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                       SECURITIES AND EXCHANGE COMMISSION
 
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                   FORM 10-K
 
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
 
                         COMMISSION FILE NUMBER 0-28018
                            ------------------------
 
                                  YAHOO! INC.
 
             (Exact name of Registrant as specified in its charter)
 

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

 
                            3420 CENTRAL EXPRESSWAY
                         SANTA CLARA, CALIFORNIA 95051
 
                    (Address of principal executive offices)
 
       Registrant's telephone number, including area code: (408) 731-3300
                            ------------------------
 
          Securities registered pursuant to Section 12(b) of the Act:
 
                                      NONE
 
          Securities registered pursuant to Section 12(g) of the Act:
 
                        COMMON STOCK, $.00017 PAR VALUE
                                (Title of Class)
                            ------------------------
 
    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
 
    As of January 31, 1999, the aggregate market value of voting stock held by
non-affiliates of the Registrant, based upon the closing sales price for the
Registrant's Common Stock, as reported in the NASDAQ National Market System, was
$15,415,530,000. Shares of Common Stock held by each officer and director and by
each person who owns 5% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for any other
purpose.
 
    The number of shares of the Registrant's Common Stock outstanding as of
January 31, 1999 was 200,510,944.
 
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                      DOCUMENTS INCORPORATED BY REFERENCE
 
    The following documents (or parts thereof) are incorporated by reference
into the following parts of this Form 10-K:
 
        (1) Proxy Statement for the 1999 Annual Meeting of Shareholders--Items
    10, 11, 12 and 13.
 

                                     PART I
 

ITEM 1.  BUSINESS
 
    EXCEPT FOR HISTORICAL INFORMATION, THE FOLLOWING DESCRIPTION OF THE
COMPANY'S BUSINESS CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
SET FORTH IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF A NUMBER OF
FACTORS, INCLUDING THOSE SET FORTH IN THIS ANNUAL REPORT UNDER THE HEADING,
"RISK FACTORS."
 
OVERVIEW
 
    Yahoo! Inc. (including its subsidiaries, "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. 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. Yahoo! was developed and first made available in 1994 by the
Company's founders, David Filo and Jerry Yang, while they were graduate students
at Stanford University. 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.
During October 1997, the Company completed the acquisition of Four11 Corporation
("Four11"), a privately-held online communications and Internet directory
company. In June 1998, the Company acquired Viaweb Inc. ("Viaweb"), a
privately-held company providing highly-ranked software and reporting tools for
building and operating online commerce Web sites. In July 1998, the Company
acquired WebCal Corporation ("WebCal"), developer and marketer of Web-based
calendaring and scheduling products, and publisher of EventCal, a comprehensive
database of world-wide public events. During October 1998, the Company acquired
Yoyodyne Entertainment, Inc. ("Yoyodyne"), a recognized leader in Internet
direct marketing. During December 1998, the Company acquired HyperParallel, Inc.
("HyperParallel"), a direct marketing company specializing in data analysis. In
January 1999, the Company announced the signing of a definitive agreement to
acquire GeoCities, a publicly traded Internet company. The acquisition is
expected to be completed in the second quarter of 1999 and is subject to certain
conditions, regulatory approval, and approval by GeoCities stockholders.
 
    Under the Yahoo! brand, the Company provides broadcast media, personal
communications, and direct services. In December 1998, Internet users viewed an
average of approximately 167 million Web pages per day on Yahoo!-branded online
media properties.
 
    The Company makes its properties available without charge to users, and
generates revenue primarily through the sale of advertisements, promotions,
sponsorships, merchandising and direct marketing. Advertising on domestic Yahoo!
properties is sold through the Company's internal advertising sales force and
advertising on international Yahoo! properties is sold through a combination of
the Company's internal advertising sales force and third party agents. During
1998, approximately 3,800 customers advertised on Yahoo! properties.
 
