Company has recorded $18.2
million in intangible assets, principally related to goodwill, which are being
amortized over ten years.

OTHER - NON-RECURRING COSTS

During January 1999, the Company completed the acquisition of Log-Me-On
through the issuance of 50,000 shares of Yahoo! Common Stock and $1.5 million in
cash. During the quarter ended March 31, 1999, the Company recorded a
non-recurring charge of $9.8 million for in-process research and development
that had not yet reached technological feasibility and had no alternative future
use.

INVESTMENT INCOME, NET

Investment income, net of expense, was $6.6 million for the quarter ended
March 31, 1999. For the quarter ended March 31, 1998, investment income was
$1.4 million. The increase is primarily attributable to a higher average
investment balance, principally due to proceeds of $250 million received by the
Company on July 14, 1998 from a private placement of shares to SOFTBANK and cash
provided by operations. 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

Minority interests in operations of consolidated subsidiaries were
($325,000) for the quarter ended March 31, 1999 compared to $243,000 for the
year ago quarter. The decrease is attributable to the profitable results
recorded in the European and Korean joint ventures in the aggregate during the
quarter ended March 31, 1999 as compared to losses in the year ago quarter. The
Company expects that minority interests in operations of consolidated
subsidiaries in the aggregate will continue to fluctuate in future periods as a
function of the results from consolidated subsidiaries. If the consolidated
subsidiaries remain profitable, the minority interests adjustment on the
statement of operations will continue to reduce the Company's net income by the
minority partners' share of the subsidiaries' net income.

INCOME TAXES

The Company's effective income tax rate increased to 39% for the first
quarter of 1999 as compared to 25% in the year ago period due principally to the
release of a portion of the valuation allowance in 1998. This rate may change
during the remainder of 1999 if

operating results or acquisition-related costs differ significantly from the
current projections.

NET INCOME

The Company recorded net income of $16.4 million or $0.07 per share diluted
for the quarter ended March 31,1999 compared to net income of $3.3 million or
$0.02 per share diluted for the quarter ended March 31, 1998. The results for
the quarter ended March 31, 1999 include a non-recurring charge of $9.8 million
incurred in connection with a January 1999 acquisition and the amortization of
$2.6 million from the purchased technology and intangible assets acquired in
various purchase transactions.

LIQUIDITY AND CAPITAL RESOURCES

Yahoo! invests excess cash predominantly in debt 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 March 31, 1999, the Company had cash and
cash equivalents and investments in marketable debt securities totaling $524.4
million compared to $482.4 million at December 31, 1998.

For the three months ended March 31, 1999, cash provided by operating
activities of $50.8 million was primarily due to earnings before a non-recurring
charge of $9.8 million and depreciation and amortization of $4.8 million, tax
benefits from stock option plans of $10.5 million, and increases in deferred
revenue of $7.2 million and accrued liabilities of $3.5 million. The increase
in deferred revenue relates principally to overall significant growth in revenue
and increases in advanced payments on several new and relatively longer
sponsorship agreements. For the three months ended March 31, 1998, cash
provided by operating activities of $13.9 million was primarily due to increases
in accrued liabilities, deferred revenue, and net income.

Cash used in investing activities was $15.5 million for the quarter ended
March 31, 1999. Sales and maturities (net of purchases) of investments in
marketable securities and other assets during the period were offsetting while
cash of $9.2 million was paid as part of the acquisition of Yahoo! Canada and
capital expenditures totaled $6.8 million. 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. Cash used by investing activities was $36.8 million
for the quarter ended March 31, 1998. Purchases (net of sales and maturities)
of investments in marketable securities during the period were $35.1 million and
capital expenditures totaled $1.7 million.

For the three months ended March 31, 1999 and 1998, cash provided by
financing activities from the issuance of Common Stock pursuant to the exercise
of stock options was $23.7 million and $4.5 million, respectively.

The Company currently has no material commitments other than those under
operating lease agreements and fees associated with the proposed acquisitions of
GeoCities

and broadcast.com. The Company has experienced a substantial increase in its
capital expenditures and operating lease arrangements since its inception, which
is 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 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; however,
the Company may sell additional equity or debt securities or obtain credit
facilities to further enhance its liquidity position. The sale of additional
securities could result in additional dilution to the Company's shareholders.

YEAR 2000 IMPLICATIONS

Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field and cannot distinguish
twenty-first century dates from twentieth century dates. To function properly,
these date-code fields must distinguish twenty-first century dates from
twentieth century dates and, as a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with such "Year
2000" requirements.

Yahoo! is dependent on the operation of numerous systems that may be
adversely affected by the Year 2000 problem, including Yahoo!'s internal
systems, and equipment, software and content supplied to Yahoo! by third-party
vendors that may not be Year 2000 compliant, including outside providers of
Web-hosting services on which Yahoo! is currently dependent. In addition,
Yahoo!'s future business depends on the successful operation of the Internet
following the commencement of the Year 2000. If the Internet is inaccessible
for an appreciable period of time, or if Yahoo!'s customers and users are unable
to access Yahoo!'s site, Yahoo!'s business and revenues could be materially
adversely affected. Yahoo! is also subject to external forces that might
generally affect industry and commerce, such as telecommunications, utility or
transportation company Year 2000 compliance failures, related service
interruptions and the economic impact that such failures have on Yahoo!'s
customers and advertisers.

YEAR 2000 COMPLIANCE ASSESSMENT PLANS. Yahoo! has undertaken a two-phase
process of analyzing the impact of the Year 2000 problem. First, Yahoo! has
completed an informal assessment of its primary internal systems and, based on
such assessment and its knowledge of the specific software and systems, Yahoo!
currently believes that its systems are Year 2000 compliant in all material
respects or can readily be brought into compliance with the application of
corrective software modifications. In many cases, Yahoo! expects these
modifications to be provided by the vendors of the computer and software
products Yahoo! has installed. Yahoo! has not incurred material costs to date
in this informal phase of the assessment process, and currently does not believe
that the cost of additional actions will have a material effect on its results
of operations or financial condition.

Second, Yahoo! is in the process of performing a formal assessment of both
its internal systems and the vendor-supplied items and services it employs to
determine how the Year 2000 problem will affect all aspects of Yahoo!'s
operations. Yahoo! expects to complete this

second phase of its assessment by mid-spring of 1999. The formal process
involves assessment of the following Yahoo! systems:

- hardware systems, including servers and systems used for data
storage;
- software systems, including applications, development tools
and proprietary code;
- infrastructure systems, including routers, hubs and networks;
- facility systems, including general building functions, security, HVAC
and related operations; and
- the systems of our business partners, including content providers and
ISPs.

Yahoo! is conducting its formal assessment of Year 2000 readiness by
gathering information on each aspect of Yahoo!'s systems, reviewing each
component or application for date usage, and examining date representations.
With respect to vendor-supplied items and services, Yahoo! is conducting an
extensive review of product compliance information on such items and services
available online, in vendor literature and through trade group information
resources, contacting its vendors for compliance information, and maintaining
documentation of assessments that have been performed by such vendors or outside
sources.

Each department of Yahoo! is involved in this formal assessment process.
Once complete, the formal assessment will lead to the creation of a formal
remediation and contingency plan for achieving Year 2000 readiness. Yahoo! does
not anticipate, however, undertaking a formal assessment of the Year 2000
readiness of the Internet or its underlying telecommunications infrastructure,
and will therefore be unable to predict the impact of Year 2000 issues that
might affect the broader Internet business community, including Yahoo!.

RESULTS OF COMPLIANCE EFFORTS TO DATE. Based on the completed informal
assessment and the Company's progress on the formal assessment, Yahoo! currently
believes that its internal systems are, or can readily be made, Year 2000
compliant in all material respects. However, it is possible that these current
internal systems contain undetected errors or defects with Year 2000 date
functions. In addition, although Yahoo! does not anticipate problems,
vendor-supplied items and services could contain undetected errors or defects
which, if not corrected, could result in serious unanticipated negative
consequences, including significant downtime for one or more Yahoo! media
properties.

COSTS OF YEAR 2000 COMPLIANCE COULD BE SIGNIFICANT. Although Yahoo! is not
aware of any material operational issues or costs associated with preparing its
internal systems for the Year 2000, and although Yahoo! has not incurred
material costs to date with respect to the Year 2000 readiness of these internal
systems, the occurrence of any of the following events could materially and
adversely affect Yahoo!'s business, results of operations and financial
condition:

- errors and defects are detected after the formal assessment process is
complete;
- third-party equipment, software or content fails to operate properly
with regard to the year 2000;
- Web advertisers expend significant resources to correct their current
systems for Year 2000 compliance, resulting in reduced funds available
for Web advertising or sponsorship of Web services; or
- material costs arise in connection with preparing GeoCities' or
broadcast.com's internal systems for the Year 2000 problem.

