Yahoo! Chat Falls Flat

Yahoo! also expects to benefit from the growth of user-generated content, including blogs, photos and videos. The Internet audience is also showing a growing interest in searching for this type of information.

In addition, Yahoo! plans to make further moves into the mobile Web. Google also is expanding its mobile footprint. Use of these devices is expanding at a faster rate than personal computers.

"About 50% of the people accessing the Internet outside the U.S. don't have a PC and may never have a PC," says Chief Executive Terry Semel.

The company also plans to make its existing Web destinations more dynamic and interactive in order to maintain its user base and attract advertisers. This is possible because of the growing use of high-speed Internet connections.

"We intend to create a totally unique consumer experience that will be very, very difficult, if not impossible, for our competitors to match," says Lloyd Braun, the head of Yahoo!'s media group. "We have to keep in mind that most users don't know what [they want]. Our job is to help them discover what they want."