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PRODUCTS AND MEDIA PROPERTIES
 
YAHOO! MAIN SITE
 
    The Company's principal offering, yahoo.com, provides the flagship product
for its global Internet media network that is the only place anyone has to go to
find information, connect to anybody, or purchase anything. Yahoo! offers a
comprehensive, intuitive and user-friendly online guide to Web navigation,
aggregated information content, communication services, a strong user community,
and commerce. Yahoo! includes a hierarchical, subject-based directory of Web
sites, which enables Web users to locate and access desired information and
services through hypertext links included in the directory. As of December 1998,
Yahoo! organized over 1,200,000 Web site listings under the following 14
principal categories: Arts and Humanities, Business and Economy, Computers and
Internet, Education, Entertainment, Government, Health, News and Media,
Recreation and Sports, Reference, Regional, Science, Social Science, and Society
and Culture. Web sites are further organized under these major headings by
hierarchical subcategories. Users can either browse the directory listings by
subject matter, or use a rapid keyword search facility that scans the contents
of the entire directory or any subcategory within Yahoo!. The basic Web site
listings are in many cases supplemented with brief descriptive commentary, and a
special symbol is used to indicate listings that, in the view of the Company's
editorial staff, provide unique presentation or content within their topic area.
Yahoo! also provides Web-wide text search results from the Inktomi search
engine. These results are integrated into the directory search function so that
Web-wide search results are presented in the absence of relevant listings from
the Yahoo! directory.
 
    Yahoo! also incorporates a rich set of current and reference information
from leading content providers, including real-time news (provided by numerous
sources including Reuters New Media, Associated Press, Deutsche Presse Agentur,
and Agence France Presse), stock quotes (Reuters), corporate earnings reports
(Zacks), audio news (National Public Radio), mutual fund holdings (CDA/
Wiesenberger), stock investing commentary (Motley Fool), sports scores (ESPN
SportsTicker), sports commentary (The Sporting News), employment (The Wall
Street Journal) weather information (Weathernews, Inc. and the Weather Channel),
and entertainment industry gossip (E! Online). Yahoo! also organizes hypertext
links to Web sites featuring current events and issues of interest, such as
elections, holidays, political issues and major weather conditions, organized in
a topical format and updated regularly. Other content offered by Yahoo! includes
auctions, Yellow Pages, maps, driving directions, and classifieds listings.
 
    Yahoo! has also established itself as a leading communications hub on the
Internet. Through its integrated chat service, pager, and message boards, Yahoo!
members can contact each other as well as communicate with the Web community at
large. Yahoo! has built a community of members who register with Yahoo!. Yahoo!
currently provides more than a dozen registered services for its members,
including Yahoo! Shopping, Yahoo! Auctions, Yahoo! Clubs, Yahoo! Address Book,
Yahoo! Calendar, Yahoo! Mail, My Yahoo!, stock portfolios, and travel
reservations and ticketing. The Company also introduced a beta version of
TrueSync for Yahoo!, allowing users of Yahoo! Calendar
(http://calendar.yahoo.com), Yahoo! Address Book, and Yahoo! To Do List to
access their information from computers and devices including Microsoft Outlook
and 3Com Palm products. Yahoo! offers its registered members a complete suite of
communications and community tools, including Yahoo! Mail, Yahoo! Pager, Yahoo!
Chat, Yahoo! Message Boards, Yahoo! Clubs, Yahoo! Calendar, Yahoo! Address Book,
and Yahoo! To Do List.
 
    In addition, one of the Company's primary strategies is to provide a
marketplace for commerce on the Web. Through sponsorship arrangements with
premier merchants, Yahoo! offers its members the opportunity to purchase goods
and services such as books (Amazon.com), music (CDnow), automotive services
(Autoweb, Microsoft Carpoint), mortgages (E-Loan), brokerage services (E*Trade,
Discover), traditional communications services (AT&T), unified message (JFAX),
electronics (Value America),
 
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sports (Genesis Direct), and magazine subscriptions (Electronic Newsstand).
During 1998, Yahoo! unveiled a major new online shopping service, Yahoo!
Shopping (http://shopping.yahoo.com), that leverages Yahoo!'s acquisition of
Viaweb to provide a complete service for merchants to reach Yahoo!'s millions of
unique users.
 
TARGETED ONLINE PROPERTIES
 
    The comprehensive subject-based, demographic and geographic listings in
Yahoo! have provided a platform for the Company to develop and offer independent
navigational tools and information services that are targeted to particular
interests and Web users, and are presented within the familiar Yahoo! framework
and style. The Company works with appropriate strategic partners who develop
localized or targeted content and, in some cases, promote and sell advertising.
The Company also has developed Web-based media properties that allow the user to
personalize and tailor the presentation of information and navigational
resources. The Company believes that, if implemented successfully, these
services further strengthen customer loyalty to the Yahoo! brand and create
additional revenue opportunities through a broader end user and advertiser base
and increasingly targeted advertising opportunities.
 