RISK FACTORS

WE HAVE A LIMITED OPERATING HISTORY AND MAY NOT BE ABLE TO IMPLEMENT OUR GROWTH
STRATEGY.

Yahoo! was incorporated in March 1995 and did not begin generating
advertising revenues until August 1995. Therefore, we have a limited
operating history, and our prospects are subject to the risks, expenses and
uncertainties frequently encountered by young companies that operate
exclusively in the new and rapidly evolving markets for Internet products and
services. Successfully achieving our growth plan depends on, among other
things, our ability to:

- continue to develop and extend the Yahoo! brand;
- develop new media properties;
- maintain and increase the levels of traffic on Yahoo! properties;
- develop or acquire competitive services or products;
- effectively generate revenues through sponsored services and
placements;
- effectively integrate businesses or technologies;
- successfully develop personalized Web-based services, such as e-mail
services; and
- continue to identify, attract, retain and motivate qualified
personnel.

Furthermore, Yahoo!'s growth depends on factors outside of our control,
including:

- adoption by the market of the Web, and more specifically, Yahoo! as an
effective advertising medium; and
- relative price stability for Web-based advertising, despite
competition and other factors that could reduce market prices for
advertising.

We may not be successful in implementing our growth plan.

WE ANTICIPATE INCREASED OPERATING EXPENSES AND MAY EXPERIENCE LOSSES.

Because of our limited operating history and the uncertain nature of the
rapidly changing market we serve, the prediction of future results of operations
is difficult or impossible. In addition, period-to-period comparisons of
operating results are not likely to be meaningful. You should not rely on the
results for any period as an indication of future performance. In particular,
although we experienced strong revenue growth during 1998 and the first quarter
of 1999, we do not believe that this level of revenue growth will be sustained
in future periods. We currently expect that our operating expenses will continue
to increase significantly as we expand our sales and marketing operations,
continue to develop and extend the Yahoo! brand, fund greater levels of product
development, develop and commercialize additional media properties, and acquire
complementary businesses and technologies. As a result, we may experience
significant losses on a quarterly and annual basis.

OUR QUARTERLY OPERATING RESULTS WILL FLUCTUATE BECAUSE OF A NUMBER OF FACTORS,
INCLUDING THE RELIANCE ON SHORT-TERM ADVERTISING CONTRACTS.

Our operating results may fluctuate significantly in the future as a result
of a variety of factors, many of which are outside of our control. These factors
include:

- the level of usage of the Internet;
- demand for Internet advertising;
- the addition or loss of advertisers;
- the level of user traffic on Yahoo! online properties;
- the mix of types of advertising we sell (targeted advertising
generally has higher rates);
- the amount and timing of capital expenditures and other costs relating
to the expansion of our operations;
- the introduction of new products or services by us or our competitors;
- pricing changes for Internet-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! online
properties;
- costs incurred with respect to acquisitions; and
- negative general economic conditions and their resulting effects on
media spending.

We may from time to time make certain pricing, service or marketing
decisions that may adversely affect our profitability in a given quarterly or
annual period.

We derive the majority of our revenues from the sale of advertisements
under short-term contracts, which are difficult to forecast accurately. Our
expense levels are based in part on expectations of future revenue and, to a
large extent, are fixed. We may be unable to adjust spending quickly enough to
compensate for any unexpected revenue shortfall. Accordingly, the cancellation
or deferral of advertising or sponsorship contracts could have a material
adverse effect on our financial results. Our operating expenses are likely to
increase significantly over the near term and, to the extent that our expenses
increase but our revenues do not, our business, operating results, and financial
condition may be materially and adversely affected.

Our advertising revenue is also subject to seasonal fluctuations.
Historically, advertisers spend less in the first and third calendar quarters
and user traffic on our online media properties has historically been lower
during the summer and during year-end vacation and holiday periods.

THE RATE STRUCTURE OF SOME OF OUR ADVERTISING CONTRACTS CREATES EXPOSURE TO
POTENTIALLY SIGNIFICANT FINANCIAL RISKS.

A key element of our strategy is to generate advertising revenues through
sponsored services and placements by third parties in our online media
properties in addition to banner advertising. We typically receive sponsorship
fees as well as a portion of transaction revenues received by the sponsor from
users originated through the Yahoo! placement in return for minimum levels of
user impressions to be provided by us. These arrangements expose us to
potentially significant financial risks, including the following:

- if we fail to deliver required minimum levels of user impressions or
"click throughs," our fee may be adjusted downwards;
- the sponsors may not renew the agreements or renew at lower rates; and

- the arrangements may not generate anticipated levels of shared
transaction revenue, or sponsors may default on the payment
commitments in such agreements as has occurred in the past.

As a result of these financial risks, we may not achieve significant
revenue from these sponsorship arrangements. In addition, because of the limited
experience with these arrangements, we are unable to determine what effect these
arrangements will have on gross margins and results of operations.
Transaction-based fees have not to date represented a material portion of our
net revenues. If and to the extent such revenues become a significant portion of
our results, there could be greater variations in our quarterly operating
results.

WE ARE IN A HIGHLY COMPETITIVE INDUSTRY AND SOME OF OUR COMPETITORS MAY BE MORE
SUCCESSFUL IN ATTRACTING AND RETAINING CUSTOMERS.

The market for Internet products and services is highly competitive. There
are no substantial barriers to entry in these markets, and we expect that
competition will continue to intensify. Negative competitive developments could
have a material adverse effect on our business and the trading price of our
stock.

We will compete with many other providers of online navigation,
information, entertainment, business and community services. As we expand the
scope of our Internet offerings, we will compete directly with a greater number
of Internet sites, media companies, and companies providing business services
across a wide range of different online services, including:

- vertical markets where competitors may have advantages in expertise,
brand recognition, and other factors;
- metasearch services and software applications that allow a user to
search the databases of several directories and catalogs
simultaneously;
- database vendors that offer information search and retrieval
capabilities with their core database products;
- Web-based email and instant messaging services either on a stand alone
basis or integrated into other products and media properties;
- online merchant hosting services; and
- online broadcasting of business events following consummation of the
proposed broadcast.com merger.

Companies that offer competitive products or services addressing Web
navigation, information and community services include:

- America Online, Inc. (NetFind) including Netscape (Netcenter);
- CNET, Inc. (Snap);
- Compaq/Digital Equipment Corporation (AltaVista);
- Excite, Inc. (including WebCrawler);
- Infoseek Corporation (including GO Network);
- Inktomi Corporation;
- Lycos, Inc. (including HotBot and Tripod); and
- Microsoft Corporation (msn.com).

A large number of these websites and online services as well as
high-traffic e-commerce merchants such as Amazon.com, Inc. also offer or are
expected to offer informational and community features that may be competitive
with the services that Yahoo! offers. In order to effectively compete, we may
need to expend significant internal engineering resources or acquire other
technologies and companies to provide such capabilities. Any of these efforts
could be dilutive to our shareholders.

MARKET CONSOLIDATION IS CREATING MORE FORMIDABLE COMPETITORS.

In the recent past, there have been a number of significant acquisitions
and strategic plans announced among and between certain of our competitors,
including:

- The Walt Disney Company acquiring a significant interest in Infoseek;
- AOL acquiring Netscape;
- @Home Networks, a provider of high speed internet access serving the
cable television infrastructure and the largest shareholder of which
is AT&T, acquiring Excite;
- NBC acquiring an interest in Snap, a subsidiary of CNET, and
announcing plans to merge its Internet assets with XOOM.com and Snap
to create a new Internet media network;
- Compaq taking control of AltaVista through its acquisition of Digital
Equipment Corporation; and
- Microsoft investing $5 billion in AT&T, and AT&T acquiring MediaOne.

The effect of these completed and pending acquisitions and strategic plans
on Yahoo! cannot be predicted with certainty, but all of these competitors are
aligned with companies that are significantly larger or more well established
than Yahoo!. In particular, many of them are television broadcasters having
substantial marketing resources and capabilities to assist our competitors. As a
result, each of them will have access to significantly greater financial,
marketing and, in certain cases, technical resources than Yahoo!.

RECENT ALLIANCES MAY MAKE IT MORE DIFFICULT TO ACCESS YAHOO!'S PRODUCTS AND
MEDIA PROPERTIES.

