Yahoo! CFO Likes Ad Trends

Are you seeing many advertisers from the brand side cross over onto the search side, and vice versa?

It's hard to know. The major categories in the two forms are somewhat different today. The one industry that crosses both forms the most extensively is financial. Financial services is one of the largest brand categories and one of the largest search categories. Travel and retail are among the largest search categories. But both tend to be between Nos. 5 and 10 in rank for the brand side.

To date, the industries that are the largest in one category have tended not to be largest in another, except in the financial category, where you see a lot of spending on both.

TSC: Like a lot of Internet companies, Yahoo! has been making a number of small acquisitions. Do you think that trend will increase or decrease from here?

Decker: It's hard to predict how much money we'll spend because it will depend on what kind of things emerge, where we see attractive return and where we see great integration potential. We spent just under $800 million last year on 10 to 12 deals. Some were larger like [European comparison-shopping site] Kelkoo and [U.S. music software] MusicMatch. But some smaller technology deals also helped us with speed to market or new technology we didn't have.

Our intention is very much to continue doing the same. If anything, we're looking at more and more things. We're very encouraged by what we're seeing in terms of value-creating opportunities. But it's tough to predict when they'll close, or whether they'll close or exactly how many well do. But we don't expect any conceptual change in what we'll do.

Some of these companies, like Flickr, have lots of promise but are still very much startups. How do you value them?

Decker: I'm very involved in that process. Here's the process we go through: We do a discounted free cash flow analysis on everything we buy, and we compare the returns on buying something and integrating it into our assets with the kind of returns we'd get if we built it ourselves.

In most cases we do build. When we choose to make acquisitions, it's in part the speed-to-market advantage by buying and that the marketplace is growing quickly in terms of dollars, giving us actually a higher ROI than if we built it ourselves. In other cases when we buy it, it could be because of certain expertise of the people we think are different and incremental to what we have, and can usually be extensible across different platforms to help leverage the rest of Yahoo!.