GEOGRAPHIC PROPERTIES
 
    The Company seeks to build upon its global user base by developing Internet
properties focused on geographic regions, which include foreign countries as
well as domestic metropolitan areas. As of the date of this Report, the Company
had launched numerous geographically targeted Web properties.
 
    INTERNATIONAL ONLINE PROPERTIES.  The Company has developed 15 international
online properties including localized versions of Yahoo! in Asia (English
language), Australia & New Zealand, Canada, Denmark, France, Germany, Italy,
Japan, Korea, Norway, Spain, Sweden, and the United Kingdom & Ireland and Yahoo!
guides in Spanish and Mandarin Chinese languages. Outside the English-speaking
markets, the Company has built independent directories of local language Web
sites and other content, developed by native speakers of each language. The
Company owns a majority or 100% of its non-US operations (except in Japan and
Canada), and has established Yahoo! offices in 13 different locations to ensure
the development of their businesses. The Company has pursued a consistent
strategy of content aggregation with best of breed third parties and intends to
rollout the full range of its products and services for all these markets.
 
    YAHOO! JAPAN--Yahoo!'s first geographic property was developed during 1996
through a joint venture with SOFTBANK, a holder of 30% of the Company's Common
Stock at December 31, 1998 and Japan's largest distributor of computer software,
peripherals and systems, as well as one of Japan's largest publishers of
computer-related magazines and books. Yahoo! Japan was formed to establish and
manage in Japan a Japanese version of Yahoo!, develop related Japanese online
navigational services, and conduct other related business. Yahoo! Japan
completed its initial public offering on the Japanese over-the-counter market in
November 1997. At December 31, 1998, the Company owned approximately 34% of
Yahoo! Japan.
 
    YAHOO! EUROPE--During November 1996, the Company signed a joint venture
agreement with a subsidiary of SOFTBANK whereby separate companies were formed
in Germany, the United Kingdom, and France ("Yahoo! Europe") to establish and
manage versions of Yahoo! for those countries, develop related online
navigational services, and conduct other related business. The Company owns
approximately 70% of each of these Yahoo! Europe entities.
 
    YAHOO! KOREA--During August 1997, the Company signed a joint venture
agreement with SOFTBANK and other SOFTBANK affiliate companies to develop and
operate Yahoo! Korea, a Korean version of Yahoo!, to develop related Korean
online navigational services, and to conduct other related business. The Company
owns approximately 60% of the joint venture.
 
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    LOCAL ONLINE PROPERTIES.  Yahoo! Get Local offers extensive information for
all 50 states, 211 metropolitan areas and more than 30,000 counties and cities
in the United States. The property provides users with comprehensive local Web
programming, including sports, weather, news, yellow pages, white pages,
entertainment, community information and more. Yahoo! Get Local is also
integrated into the main directory of Yahoo!. This integration enhances the
subcategories under the Regional category of the main Yahoo! hierarchy, giving
individuals easy access to a wealth of local information.
 
SUBJECT-BASED PROPERTIES
 
    The Company has developed subject-based Internet properties, including
Yahoo! Sports (sports scores and information), Yahoo! Autos (new and used car
buying information), Yahoo! Travel (travel arrangement and booking information),
Yahoo! Games (Java-based games), Yahoo! Employment (job information), Yahoo!
Real Estate (new and resale house buying information) and Yahoo! Finance (stock
quotes and company and industry information).
 
DEMOGRAPHIC PROPERTIES
 
    The Company also has developed and offers online properties focused on
targeted demographic groups, initially children. In March 1996, the Company
introduced Yahooligans!, a version of Yahoo! designed for children aged 7 to 12.
The Web sites included in Yahooligans! are selected by experienced educators who
evaluate the sites for appropriate content and links, applicability to school
curricula, and interest to the children.
 
PERSONALIZED INFORMATION SERVICES
 
    In July 1996, the Company launched My Yahoo!, a personalized Web information
service. My Yahoo! allows users to create a personal profile which directly
organizes and delivers to the user information of personal interest such as
selected stock quotes, stock portfolio management, local and national headlines,
local and national weather and sports news, as well as the user's favorite Web
searches and Yahoo! categories. The Company has developed a universal
registration system that permits Yahoo! users to easily use more than a dozen
Yahoo! services under a single username, including My Yahoo!, Yahoo! Chat,
Yahoo! Mail, Yahoo! Portfolios, Yahoo! Message Boards, Yahoo! Shopping, Yahoo!
Auctions, Yahoo! Clubs, Yahoo! Address Book, Yahoo! Calendar, and Yahoo!
Classifieds.
 