The recent acquisitions and alliances discussed above will result in
greater competition as more users of the Internet consolidate on fewer services
that incorporate search and retrieval features. In addition, providers of
software and other Internet products and services are incorporating search and
retrieval features into their offerings. For example, Web browsers offered by
Netscape and Microsoft increasingly incorporate prominent search buttons that
direct search traffic to competing services. These features could make it more
difficult for Internet users to find and use our products and services. Netscape
has an agreement with Excite under which Excite is the most prominent
navigational service within the Netcenter website. In the future, Netscape,
Microsoft and other browser suppliers may also more tightly integrate products
and services similar to ours into their browsers or their browsers' pre-set home
pages. Another example is the recently announced arrangement that will result in
Compaq including prominent links to Alta Vista with many of the computers which
it sells. Any of these companies could take actions that would make it more
difficult for consumers to

find and use Yahoo! services. Microsoft recently announced that it will feature
and promote Internet search services provided by Alta Vista and signed a long
term partnership with LookSmart to provide directory services in the Microsoft
Network and other Microsoft online properties. Such search services may be
tightly integrated into future versions of the Microsoft operating system, the
Internet Explorer browser, and other software applications, and Microsoft may
promote such services within the Microsoft Network or through other Microsoft
affiliated end-user services such as MSNBC or WebTV Networks. Each of these
situations creates a potential competitive advantage over ours because their
Internet navigational offerings may be more conveniently accessed by users.

INCREASED COMPETITION MAY EXERT DOWNWARD PRICING PRESSURE ON ADVERTISING
CONTRACTS.

We compete with online services, other website operators and advertising
networks, as well as traditional offline media such as television, radio and
print for a share of advertisers' total advertising budgets. We believe that the
number of companies selling Web-based advertising and the available inventory of
advertising space has recently increased substantially. Accordingly, we may face
increased pricing pressure for the sale of advertisements, which could reduce
our advertising revenues. In addition, our sales may be adversely affected to
the extent that our competitors offer superior advertising services that better
target users or provide better reporting of advertising results.

WE DEPEND ON CONTINUED GROWTH IN THE USE OF WEB ADVERTISING TO SUPPORT OUR
REVENUE MODEL.

Web-based advertising is relatively new, and it is difficult to predict the
extent of further growth, if any, in Web advertising expenditures. The Internet
may not prove to be a viable commercial marketplace for a number of reasons,
including the lack of acceptable security technologies, potentially inadequate
development of the necessary infrastructure, or the lack of timely development
and commercialization of performance improvements.

THE MARKET FOR OUR PRODUCTS IS NEW, AND THE GROWTH IN MARKET ACCEPTANCE FOR
THESE PRODUCTS IS UNCERTAIN.

The markets for our products and media properties have only recently begun
to develop, are rapidly evolving, and are increasingly competitive. Demand and
market acceptance for recently introduced products and services are subject to a
high level of uncertainty and risk. If the market develops more slowly than
expected or becomes saturated with competitors, or if our products and media
properties do not sustain market acceptance, our business, operating results,
and financial condition will be materially and adversely affected.

THE INTERNET IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGES, AND WE MUST ADAPT
QUICKLY TO THESE CHANGES TO COMPETE EFFECTIVELY.

The market for Internet products and services is characterized by rapid
technological developments, evolving industry standards and customer demands,
and frequent new product introductions and enhancements. For example, to the
extent that higher bandwidth Internet access becomes more widely available, we
may be required to make significant changes to the design and content of our
products and media properties. Failure to effectively adapt to these

or any other technological developments could adversely affect our business,
operating results, and financial condition.

WE MUST DEVELOP AND MAINTAIN A "BRAND IDENTITY" FOR OUR PRODUCTS IN ORDER TO
ATTRACT AND EXPAND OUR USER AND ADVERTISER BASE.

We believe that establishing and maintaining the Yahoo! brand is an
important aspect of our efforts to attract and expand our user and advertiser
base. We also believe that the importance of brand recognition will increase due
to the growing number of Internet sites and the relatively low barriers to
entry. Promotion and enhancement of the Yahoo! brand will depend largely on our
success in providing high-quality products and services. In order to attract and
retain Internet users and to promote and maintain the Yahoo! brand, we may find
it necessary to increase expenditures devoted to creating and maintaining brand
loyalty. In the event of any breach or alleged breach of security or privacy
involving our services, or if any third party undertakes illegal or harmful
actions utilizing our community, communications or commerce services, we could
suffer substantial adverse publicity and impairment of our brand and reputation.
If any of these events occur, our business, operating results, and financial
condition will be materially and adversely affected.

OUR ABILITY TO UTILIZE THE WEB AS AN ADVERTISING MEDIUM DEPENDS ON EFFECTIVELY
REACHING AN AUDIENCE THAT IS ATTRACTIVE TO ADVERTISERS AND CONTINUING TO ENHANCE
DELIVERY AND MEASUREMENT SYSTEMS.

Most of our advertising customers have limited experience with the Web as
an advertising medium. Our ability to generate significant advertising revenues
will depend upon:

- the development of a large base of users of our services possessing
demographic characteristics attractive to advertisers; and
- our ability to continue to develop and update effective advertising
delivery and measurement systems.

No standards have yet been widely accepted for the measurement of the
effectiveness of Web-based advertising. Advertisers may determine that banner
advertising, which comprises the majority of our revenues, is not an effective
advertising medium. We may not be able to effectively transition to any other
forms of Web-based advertising, should such other forms prove more popular.
Certain advertising filter software programs are available that limit or remove
banner advertising from Web pages viewed by an Internet user. Such software, if
generally adopted by users, may have a materially adverse effect upon the
viability of advertising on the Internet. Our advertising customers may not
accept the internal and third-party measurements of impressions received by
advertisements on Yahoo! online media properties and such measurements may
contain errors. We rely primarily on our internal advertising sales force for
domestic advertising sales, which involves additional risks and uncertainties,
including risks associated with the recruitment, retention, management,
training, and motivation of sales personnel. As a result of these factors, we
may not be able to sustain or increase current advertising sales levels. Failure
to do so will have a material adverse effect on our business, operating results,
and financial position.

THE SUCCESSFUL OPERATION OF OUR BUSINESS DEPENDS UPON THE SUPPLY OF CRITICAL
ELEMENTS FROM OTHER COMPANIES.

We will depend substantially upon third parties for several critical
elements of our business including technology and infrastructure, content
development, and distribution activities.

TECHNOLOGY AND INFRASTRUCTURE. Inktomi provides text-based Web search results
to complement our directory and navigational guide. We depend substantially upon
ongoing maintenance and technical support from Inktomi to ensure accurate and
rapid presentation of such search results to customers. If Inktomi were to
prematurely terminate its agreement with us or fail to renew it, we would have
to make substantial expenditures to develop or license replacement technology.
This also could result in lower levels of use of our navigational services. We
rely on a private third-party provider, Frontier GlobalCenter, Inc., for our
principal Internet connections. Email and other service Internet connections are
provided to us by GTE. Any disruption in the Internet access provided by these
third-party providers or any failure of these third-party providers to handle
current or higher volumes of use could have a material adverse effect on our
business, operating results, and financial condition. We license technology and
related databases from third parties for certain elements of our properties,
including, among others, technology underlying the delivery of news, stock
quotes and current financial information, chat services, street mapping and
telephone listings, streaming capabilities and similar services. We have
experienced and expect to continue to experience interruptions and delays in
service and availability for such elements, including recent interruptions in
our stock quote services. Furthermore, we are dependent on hardware suppliers
for prompt delivery, installation, and service of servers and other equipment to
deliver our products and services. Any errors, failures, interruptions, or
delays experienced in connection with these third-party technologies and
information services could negatively impact our relationship with users and
adversely affect our brand and our business, and could expose us to liabilities
to third parties.

CONTENT DEVELOPMENT. A key element of our strategy involves the implementation
of Yahoo!-branded media properties targeted for interest areas, demographic
groups, and geographic areas. In these efforts, we rely on content development
and localization efforts of third parties, such as SOFTBANK in Japan and Korea.
We cannot guarantee that our current or future third-party affiliates will
effectively implement these properties, or that their efforts will result in
significant revenue to us. Any failure of these parties to develop and maintain
high-quality and successful media properties also could hurt the Yahoo! brand.
Certain of these arrangements also require us to integrate third parties'
content with our services, which can require significant programming and design
efforts. In addition, we have granted exclusivity provisions to certain third
parties, and may in the future grant additional exclusivity rights. These
exclusive rights may have the effect of preventing us from accepting particular
advertising, sponsorship, or content arrangements during the term of
exclusivity.

