F012217293 - Yahoo, Google and Internet Math - Revenue Is...

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Yahoo, Google and Internet Math --- Revenue Is Counted Differently By the Web-Search Powerhouses, Creating Confusion for Investors By Scott Thurm and Kevin J. Delaney May 10, 2004 The Wall Street Journal http://online.wsj.com/article/0,,SB108415195909406432,00.html YAHOO INC. reported first-quarter revenue of $758 million. Looked at another way, Yahoo said revenue totaled $550 million. Rival Google Inc. said its first-quarter revenue totaled $390 million. Or maybe it was really $652 million. Confused? Pity the investors trying to place a value on Google for its highly anticipated initial public stock offering. For guidance, many look at Yahoo, another Internet company with a similar business to Google's and which has been public since 1996. But Yahoo and Google don't count revenue the same way, making it hard to compare many aspects of the two companies' finances. Google uses a more-conservative definition that has the effect of damping its revenue and increasing its profit margins. The differences demonstrate that accounting standards may be "generally accepted," but they aren't always uniformly interpreted. And details about revenue-recognition policies buried in the fine print of financial statements can trip up less-than-seasoned investors. In this case, the difference revolves around the way that Yahoo and Google treat revenue from small-text advertisements that they place on other companies' Web sites. The two Internet companies effectively act as technological intermediaries and quasi-advertising agencies, bringing together Web publishers and advertisers. Yahoo and Google get paid each time an Internet user clicks on an ad, then give some of that money to the Web publisher on whose site the ad appeared. (Yahoo and Google also accept ads for their own sites, and both companies account for them in the same way.) In accounting terms, however, that is where the similarities end. Yahoo counts as revenue the "gross" amount it is paid. It counts its payment to the publisher as an expense, labeled as a "traffic acquisition cost." Google, by contrast, counts as revenue only the "net" amount remaining, after it pays the Web publisher. Here's how it works in practice: XYZ Corp. places ads on the sites of UVW Corp.,
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This note was uploaded on 10/20/2010 for the course ACCOUNTING f0122 taught by Professor Gatot during the Spring '10 term at Bina Nusantara University.

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F012217293 - Yahoo, Google and Internet Math - Revenue Is...

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