PRINT AND OTHER OFFLINE PROPERTIES
 
    The Company seeks to extend the Yahoo! brand into print and other offline
media, primarily for the purpose of promoting the brand and creating greater
demand for the Company's online properties. The Company continued its agreement
with Ziff-Davis Publishing Company, a subsidiary of SOFTBANK, for the
publication of Yahoo! Internet Life, a monthly print magazine companion to the
online magazine. The Company also has entered into a multiple-book publishing
arrangement with IDG Books Worldwide, Inc., a leading publisher of computer
books and magazines. Under this agreement, several guides to the Internet have
been published, including Yahoo! Unplugged, Yahoo! Wild Web Rides, and
Yahooligans! Way Cool Web Sites. Royalty revenues under these arrangements have
been and are expected to continue to be nominal. The Company additionally has an
agreement with King Features to extend brand awareness through print syndication
of Yahoo! content in newspapers around the country.
 
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ADVERTISING SALES AND ELECTRONIC COMMERCE
 
    The Company has derived substantially all of its revenues to date from the
sale of advertisements. These revenue sources include placement fees,
promotions, banner advertisements, sponsorships, direct marketing, and
transactions on Yahoo! properties. The Company's advertising products currently
consist of banner advertisements that appear on pages within Yahoo! properties,
higher profile promotional sponsorships that are typically focused on a
particular event, such as a sweepstakes, and merchant buttons on targeted
advertising inventory encouraging users to complete a transaction. Hypertext
links are embedded in each banner advertisement or button to provide the user
with instant access to the advertiser's Web site, to obtain additional
information, or to purchase products and services.
 
    Although a substantial amount of advertising purchases on Yahoo! properties
are for general rotation on pages within the services, the Company seeks to
offer increasingly targeted properties that will deliver greater value to
advertisers through more focused audiences. By developing an extended family of
Yahoo!-branded properties, the Company seeks to offer advertisers a wide range
of placement options.
 
ADVERTISING SALES ORGANIZATION
 
    In late 1996, the Company established an internal sales force. As of
December 1998, advertising sales professionals were employed in nine locations
across the U.S., including Atlanta, Boston, Chicago, Dallas, Detroit, Los
Angeles, Miami, New York, and the San Francisco Bay Area. The Company's
advertising sales organization consults regularly with agencies and customers on
design and placement of Web-based advertising, and provides clients with
measurement and analysis of advertising effectiveness.
 
    In international markets, Yahoo!'s advertising sales are principally handled
by the Company's internal sales representatives. In some countries, including
several where the Company has not established full operational capacity and
localized properties, sales agency relationships have been put in place.
 
ADVERTISING PRICING
 
    The Company offers many forms of advertising which have varying ranges of
prices. There are targeted and general rotation of banner advertising. In
addition to banner advertising, the Company offers premium positions on the top
page of Yahoo! properties that typically are used in connection with promotions
and special events. The Company's strategy is to use these sponsorship positions
for high-profile promotions that can also result in additional visibility and
awareness for Yahoo!. Yahoo! has also created special holiday- and
event-oriented promotional spaces for holidays and events such as Back to
School, Halloween, Mother's Day, Father's Day, Valentine's Day, Home
Improvement, and Christmas. Yahoo! also offers sponsorships, merchandising,
placement, transaction fees, direct marketing, and other forms of carriage on
its network of properties.
 
STRATEGIC ALLIANCES
 
    In order to serve users more effectively and to extend the Yahoo! brand to
new media properties, the Company has entered into strategic relationships with
business partners who offer content, technology, and distribution capabilities.
 
CONTENT AND COMMERCE ALLIANCES
 
    Yahoo! has entered into strategic alliances with selected leading
providers--including Ziff-Davis, SOFTBANK, Reuters, Granite Broadcasting,
Sporting News, ESPN SportsTicker, E! Online, Fox Sports, PriMedia, The Wall
Street Journal, and the Motley Fool--which permit the Company to bring
 
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Yahoo!-branded, targeted media products to market more quickly, while avoiding
the cost of producing original editorial content.
 