DISTRIBUTION RELATIONSHIPS. In order to create traffic for our online
properties and make them more attractive to advertisers and consumers, we have
certain distribution agreements and informal relationships with leading Web
browser providers such as Microsoft and Netscape, operators of online networks
and leading websites, and computer manufacturers, such as Toshiba,
Hewlett-Packard and Gateway. These distribution arrangements typically are not

exclusive, and may be terminated upon little or no notice. In addition, we may
be required to establish relationships with providers of broadband services.
Even if sufficient distribution opportunities are available to us in the U.S. or
abroad, third parties that provide distribution assess fees or otherwise impose
additional conditions on the listing of Yahoo! or our other online properties.
Any failure to cost-effectively obtain distribution could have a material
adverse effect on our business, results of operations, and financial condition.

We recently announced a co-branding and distribution arrangement with AT&T
under which we will provide a Web-based online service in conjunction with
dial-up Internet access provided by AT&T WorldNet Service. The acquisition of
Excite by @Home Networks, whose largest stockholder is AT&T, could adversely
affect our relationship with AT&T.

TO BE SUCCESSFUL IN THE CONTINUALLY EVOLVING MARKET FOR ONLINE SERVICES, WE MUST
CONTINUE TO ENHANCE OUR PROPERTIES AND DEVELOP NEW ONES.

To remain competitive, we must continue to enhance and improve the
functionality, features, and content of the Yahoo! main site, as well as our
other media properties. We may not be able to successfully maintain competitive
user response times or implement new features and functions, which will involve
the development of increasingly complex technologies. Personalized information
services, such as our Web-based email services, message boards, stock portfolios
and Yahoo! Clubs community features, require significantly greater expenses than
our general services. We cannot guarantee that these additional expenses will be
offset by additional revenues from personalized services.

Our future success also depends in part upon the timely processing of
website listings submitted by users and Web content providers, which have
increased substantially in recent periods. We have, from time to time,
experienced significant delays in the processing of submissions. Further delays
could have a material adverse effect on our goodwill among users and Web content
providers, and on our business.

A key element of our business strategy is the development and introduction
of new Yahoo!-branded online properties targeted for specific interest areas,
user groups with particular demographic characteristics, and geographic areas.
We may not be successful in developing, introducing, and marketing such products
or media properties and such properties may not achieve market acceptance,
enhance our brand name recognition, or increase user traffic. Furthermore,
enhancements of or improvements to Yahoo! or new media properties may contain
undetected errors that require significant design modifications, resulting in a
loss of customer confidence and user support and a decrease in the value of our
brand name. If we fail to effectively develop and introduce new properties, or
those properties fail to achieve market acceptance, our business, results of
operations, and financial condition could be adversely affected.

OUR EQUITY INVESTMENTS IN OTHER COMPANIES MAY NOT YIELD ANY RETURNS.

We have made equity investments in affiliated companies that are involved
in the commercialization of Yahoo!-branded online properties, such as Yahoo!
Japan and Yahoo! Korea. These affiliated companies typically are in an early
stage of development and may be expected to incur substantial losses. Our
investments in such companies may not result in any

return. As a result, we have recorded and expect to continue to record a share
of the losses in such affiliates attributable to our ownership. We have also
made equity investments in non-affiliated companies involved in the development
of technologies or services that are complementary or related to our business.
We intend to continue to make significant additional investments in the future.
Losses resulting from such investments could have a material adverse effect on
our operating results.

WE MUST MANAGE OUR RECENT GROWTH AND THE INTEGRATION OF RECENTLY ACQUIRED
COMPANIES SUCCESSFULLY IN ORDER TO ACHIEVE DESIRED RESULTS.

Our recent growth has placed a significant strain on our managerial,
operational, and financial resources. To manage our growth, we must continue to
implement and improve our operational and financial systems and to expand,
train, and manage our employee base. Any inability to manage growth effectively
could have a material adverse effect on our business, operating results, and
financial condition.

The process of managing advertising within large, high traffic websites
such as ours is an increasingly important and complex task. We rely on both
internal and licensed third-party advertising inventory management and analysis
systems. To the extent that any extended failure of our advertising management
system results in incorrect advertising insertions, we may be exposed to "make
good" obligations, which, by displacing advertising inventory, could defer
advertising revenues. Failure of our advertising management systems to
effectively scale to higher levels of use or to effectively track and provide
accurate and timely reports on advertising results also could negatively affect
our relationships with advertisers.

As part of our business strategy, we have completed several acquisitions
and expect to enter into additional business combinations and acquisitions
including our proposed acquisitions of GeoCities and broadcast.com. Acquisition
transactions are accompanied by a number of risks, including:

- the difficulty of assimilating the operations and personnel of the
acquired companies;
- the potential disruption of our ongoing business and distraction of
management;
- the difficulty of incorporating acquired technology or content and
rights into our products and media properties;
- the negative impact on reported earnings if any of these transactions
which are expected to qualify for pooling of interest accounting
treatment for financial reporting purposes fail to so qualify;
- the correct assessment of the relative percentages of in-process
research and development expense which can be immediately written off
as compared to the amount which must be amortized over the appropriate
life of the asset;
- the failure to successfully develop an acquired in-process technology
resulting in the impairment of amounts currently capitalized as
intangible assets;
- unanticipated expenses related to technology integration;
- the maintenance of uniform standards, controls, procedures and
policies;
- the impairment of relationships with employees and customers as a
result of any integration of new management personnel; and
- the potential unknown liabilities associated with acquired businesses.

We may not be successful in addressing these risks or any other problems
encountered in connection with such acquisitions. See "Risks Related to the
Pending GeoCities and Broadcast.com Mergers."

WE WILL CONTINUE TO EXPAND INTO INTERNATIONAL MARKETS IN WHICH WE HAVE LIMITED
EXPERIENCE.

A key part of our strategy is to develop Yahoo!-branded online properties
in international markets. We have developed and operate, through joint ventures
with SOFTBANK and related entities, versions of Yahoo! localized for Japan,
Germany, France, the United Kingdom, and Korea. We also operate localized or
mirror versions of Yahoo! through wholly-owned subsidiaries in Australia,
Denmark, Italy, Norway, Sweden, and Singapore and offer Yahoo! guides in Spanish
and Mandarin Chinese. We or our partners may not be able to successfully market
and operate our products and services in foreign markets.

To date, we have only limited experience in developing localized versions
of our products and marketing and operating our products and services
internationally. We rely on the efforts and abilities of our foreign business
partners in such activities. We also believe that in light of substantial
anticipated competition, we will need to move quickly into international markets
in order to effectively obtain market share. For example, in a number of
international markets, we face substantial competition from ISPs, some of which
have a dominant market share in their territories, that offer or may offer their
own navigational services. We expect to continue to experience higher costs as a
percentage of revenues in connection with international online properties.
International markets we have selected may not develop at a rate that supports
our level of investment. In particular, international markets may be slower in
adoption of the Internet as an advertising and commerce medium.

In addition to uncertainty about our ability to continue to generate
revenues from our foreign operations and expand our international presence,
there are certain risks inherent in doing business on an international level,
including:

- unexpected changes in regulatory requirements;
- trade barriers;
- difficulties in staffing and managing foreign operations including, as
a result of distance, language and cultural differences;
- longer payment cycles;
- currency exchange rate fluctuations;
- problems in collecting accounts receivable;
- political instability;
- export restrictions;
- seasonal reductions in business activity; and
- potentially adverse tax consequences.

One or more of these factors could have a material adverse effect on our future
international operations and, consequently, on our business, operating results,
and financial condition.

OUR OPERATIONS COULD BE SIGNIFICANTLY HINDERED BY THE OCCURRENCE OF A NATURAL
DISASTER OR OTHER CATASTROPHIC EVENT.

Our operations are susceptible to outages due to fire, floods, power loss,
telecommunications failures, break-ins and similar events. In addition,
substantially all of our network infrastructure is located in Northern
California, an area susceptible to earthquakes. We do not have multiple site
capacity in the event of any such occurrence. Despite our implementation of
network security measures, our servers are vulnerable to computer viruses,
break-ins, and similar disruptions from unauthorized tampering with our computer
systems. We do not carry sufficient business interruption insurance to
compensate us for losses that may occur as a result of any of these events. Such
events could have a material adverse effect on our business, operating results,
and financial condition.

OUR INTELLECTUAL PROPERTY RIGHTS ARE COSTLY AND DIFFICULT TO PROTECT.

We regard our copyrights, trademarks, trade dress, trade secrets, and
similar intellectual property as critical to our success. We rely upon trademark
and copyright law, trade secret protection and confidentiality or license
agreements with our employees, customers, partners and others to protect our
proprietary rights. For example, we have obtained the registration for certain
of our trademarks, including "Yahoo!" and "Yahooligans!". Effective trademark,
copyright, and trade secret protection may not be available in every country in
which our products and media properties are distributed or made available
through the Internet, and while we attempt to ensure that the quality of our
brand is maintained by our licensees, our licensees may take actions that could
materially and adversely affect the value of our proprietary rights or the
reputation of our products and media properties. We are aware that third parties
have, from time to time, copied significant portions of Yahoo! directory
listings for use in competitive Internet navigational tools and services.
Protection of the distinctive elements of Yahoo! may not be available under
copyright law. We cannot guarantee that the steps we have taken to protect our
proprietary rights will be adequate.

WE MAY BE SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, WHICH ARE COSTLY
TO DEFEND AND COULD LIMIT OUR ABILITY TO USE CERTAIN TECHNOLOGIES IN THE FUTURE.

Many parties are actively developing search, indexing, e-commerce and other
Web-related technologies. We believe that these parties will continue to take
steps to protect these technologies, including seeking patent protection. As a
result, we believe that disputes regarding the ownership of these technologies
are likely to arise in the future. For example, we are aware that a number of
patents have been issued in the areas of:

- electronic commerce;
- online auctions;
- Web-based information indexing and retrieval, including patents
recently issued to one of our direct competitors;
- online direct marketing;
- fantasy sports;
- common Web graphics formats; and
- mapping technologies.

We anticipate that additional third-party patents will be issued in the
future. From time to time, parties assert patent infringement claims against us
in the form of letters, lawsuits and other forms of communications.

In addition to patent claims, third parties may assert claims against us
alleging infringement of copyrights, trademark rights, trade secret rights or
other proprietary rights or alleging unfair competition. In the event that we
determine that licensing patents or other proprietary rights is appropriate, we
cannot guarantee that we will be able to license such proprietary rights on
reasonable terms or at all. We may incur substantial expenses in defending
against third-party infringement claims regardless of the merit of such claims.
In the event that there is a determination that we have infringed third-party
proprietary rights, we could incur substantial monetary liability and be
prevented from using the rights in the future.

We are aware of lawsuits filed against two of our competitors regarding the
presentment of advertisements in response to search requests on "keywords" that
may be trademarks of third parties. It is not clear what, if any, impact an
adverse ruling in these recently filed lawsuits would have on us. In addition,
lawsuits have been filed against broadcast.com, a company we propose to acquire,
alleging patent infringement relating to broadcast.com's use of streaming media
products.

WE DEPEND ON KEY PERSONNEL WHO MAY NOT CONTINUE TO WORK FOR US.

We are substantially dependent on the continued services of our key
personnel, including our two founders, our chief executive officer, chief
financial officer, chief operating officer, chief technical officer, our vice
presidents in charge of business development, sales and production and our
senior engineers. Each of these individuals has acquired specialized knowledge
and skills with respect to Yahoo! and its operations. As a result, if any of
these individuals were to leave Yahoo!, we could face substantial difficulty in
hiring qualified successors and could experience a loss in productivity while
any such successor obtains the necessary training and experience. We expect that
we will need to hire additional personnel in all areas. The competition for
qualified personnel is intense, particularly in the San Francisco Bay Area,
where our corporate headquarters are located. At times, we have experienced
difficulties in hiring personnel with the right training or experience,
particularly in technical areas. We do not maintain key person life insurance
for any of our personnel. If we do not succeed in attracting new personnel, or
retaining and motivating existing personnel, our business will be adversely
affected.

GEOCITIES, A COMPANY WE PROPOSE TO ACQUIRE, HAS AN UNPROVEN BUSINESS MODEL THAT
IS HIGHLY DEPENDENT ON THE CONTINUED SUPPORT OF ITS MEMBERS AND ADVERTISERS.

GeoCities' business model, which will be incorporated into and become a
meaningful part of the Yahoo! business model following the consummation of the
GeoCities merger (assuming the merger is consummated), depends upon its ability
to leverage its community platform and to generate multiple revenue streams.
The potential profitability of this business model is unproven, and, to be
successful, we must, among other things, develop and market solutions that
achieve broad market acceptance by our members, Internet advertisers, commerce
vendors and Internet users. GeoCities is substantially dependent upon its
member-generated content, the grass-roots promotional efforts of its members,
the acceptance

by its members of advertising and other promotional programs of third parties
and GeoCities and the voluntary involvement of its community leaders and
liaisons to attract Web users to its site and to reduce the demands on company
personnel. This model has existed for only a limited period of time, and, as a
result, is relatively unproven. There can be no assurance that member-generated
content or the promotional efforts of members will continue to attract users to
GeoCities' website or that we will attract advertising revenue from third
parties in sufficient amounts to make the business commercially viable. There
can also be no assurance that GeoCities' community leaders and liaisons will
continue to devote their time voluntarily to improving the community. If,
following the consummation of the merger, a substantial number of homesteaders
become dissatisfied with our services or our focus on the commercialization of
those services, our business, results of operations and financial condition
would be adversely affected.

The GeoCities business model relies on volunteers such as its community
leaders and liaisons to provide assistance to homesteaders and other users of
the GeoCities website. We are aware of a published report that several
volunteers at AOL have asked the U.S. Department of Labor to investigate whether
AOL's use of voluntary labor violates the Federal Fair Labor Standards Act. The
same report states that the Labor Department has not begun an investigation into
the matter, but acknowledges that it has received information from several of
AOL's volunteers. Although we are not aware of any similar requests by any of
GeoCities' volunteers, no assurances can be given that such requests will not be
made in the future. We do not believe that any of GeoCities' practices in
connection with the use of volunteers in its business is in violation of any
labor laws; however, to the extent that the Department of Labor makes an adverse
determination in the AOL matter, it could materially and adversely affect our
business and financial results following the consummation of the GeoCities
merger.

WE ARE SUBJECT TO U.S. AND FOREIGN GOVERNMENT REGULATION OF THE INTERNET, THE
IMPACT OF WHICH IS DIFFICULT TO PREDICT.

There are currently few laws or regulations directly applicable to the
Internet. The application of existing laws and regulations to Yahoo! relating to
issues such as user privacy, defamation, pricing, advertising, taxation,
gambling, sweepstakes, promotions, content regulation, quality of products and
services, and intellectual property ownership and infringement can be unclear.
In addition, we will also be subject to new laws and regulations directly
applicable to our activities. Any existing or new legislation applicable to us
could expose us to substantial liability, including significant expenses
necessary to comply with such laws and regulations, and dampen the growth in use
of the Web.

Other nations, including Germany, have taken actions to restrict the free
flow of material deemed to be objectionable on the Web. The European Union has
recently adopted privacy and copyright directives that may impose additional
burdens and costs on our international operations. In addition, several
telecommunications carriers, including America's Carriers' Telecommunications
Association, are seeking to have telecommunications over the Web regulated by
the FCC in the same manner as other telecommunications services. Many areas with
high Web use have begun to experience interruptions in phone service, and local
telephone carriers, such as Pacific Bell, have petitioned the FCC to regulate
ISPs and OSPs and to impose access fees. A number of proposals have been made at
the federal, state and local level that would impose additional taxes on the
sale of goods and services through the Internet.

If any such proposals are adopted, it could substantially impair the growth of
the Internet and adversely affect us.

Several recently passed federal laws could have an impact on our business.
The Digital Millenium Copyright Act is intended to reduce the liability of
online service providers for listing or linking to third-party websites that
include materials that infringe copyrights or other rights of others. The
Children's Online Protection Act and the Children's Online Privacy Protection
Act are intended to restrict the distribution of certain materials deemed
harmful to children and impose additional restrictions on the ability of online
services to collect user information from minors. In addition, the Protection of
Children From Sexual Predators Act of 1998 requires online service providers to
report evidence of violations of federal child pornography laws under certain
circumstances. We are currently reviewing this legislation, and cannot currently
predict the effect, if any, that it will have on our business. Such legislation
may impose significant additional costs on our business or subject us to
additional liabilities.

We post policies concerning the use and disclosure of user data. In
addition, following the consummation of the GeoCities merger, we will be
required to comply, to a certain extent, with a consent order issued by the FTC
to GeoCities, which imposes certain obligations and restrictions with respect to
information collected from users. Any failure by us to comply with our posted
privacy policies or, following the consummation of the GeoCities merger, the
consent order could adversely affect our business, results of operations, and
financial condition.

Due to the global nature of the Web, it is possible that the governments of
other states and foreign countries might attempt to regulate its transmissions
or prosecute us for violations of their laws. We might unintentionally violate
such laws. Such laws may be modified, or new laws enacted, in the future. Any
such developments could have a material adverse effect on our business, results
of operations, and financial condition.