DISTRIBUTION ALLIANCES
 
    In order to broaden Yahoo!'s user base, the Company has established
co-promotional relationships with commercial online services, Internet access
providers and operators of leading Web sites. The Company believes these
arrangements are important to the promotion of Yahoo!, particularly among new
Web users who may first access the Web through these services or Web sites.
These co-promotional arrangements typically are terminable upon short or no
notice.
 
    LEADING WEB SITES AND BROWSERS.  The Company has short-term distribution
relationships with Microsoft Corporation ("Microsoft"). Microsoft and the
Company have entered into an agreement under which MSN, the Microsoft Network
online service, has made Yahoo! the exclusive third-party consumer-branded
provider of global directory services on the MSN Premier subscription service
and on MSN.com, the online service's free Web site. Yahoo!'s directory will
complement the current search and directory services on MSN.
 
    INTERNET ACCESS PROVIDERS.  The Company also has relationships with
companies such as AT&T, MCI, @Home, Ameritech, and WebTV, under which these
Internet access providers feature Yahoo! as a key navigational tool and engage
in certain promotional activities.
 
    OEM'S.  Yahoo! has established distribution agreements with Hewlett Packard,
Compaq, IBM, and Gateway whereby links to Yahoo! services will be offered on the
desktop of new computers.
 
    OTHER DEVICES.  Yahoo! announced plans to give wireless access to Yahoo!
People Search (http://people.yahoo.com) for users of the Palm VII-TM- organizer
from Palm Computing. The Company expects to begin testing this service for Palm
VII organizer users in the first half of 1999.
 
    YAHOO! ONLINE SERVICES.  The Company and AT&T entered into a co-marketing
and distribution agreement to launch a new co-branded, co-marketed online
service. The service, Yahoo! Online powered by AT&T, is designed to provide
consumers with an integrated and simple solution to easily explore the Internet
with nationwide dial-up access coverage. Yahoo! and British Telecommunications
plc (BT) launched Yahoo! Click, a new service combining Internet access from BT
with the navigational and aggregation expertise of Yahoo! UK & Ireland
(http://www.yahoo.co.uk) for Web users in the United Kingdom.
 
OPERATIONS AND TECHNOLOGY
 
    The Company makes Yahoo! available to users through a set of network servers
operating with public domain server software that has been optimized internally
to provide an efficient and responsive user experience. The Company has
developed a set of proprietary database tools that it uses to maintain and
update directory listings on Yahoo! and other directory properties.
Substantially all of the listings on Yahoo! are submitted by Web site
developers. The Company's "surfers" review submissions and categorize them into
appropriate category headings. The Company also uses automated systems to
regularly check Web sites in the Yahoo! directory listings, and to remove sites
that are no longer available.
 
    Yahoo! includes an internally developed responsive keyword search function
that is used to locate listings within the directory. This search function not
only returns relevant Web site listings but also appropriate category headings,
which link to further listings that may be relevant to the user's query. The
Company has also internally developed an extensive classifieds system capable of
listing and searching millions of items in multiple categories. Additionally,
Yahoo! has internally developed a personalization system, My Yahoo!, to allow
users to customize and localize the information they
 
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regularly view, such as stock quotes, news categories, sports scores, and
weather. The Company utilizes the Web-wide searching technology and Web index
from a third party.
 
COMPETITION
 
YAHOO!'S MARKETS ARE HIGHLY COMPETITIVE
 
    The market for Internet products and services is highly competitive. There
are no substantial barriers to entry in these markets, and Yahoo! expects that
competition will continue to intensify. Negative competitive developments could
have a material adverse effect on Yahoo!'s business and on the trading price of
its stock.
 
    MULTIPLE PROVIDERS OF COMPETITIVE SERVICES; RECENT ACQUISITIONS RESULTING IN
CONSOLIDATION. Yahoo! competes with many other providers of online navigation,
information and community services. As Yahoo! expands the scope of its Internet
services, Yahoo! will compete directly with a greater number of Internet sites
and other media companies across a wide range of different online services.
Yahoo! also competes in vertical markets where competitors may have advantages
in expertise, brand recognition, and other factors. In addition, Yahoo! competes
with metasearch services and software applications that allow a user to search
the databases of several directories and catalogs simultaneously. Yahoo! also
competes indirectly with database vendors that offer information search and
retrieval capabilities with their core database products. Many companies offer
directly competitive products or services addressing Web navigation, information
and community services, including, among others:
 
- -  America Online, Inc. (NetFind);
 
- -  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);
 
- -  Microsoft Corporation (msn.com); and
 
- -  Netscape Communications Corporation (Netcenter).
 
    In the past several months, there have been a number of significant
acquisitions and strategic plans announced among and between these companies.
These include:
 
- -  The Walt Disney Company acquiring a significant interest in Infoseek;
 
- -  AOL acquiring Netscape;
 
- -  @Home Networks, Inc., a provider of high speed internet access serving the
   cable television infrastructure and the largest shareholder of which is AT&T,
   acquiring Excite, Inc.;
 
- -  NBC acquiring an interest in Snap, a subsidiary of CNET;
 
- -  USA Networks and Ticketmaster Online-Citysearch, Inc. announcing that they
   intend to combine their services with Lycos, Inc.; and
 
- -  Compaq, a computer manufacturer, announcing that it intends to spinoff
   AltaVista into a separate independent entity through an initial public
   offering.
 
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
 
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larger or more well established than Yahoo!. As a result, each of them will have
access to significantly greater financial, marketing and, in certain cases,
technical resources than Yahoo!. For example, assuming that its acquisition by
@Home Networks is approved, Excite will significantly enhance its access to
knowledge about broadband transmission technology.
 
    These acquisitions, if consummated, will also result in many of these
companies gaining access to significantly greater marketing resources. For
example, the combination of Lycos with USA Networks and Ticketmaster
Online-Citysearch, Inc. will permit Lycos to access significant television
resources for marketing and other purposes. In addition, Infoseek and The Walt
Disney Company recently entered into an agreement whereby Disney gains a
significant interest in Infoseek. The parties have introduced a portal and
navigation service entitled Go.com, which is supported by Disney's substantial
promotional and media resources. Similarly, Snap, by virtue of its relationship
with NBC, has and will continue to be supported by NBC's substantial promotional
and media resources. Several large media companies, including both Time Warner,
Inc. and CBS, have announced that they are contemplating Internet navigation
services and are attempting to become "gateway" sites for Web users. These and
other competitors are expected to continue to make substantial marketing
expenditures to promote their online properties. Yahoo! may be required to
increase its sales and marketing expenditures significantly in response to these
efforts, which may materially impair its operating results and may not be
successful.
 
    The recent announcements of the proposed acquisitions listed above will
result in greater competition as they consolidate more users of the Internet on
a single service and incorporate search and retrieval features other than
Yahoo!'s into their offerings. 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 Yahoo!'s products and services. Netscape announced an
agreement with Excite under which Excite will be the most prominent navigational
service within the Netcenter Web site. In the future, Netscape, Microsoft and
other browser suppliers may also more tightly integrate products and services
similar to Yahoo!'s into their browsers or their browsers' pre-set home pages.
In addition, entities that sponsor or maintain high-traffic Web sites or that
provide an initial point of entry for Internet users, such as the Regional Bell
Operating Companies, long-distance providers and cable companies such as
AT&T/TCI through @Home Networks and Excite, Inc., or Internet Service Providers
("ISPs") such as Microsoft and AOL, currently offer and could further develop,
acquire or license Internet search and navigation functions and community and
communications services that compete with those Yahoo! offers. 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. For example, 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. Yahoo! expects that such search services may be tightly integrated
into future versions of the Microsoft operating system, the Internet Explorer
browser, and other software applications, and that Microsoft will promote such
services within the Microsoft Network or through other Microsoft affiliated
end-user services such as MSNBC or WebTV Networks, Inc. Compaq and Microsoft may
have a competitive advantage because their Internet navigational offerings are
more conveniently accessed by users.
 
    A large number of Web sites and online services, such as the Microsoft
Network, AOL, and Netscape (Netcenter); other Web navigation companies such as
Excite, Lycos, and Infoseek; and high-traffic e-commerce merchants such as
Amazon.com, Inc. also offer or are expected to offer informational and community
features (such as news, stock quotes, sports coverage, Yellow Pages and
 