WE MAY BE SUBJECT TO LEGAL LIABILITY FOR OUR ONLINE SERVICES.

We host a wide variety of services that enable individuals to exchange
information, generate content, conduct business and engage in various online
activities, including services relating to online auctions and, following the
consummation of the GeoCities merger, the homesteading and other services
offered by GeoCities. The law relating to the liability of providers of these
online services for activities of their users is currently unsettled. Claims
could be made against us for defamation, negligence, copyright or trademark
infringement, unlawful activity, tort, including personal injury, fraud, or
other theories based on the nature and content of information that we provide
links to or that may be posted online or generated by our users or with respect
to auctioned materials. These types of claims have been brought, and sometimes
successfully pressed, against online service providers in the past. In addition,
we are aware that governmental agencies are currently investigating the conduct
of online auctions.

We also periodically enter into arrangements to offer third-party products,
services, or content under the Yahoo! brand or via distribution on Yahoo!
properties, including stock quotes and trading information. Likewise, GeoCities
and broadcast.com license third-party content for distribution over the
Internet. We may be subject to claims concerning these products, services or
content by virtue of our involvement in marketing, branding, broadcasting or
providing access to them, even if we do not ourself host, operate, provide, or
provide access

to these products, services or content. While our agreements with these parties
often provide that we will be indemnified against such liabilities, such
indemnification may not be adequate.

It is also possible that, if any information provided directly by us
contains errors or is otherwise negligently provided to users, third parties
could make claims against us. For example, we offer Web-based email services,
which expose us to potential risks, such as liabilities or claims resulting from
unsolicited email, lost or misdirected messages, illegal or fraudulent use of
email, or interruptions or delays in email service. Investigating and defending
any of these types of claims is expensive, even to the extent that the claims do
not result in liability.

OUR E-COMMERCE ACTIVITIES MAY EXPOSE US TO UNCERTAIN LEGAL RISKS AND POTENTIAL
LIABILITIES.

As part of our business, we enter into agreements with sponsors, content
providers, service providers, and merchants under which we are entitled to
receive a share of revenue from the purchase of goods and services by users of
our online properties. In addition, we provide hosting and other services to
online merchants. These types of arrangements may expose us to additional legal
risks and uncertainties, including potential liabilities relating to the
products and services offered by such third parties.

We recently began offering a Yahoo!-branded VISA credit card, which
includes a "rewards" program entitling card users to receive points that may be
redeemed for merchandise, such as books or music. This arrangement exposes us to
risks and expenses relating to compliance with consumer protection laws, loss of
customer data, disputes over redemption procedures and rules, products
liability, sales taxation and liabilities associated with any failure in
performance by participating merchants.

Although we maintain liability insurance, insurance may not cover these
claims or may not be adequate. Even to the extent these types of claims do not
result in material liability, investigating and defending the claims is
expensive.

RISKS RELATED TO THE PENDING GEOCITIES AND BROADCAST.COM MERGERS

EXPECTED BENEFITS OF EITHER MERGER MAY NOT BE REALIZED.

If we are not able to effectively integrate technology, operations and
personnel from the acquired companies in a timely and efficient manner, then the
benefits of such mergers will not be realized. In particular, if the integration
is not successful:

- our operating results may be adversely affected;
- we may lose key personnel; and
- we may not be able to retain the acquired companies' user bases or
content providers (including, in the case of the GeoCities merger,
GeoCities' community membership base of homesteaders).

In addition, whether or not such integrations are successful, the attention
and effort devoted to the integration of the acquired companies will
significantly divert management's attention from other important issues, and
could result in the delay of strategic initiatives, the

disruption of sales and marketing efforts, and the loss of customers, vendors,
and employees, any of which could have a material adverse impact on us.

EITHER MERGER COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS.

If the benefits of either merger do not exceed the costs associated with
such merger, including the dilution to Yahoo! shareholders resulting from the
issuance of shares in connection with such merger, our financial results,
including earnings per share, could be adversely affected. Specifically, we
expect to incur a one-time charge of approximately $66 million related to the
GeoCities merger during the second quarter of 1999 and a yet to be determined
amount related to the broadcast.com merger during the third quarter of 1999.

THE MARKET PRICE OF OUR COMMON STOCK MAY DECLINE AS A RESULT OF EITHER MERGER.

The market price of our common stock may decline as a result of the mergers
with GeoCities or broadcast.com if:

- the integration of Yahoo! with either company is unsuccessful;
- we do not achieve the perceived benefits of either merger as rapidly
or to the extent anticipated by financial analysts; or
- the effect of either merger on our financial results is not consistent
with the expectations of financial analysts.

FAILURE OF EITHER MERGER TO QUALIFY AS A POOLING OF INTERESTS WOULD NEGATIVELY
AFFECT OUR FINANCIAL RESULTS.

The failure of either merger to qualify for pooling of interests accounting
treatment for financial reporting purposes for any reason would materially and
adversely affect our reported earnings and, likely, the price of our common
stock.

The availability of pooling of interests accounting treatment for each
merger depends upon circumstances and events occurring after the effective time
of such merger. For example, there must be no significant changes in the
business of the combined company, including significant dispositions of assets,
for a period of two years following the effective time of each such merger.
Further, affiliates of Yahoo! and the acquired company must not sell any shares
of either Yahoo! or the acquired company's capital stock until the day that
Yahoo! publicly announces financial results covering at least 30 days of
combined operations of Yahoo! and the acquired company after each such merger.
If affiliates of Yahoo! or the acquired company sell their shares of Yahoo!
common stock prior to that time despite a contractual obligation not to do so,
such merger may not qualify for accounting as a pooling of interests for
financial reporting purposes.

FAILURE TO SUCCESSFULLY COMPLETE THE ACQUISITION OF EITHER GEOCITIES OR
BROADCAST.COM COULD ADVERSELY AFFECT OUR STOCK PRICE.

The consummation of the GeoCities and broadcast.com mergers is subject to a
number of conditions including approval by the GeoCities and broadcast.com
stockholders, respectively. In addition, the broadcast.com merger is still
awaiting regulatory approval. If we

are unable to effectively complete either merger for any reason, our business
and operations could be seriously harmed. In particular, whether or not the
mergers are successful over the long term, the acquisition of GeoCities and
broadcast.com may:

- significantly divert the attention of management from other important
issues;
- delay strategic initiatives;
- cause the loss of customers or key employees; and
- disrupt sales and marketing efforts.

In addition, our stock price may decline if it does not achieve the
perceived benefits of either merger in a manner consistent with the expectations
of the financial markets.

RISKS RELATED TO BROADCAST.COM'S BUSINESS

Assuming the proposed broadcast.com merger is consummated, broadcast.com
will constitute a meaningful part of Yahoo!'s business and, as a result, we will
become subject to the following additional risks with respect to the
broadcast.com portion of our business.

BROADCAST.COM IS DEPENDENT ON THIRD-PARTY CONTENT PROVIDERS.

Broadcast.com's future success depends upon its ability to aggregate
compelling content and deliver that content on the Web. Broadcast.com typically
does not create content. Rather, it relies on third parties including major
sports organizations, radio and television stations, record labels, cable
networks, businesses, colleges and universities, film producers and
distributors, and other organizations for the compelling and entertaining
content available on the broadcast.com site. Broadcast.com's ability to
maintain and build relationships with third-party content providers will be
critical to the combined company's success and also exposes it to the following
risks.

MANY OF BROADCAST.COM'S CONTENT AGREEMENTS EXTEND FOR A PERIOD OF LESS THAN TWO
YEARS AND THERE CAN BE NO GUARANTEE THAT THEY WILL BE RENEWED UPON THEIR
EXPIRATION ON FAVORABLE TERMS OR AT ALL. Broadcast.com's inability to secure
licenses from content providers or performances rights societies or the
termination of a significant number of content provider agreements would
decrease the availability of content and likely result in decreased traffic on
broadcast.com's websites. As a result, broadcast.com would receive decreased
advertising revenue, which would adversely affect its business. Also, as
competition for compelling content increases, broadcast.com's content providers
may increase the prices at which it offers its content to broadcast.com upon the
expiration of these contracts. Either of these events would negatively affect
broadcast.com's business.

THE ROYALTY RATES FOR CERTAIN MUSIC LICENSES HAVE NOT BEEN SET AND MAY BE SET AT
RATES THAT ARE HIGHER THAN ANTICIPATED. In order to have the right to broadcast
music on the Web, broadcast.com is currently required to license and pay
royalties on the copyright in the musical compositions and also to license and
pay royalties on the separate copyright in the actual recordings of the music to
be broadcast. Broadcast.com has license agreements in place with ASCAP and BMI,
the two largest music societies that license the copyrights to the compositions,
to license the musical composition copyrights on reasonable terms.