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email listings, weather news, chat services, message boards, email, personal
calendaring and online store hosting services) that may be competitive with the
services Yahoo! offers. For example, Netscape recently significantly enhanced
its Netcenter service as a "gateway" Web site through commercial relationships
with certain of its competitors, including Excite. A number of companies,
including Hotmail (acquired by Microsoft) and WhoWhere? Inc. (acquired by
Lycos), offer Web-based email service similar to those Yahoo! offers. These
companies are expected to continue to provide such services in tandem with
larger navigational sites and online services. AOL recently acquired Mirabilis,
a provider of "ICQ" instant Internet messaging software and services that
compete with Yahoo!'s Yahoo! Pager service. The ICQ user base will provide AOL
with an additional platform for distribution of AOL's other navigation,
information and communications services that compete with Yahoo!. Several
companies, including Microsoft and AOL, also are developing or currently offer
online information services for local markets, which compete with Yahoo!'s
regional online properties. As a result of its acquisition of Viaweb Inc.,
Yahoo! faces competition in the market for hosting online merchant stores,
including companies such as iCat Corporation and Open Market, Inc. Yahoo! also
faces intense competition in international markets, including from U.S.
companies, media and online companies, Internet service providers and
telecommunications companies that are already well established in those foreign
markets and in some cases are monopolies. In order to effectively compete,
Yahoo! 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 Yahoo! shareholders.
 
    COMPETITION FOR ADVERTISING EXPENDITURES.  Yahoo! competes with online
services, other Web site operators and advertising networks, as well as
traditional offline media such as television, radio and print for a share of
advertisers' total advertising budgets. Yahoo! believes that the number of
companies selling Web-based advertising and the available inventory of
advertising space has recently increased substantially. Accordingly, Yahoo! may
face increased pricing pressure for the sale of advertisements, which could
reduce its advertising revenues. In addition, its sales may be adversely
affected to the extent that its competitors offer superior advertising services
that better target users or provide better reporting of advertising results.
 
    PRINCIPAL COMPETITIVE FACTORS.  Yahoo! believes that the principal
competitive factors in its markets are:
 
- -  brand recognition;
 
- -  ease of use;
 
- -  comprehensiveness;
 
- -  personalization;
 
- -  independence;
 
- -  quality and responsiveness of search results and other services;
 
- -  the availability of high-quality, targeted content and focused value-added
   products and services;
 
- -  access to end users; and
 
- -  with respect to advertisers and sponsors, the number of users, duration and
   frequency of visits, and user demographics.
 
    Competition among current and future suppliers of Internet navigational and
informational services, high-traffic Web sites and ISPs, as well as competition
with other media for advertising placements, could result in significantly lower
prices for advertising and reductions in advertising revenues. Yahoo! also faces
competition with respect to the acquisition of strategic businesses and
technologies.
 
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    Many of its existing competitors, as well as a number of potential new
competitors, have significantly greater financial, technical, marketing and
distribution resources than Yahoo! does. In addition, providers of Internet
tools and services may be acquired by, receive investments from, or enter into
other commercial relationships with larger, well-established and well-financed
companies, such as Microsoft and AOL. For example, a version of the Excite
service (AOL NetFind) has been designated as the exclusive Internet search
service for use by AOL's subscribers. It is difficult to predict with certainty
what the effects will be of the proposed acquisition of Netscape by AOL or
Excite by @Home Networks, but it will likely increase competitive pressures on
Yahoo! in several respects, including their additional access to end users and
the ability to provide a more comprehensive offering to advertisers and
sponsors. In addition, well-established traditional media companies may acquire,
invest or otherwise establish commercial relationships with its competitors,
such as NBC's recent investment in CNET's Snap service, Disney's investment in
Infoseek or USA Network's and Ticketmaster Online-Citysearch's combination of
their services with Lycos. These larger companies may use their substantial
media resources to promote and enhance their own services. Greater competition
resulting from such relationships could have a material adverse effect on
Yahoo!'s business, operating results, and financial condition.
 
PROPRIETARY RIGHTS
 
    Yahoo! regards its copyrights, trademarks, trade dress, trade secrets, and
similar intellectual property as critical to its success. Yahoo! relies upon
trademark and copyright law, trade secret protection and confidentiality or
license agreements with its employees, customers, partners and others to protect
its proprietary rights. Yahoo! has obtained the registration for certain of its
trademarks, including "Yahoo!" and "Yahooligans!." Effective trademark,
copyright, and trade secret protection may not be available in every country in
which its products and media properties are distributed or made available
through the Internet. Yahoo! has licensed in the past, and may license in the
future, elements of its distinctive trademarks, trade dress, and similar
proprietary rights to third parties. While Yahoo! attempts to ensure that the
quality of its brand is maintained by its licensees, its licensees may take
actions that could materially and adversely affect the value of its proprietary
rights or the reputation of its products and media properties. Yahoo! is 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. The distinctive elements of Yahoo! may not be protectible under
copyright law. Yahoo! cannot guarantee that the steps Yahoo! has taken to
protect its proprietary rights will be adequate.
 