However, there is currently a large amount of uncertainty related to licensing
issues and there can be no assurance that those music societies will renew those
contracts on similar terms. The Recording Industry Association of America
represents the five major record labels in setting the royalties to be paid by
webcasters, like broadcast.com, for the license to most music recordings. The
RIAA has not yet determined what the royalty and other terms for the actual
sound recordings will be and it is therefore unclear how it will effect
broadcast.com's business. If ASCAP, BMI or the RIAA set high royalty rates,
offer to renew existing agreements at higher rates or provide other terms which
make it difficult to operate broadcast.com's current business model, our overall
business could be adversely affected.

CONTENT AGREEMENTS ARE OFTEN NOT EXCLUSIVE AND OTHER COMPANIES ARE OFTEN ABLE TO
OFFER SIMILAR CONTENT. In many cases, broadcast.com has not been able to enter
into exclusive licenses to the content it licenses from third parties.
Accordingly, other Web broadcasters may often be able to offer similar content
and in most cases, the content is available for broadcast on other media like
radio or television. These media are currently, and for the foreseeable future
will be, much more widely adopted for listening or viewing such content than the
Web. To the extent other companies are able to broadcast content that is
similar to or the same as broadcast.com, the broadcast.com website may not grow
at all or at a slower rate than anticipated and therefore broadcast.com will
generate less advertising revenue than expected.

BROADCAST.COM'S BUSINESS IS DEPENDENT ON BUSINESS SERVICES REVENUES.

Broadcast.com expects to derive a substantial amount of its revenues by
providing services to businesses to enable them to broadcast streaming content
over the Internet and corporate intranets. The demand and market acceptance for
these business services solutions is uncertain. Its ability to establish and
maintain a leadership position in Internet and intranet broadcasting for
businesses and in the distribution of other live and on-demand events will
depend on, among other things:

- market acceptance of its current and future business service offerings;
- the reliability of its networks and services; and
- the extent to which end users are able to receive broadcasts at adequate
bit rates to provide for high quality services, none of which can be
assured.

Broadcast.com operates in a market that is at a very early stage of
development, is rapidly evolving and is characterized by an increasing number of
competitors. Today, the most significant of these competitors are companies
offering teleconferencing or videoconferencing services. Broadcast.com also
expects other competitors to become more formidable in the future including
software companies, internet service providers or networking companies. Demand
and market acceptance for recently introduced services by broadcast.com are
subject to a high level of uncertainty and risk. Sales of business services may
require an extended sales effort in certain cases. In addition, potential
customers must accept audio and video broadcast services over the Internet as a
viable alternative to face-to-face meetings, television or audio, audio
teleconferences and video conferencing. Because the market for business
services is new and evolving, it is difficult to predict the size of this market
and its growth rate, if any. In addition, it is uncertain

whether businesses and other organizations will utilize the Internet to any
significant degree as a means of broadcasting business conferences and other
events. There can be no assurance that the market for broadcast.com's business
services will continue to develop or be sustainable. If the market fails to
develop, develops more slowly than expected or becomes more competitive than is
currently expected, or if broadcast.com's sites do not achieve or sustain market
acceptance, the portion of our business related to such activities could be
adversely affected.

BROADCAST.COM IS DEPENDENT ON THE DEVELOPMENT, ACCEPTANCE AND AVAILABILITY OF
STREAMING MEDIA TECHNOLOGY.

Broadcast.com relies on the two leading providers of streaming media
products, RealNetworks and Microsoft, to license encoders to it in order to
broadcast its content and to distribute player software in order to create a
broad base of users. There can be no assurance that these providers will
continue to license these products on reasonable terms, or at all, to
broadcast.com. In addition, users are currently able to electronically download
copies of the RealNetwork's RealPlayer and Microsoft's Windows Media Player
software free of charge from a wide variety of sources, including broadcast.com.
These providers of streaming media products may begin charging users for copies
of their player software or otherwise change their business model in a manner
which slows the widespread acceptance of these products. In order for
broadcast.com to be successful, there must be a large and growing base of users
of these streaming media products. In addition, competitors of RealNetworks and
Microsoft may introduce and promote products that obtain a substantial share of
the market for streaming media software. In such event, broadcast.com may need
to acquire licenses from such companies, as to which there can be no assurance
that they may be available on reasonable terms or at all. Broadcast.com has
limited or no control over the availability or acceptance of streaming media
software, and to the extent that any of these circumstances occur,
broadcast.com's business will be materially adversely effected.

Broadcast.com also depends on the availability of high quality streaming
media technology to users. Early streaming media technology suffered from poor
audio quality, and video streaming at 28.8 kbps (thousands of bits per second)
currently is of lower quality than television or radio broadcasts. In addition,
congestion over the Internet and packet loss may interrupt audio and video
streams, resulting in unsatisfying user experiences. In order to receive
streamed media adequately, users generally must have multimedia PCs with certain
microprocessor requirements and at least 28.8 kbps Internet access and streaming
media software. Users typically electronically download such software and
install it on their PCs. Such installation may require technical expertise that
some users do not possess. Furthermore, in order for users to receive streaming
media over corporate intranets, information systems managers may need to
reconfigure such intranets. Because of bandwidth constraints on corporate
intranets, some information systems managers may block reception of streamed
media. Widespread adoption of streaming media technology depends on overcoming
these obstacles, improving audio and video quality and educating customers and
users in the use of streaming media technology. If streaming media technology
fails to overcome these obstacles, broadcast.com's business could be adversely
affected.

BROADCAST.COM MAY NOT BE ABLE TO SUCCESSFULLY SCALE ITS OPERATIONS.

Broadcast.com's success depends on its ability to attract large numbers of
additional users and broadcast audio and video programming to a large number of
users simultaneously. In addition, streaming media content requires more
bandwidth than most data transmissions. As a result, to the extent that demand
for broadcast.com's content increases, there will be a need to expand its
infrastructure, including the capacity of its hardware servers and the
sophistication of its software. It may also result in the demand by a greater
number of users to transition to the use of high bandwidth Internet access
devices such as cable modems and xDSL devices. This expansion will be expensive
and complex, and require additional technical expertise. If broadcast.com is
unable to accommodate this growth, it will be adversely affected.

From the commencement of operations, broadcast.com has deployed unicasting
(one user per company originated stream) technology to broadcast audio and video
programming to users over the Internet. Recently, it began to deploy another
broadcast technology, multicasting (multiple users per company originated
stream). Broadcast.com believes that unicasting will continue to be used to
distribute archived and on-demand programming and that multicasting or a similar
broadcasting technology will be used for live and other events where a larger
audience for the content is expected.

To increase its unicast capacity, the successful expansion of its network
infrastructure through the acquisition and deployment of additional network
equipment and bandwidth will be necessary. There can be no assurance that
broadcast.com will be successful in such expansion.

Broadcast.com also must successfully deploy multicasting or a similar
broadcasting technology that can deliver streaming media content to many users
simultaneously through one-to-many Internet connections. Broadcast.com will be
required to test, deploy and successfully scale its multicast network
infrastructure to serve mass audiences. There can be no assurance that it will
be successful in doing so, that multicasting will be able to support a
substantial audience or that an alternative technology will not emerge that
offers superior broadcasting technology as compared to multicasting. In the
event that multicasting technology is not successfully deployed in a timely
manner or such an alternative technology emerges, broadcast.com would likely be
required to expend significant resources to deploy a technology other than
multicasting, which could adversely affect its results of operations. If it
fails to scale its broadcasts to large audiences of simultaneous users, such
failure could adversely affect its business.

INVESTMENT RISKS

OUR STOCK PRICE HAS HISTORICALLY BEEN VOLATILE, WHICH MAY MAKE IT MORE DIFFICULT
FOR YOU TO RESELL SHARES WHEN YOU WANT AT PRICES YOU FIND ATTRACTIVE.

The trading price of our common stock has been and may continue to be
subject to wide fluctuations. During 1998 and the first quarter of 1999, the
closing sale prices of our common stock on the Nasdaq Stock Market ranged from
$14.52 to $207.69. The stock price may fluctuate in response to a number of
events and factors, such as quarterly variations in

operating results, announcements of technological innovations or new products
and media properties by us or our competitors, changes in financial estimates
and recommendations by securities analysts, the operating and stock price
performance of other companies that investors may deem comparable, and news
reports relating to trends in our markets. In addition, the stock market in
general, and the market prices for Internet-related companies in particular,
have experienced extreme volatility that often has been unrelated to the
operating performance of such companies. These broad market and industry
fluctuations may adversely affect the price of our stock, regardless of our
operating performance.

MANAGEMENT AND ONE LARGE SHAREHOLDER BENEFICIALLY OWN MORE THAN 50% OF OUR
STOCK; THEIR INTERESTS COULD CONFLICT WITH YOURS.

Yahoo!'s directors and executive officers, and SOFTBANK beneficially own
more than 50% of our outstanding common stock. As a result of their ownership,
our directors and executive officers and SOFTBANK collectively are able to
control all matters requiring shareholder approval, including the election of
directors and approval of significant corporate transactions. Such concentration
of ownership may also have the effect of delaying or preventing a change in
control of Yahoo!.

ANTI-TAKEOVER PROVISIONS COULD MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO
ACQUIRE US.

Our board of directors has the authority to issue up to 10,000,000 shares
of preferred stock and to determine the price, rights, preferences, privileges
and restrictions, including voting rights, of those shares without any further
vote or action by the shareholders. The rights of the holders of common stock
may be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change of control of Yahoo! without further action by the shareholders and may
adversely affect the voting and other rights of the holders of common stock. We
have no present plans to issue shares of preferred stock. Further, certain
provisions of our charter documents, including provisions eliminating the
ability of shareholders to take action by written consent and limiting the
ability of shareholders to raise matters at a meeting of shareholders without
giving advance notice, may have the effect of delaying or preventing changes in
control or management of Yahoo!, which could have an adverse effect on the
market price of our stock. In addition, our charter documents do not permit
cumulative voting, which may make it more difficult for a third party to gain
control of the Yahoo! Board of Directors.

PRIVATELY-SOLD SHARES ELIGIBLE FOR PUBLIC RESALE COULD HAVE A NEGATIVE EFFECT ON
OUR STOCK PRICE.

As of March 31, 1999, we had 202,927,000 shares of common stock
outstanding, and there were outstanding options to purchase approximately
50,833,000 shares of our common stock under stock option plans. Of the
outstanding shares of common stock, approximately 2,570,000 shares issued by us
in connection with acquisitions and investments have been available for resale
pursuant to currently effective registration statements previously filed by us
with the SEC. Sales of substantial amounts of these shares in the public market
or the prospect of these sales could adversely affect the market price of our
common stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to the impact of interest rate changes, foreign
currency fluctuations, and change in the market values of its investments.

INTEREST RATE RISK. The Company's exposure to market rate risk for changes
in interest rates relates primarily to the Company's investment portfolio. The
Company has not used derivative financial instruments in its investment
portfolio. The Company invests its excess cash in debt instruments of the U.S.
Government and its agencies, and in high-quality corporate issuers and, by
policy, limits the amount of credit exposure to any one issuer. The Company
protects and preserves its invested funds by limiting default, market and
reinvestment risk.

Investments in both fixed rate and floating rate interest earning
instruments carries a degree of interest rate risk. Fixed rate securities may
have their fair market value adversely impacted due to a rise in interest rates,
while floating rate securities may produce less income than expected if interest
rates fall. Due in part to these factors, the Company's future investment
income may fall short of expectations due to changes in interest rates or the
Company may suffer losses in principal if forced to sell securities which have
declined in market value due to changes in interest rates.

FOREIGN CURRENCY RISK. International revenues from the Company's foreign
subsidiaries were less than 10% of total revenues. International sales are made
mostly from the Company's foreign sales subsidiaries in their respective
countries and are typically denominated in the local currency of each country.
These subsidiaries also incur most of their expenses in the local currency.
Accordingly, all foreign subsidiaries use the local currency as their functional
currency.

The Company's international business is subject to risks typical of an
international business, including, but not limited to differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions, and foreign exchange rate volatility.
Accordingly, the Company's future results could be materially adversely impacted
by changes in these or other factors.

The Company's exposure to foreign exchange rate fluctuations arises in part
from intercompany accounts in which costs incurred in the United States are
charged to the Company's foreign sales subsidiaries. These intercompany
accounts are typically denominated in the functional currency of the foreign
subsidiary in order to centralize foreign exchange risk with the parent company
in the United States. The Company is also exposed to foreign exchange rate
fluctuations as the financial results of foreign subsidiaries are translated
into U.S. dollars in consolidation. As exchange rates vary, these results, when
translated, may vary from expectations and adversely impact overall expected
profitability. The effect of foreign exchange rate fluctuations on the Company
in the quarter ended March 31, 1999 was not material.

INVESTMENT RISK. The Company invests in equity instruments of
privately-held, information technology companies for business and strategic
purposes. These investments are included in other long-term assets and are
accounted for under the cost method when

ownership is less than 20%. For these non-quoted investments, the Company's
policy is to regularly review the assumptions underlying the operating
performance and cash flow forecasts in assessing the carrying values. The
Company identifies and records impairment losses on long-lived assets when
events and circumstances indicate that such assets might be impaired. To date,
no such impairment has been recorded. During 1998, certain of these investments
in privately-held companies became marketable equity securities when the
investees completed initial public offerings. Such investments, which are in
the Internet industry, are subject to significant fluctuations in fair market
value due to the volatility of the stock market, and are recorded as long-term
investments.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time the Company is subject to legal proceedings and claims in
the ordinary course of business, including claims of alleged infringement of
trademarks, copyrights and other intellectual property rights, and a variety of
claims arising in connection with the Company's email, message boards, and other
communications and community features, such as claims alleging defamation and
invasion of privacy. 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

Yahoo! Inc. made the following unregistered sales of the Company's Common
Stock in the quarter ended March 31, 1999:

- ------------------------------------------------------------------------------------------------------------------------------------
TRANSACTION AMOUNT OF NAME OF CONSIDERATION PERSONS OR CLASS EXEMPTION
DATE SECURITIES SOLD UNDERWRITER OR RECEIVED OF PERSONS TO FROM
PLACEMENT WHOM THE REGISTRATION
AGENT SECURITIES WERE CLAIMED
SOLD
- ------------------------------------------------------------------------------------------------------------------------------------

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

1/15/99 50,000 Shares (1) None (1) Members of Section 4(2)
Log-Me- of the
On.Com LLC Securities
Act of 1933,
as amended
- ------------------------------------------------------------------------------------------------------------------------------------

(1) Pursuant to the acquisition of Log-Me-On on January 15, 1999, the Company
issued 50,000 shares of Yahoo! Common Stock and paid $1.5 million in cash
to the members of Log-Me-On. The resale of these shares has been
registered on a Registration Statement on Form S-3 filed with the
Securities and Exchange Commission on February 2, 1999 and amended on March
12, 1999 and March 23, 1999.

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. Reports on Form 8-K:

1) On January 13, 1999, the Company filed a report on Form 8-K
announcing (i) Yahoo!'s financial results for the quarter and
year ended December 31, 1998, (ii) a 2-for-1 stock split, and
(iii) the expansion of executive roles.

2) On January 21, 1999, the Company filed a report on Form 8-K/A
which amends the Form 8-K previously filed on June 12, 1998. The
original Form 8-K announced the acquisition of Viaweb and
included unaudited pro forma condensed financial statements which
were adjusted after discussions with the Staff at the Securities
and Exchange Commission regarding the allocation of the Viaweb
purchase price.

3) On January 21, 1999, the Company filed a report on Form 8-K/A
which amends the Form 8-K/A previously filed on November 19,
1998. The original Form 8-K/A included supplementary consolidated
financial statements of Yahoo!, restated for the acquisition of
Yoyodyne, which were adjusted after discussions with the Staff at
the Securities and Exchange Commission regarding the allocation
of the Viaweb purchase price.

4) On January 29, 1999, the Company filed a report on Form 8-K
announcing that they and GeoCities had entered into an Agreement
and Plan of Merger, dated as of January 27, 1999, which sets
forth the terms and conditions of the proposed merger of a
subsidiary of Yahoo! with and into GeoCities pursuant to which
GeoCities will become a wholly-owned subsidiary of Yahoo!.

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: May 17, 1999 By: /s/ Gary Valenzuela
----------------------
Senior Vice President, Finance
and Administration, and Chief
Financial Officer
(Principal Financial Officer)

Dated: May 17, 1999 By: /s/ James J. Nelson
----------------------
Vice President, Finance
(Principal Accounting Officer)

YAHOO! INC.

INDEX TO EXHIBITS

Exhibit
Title No.
- ----- ---

* Termination Agreement between Yahoo! Inc. and Rogers Media Inc.
dated January 6, 1999. . . . . . . . . . . . . . . . . . . . . . . . . . .10.1

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

* confidential treatment requested