    Many parties are actively developing search, indexing, e-commerce, and other
Web-related technologies. Yahoo! believes that such parties will continue to
take steps to protect these technologies, including seeking patent protection.
As a result, Yahoo! believes that disputes regarding the ownership of such
technologies are likely to arise in the future. For example, Yahoo! is 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 its direct competitors), online direct marketing,
fantasy sports, common Web graphics formats and mapping technologies. Yahoo!
anticipates that additional third-party patents will be issued in the future.
From time to time parties assert patent infringement claims against Yahoo! in
the form of letters, lawsuits and other forms of communication. In these
situations, to the extent that Yahoo! determines that licensing such patents is
appropriate, Yahoo! cannot guarantee that it would be able to license such
patents on reasonable terms. Yahoo! may incur substantial expenses in defending
against third-party patent claims regardless of the merit of such claims. In the
event that there is a determination that Yahoo! has infringed such third-party
patent rights, Yahoo! could incur substantial monetary liability and be
prevented from using the rights in the future.
 
                                       11

<PAGE>
    In the event that Yahoo! determines that licensing of any such proprietary
rights is appropriate, Yahoo! cannot guarantee that Yahoo! would be able to
license such proprietary rights on reasonable terms or at all. Yahoo! may incur
substantial expenses in defending against any such third party infringement
claims regardless of the merit of such claims. In the event that there is a
determination that Yahoo! has infringed such third-party proprietary rights,
Yahoo! could incur substantial monetary liability and be prevented from using
the rights in the future. In addition to patent claims, third parties may assert
claims against Yahoo! alleging infringement of copyrights, trademark rights,
trade secret rights or other proprietary rights or alleging unfair competition.
From time to time, Yahoo! receives letters, lawsuits and other communications
from third parties alleging such claims. In addition, Yahoo! is aware of
lawsuits filed against two of its 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 Yahoo!.
 
EMPLOYEES
 
    As of December 31, 1998, the Company had 803 full-time employees. Yahoo!'s
future success is substantially dependent on the performance of its senior
management and key technical personnel, and its continuing ability to attract
and retain highly qualified technical and managerial personnel.
 
RISK FACTORS
 
    In addition to the other information in this Report (including under the
captions "Competition" and "Proprietary Rights"), the following factors should
be considered carefully in evaluating the Company's business and prospects:
 
YAHOO!'S COMMON STOCK PRICE IS VOLATILE
 
    The trading price of Yahoo!'s stock has been and may continue to be subject
to wide fluctuations. During 1998, the closing sale prices of Yahoo!'s common
stock on the Nasdaq National Market ranged from $14.52 to $137.75. As of
February 16, 1999, the closing sale price was $133.375. Yahoo!'s 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 Yahoo! or its 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 its 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 Yahoo!'s common stock, regardless
of Yahoo!'s operating performance.
 
YAHOO! HAS A LIMITED OPERATING HISTORY; RISKS OF IMPLEMENTING GROWTH STRATEGY
 
    Yahoo! was incorporated in March 1995 and did not begin generating
advertising revenues until August 1995. Therefore, Yahoo! has a limited
operating history, and its 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 its growth plan depends on, among other things, Yahoo!'s:
 
- -  ability to continue to develop and extend the Yahoo! brand;
 
- -  ability to develop new media properties;
 
- -  ability to maintain and increase the levels of traffic on Yahoo! properties;
 
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- -  development or acquisition of services or products equal or superior to those
   of Yahoo!'s competitors;
 
- -  ability to effectively generate revenues through sponsored services and
   placements in Yahoo! properties;
 
- -  ability to effectively integrate the technology and operations of businesses
   or technologies acquired by Yahoo!;
 
- -  ability to successfully develop and offer personalized Web-based services,
   such as e-mail services, to consumers without errors or interruptions in
   service; and
 
- -  ability to continue to identify, attract, retain and motivate qualified
   personnel.
 
    Furthermore, the success of Yahoo!'s growth plan depends on factors outside
Yahoo!'s control including, among other things:
 
- -  the adoption by the market of the Web as an advertising medium;
 
- -  the successful sale of Web-based advertising by Yahoo!'s sales force; and
 
- -  the relative price stability for Web-based advertising, despite competition
   and other factors that could reduce market prices for advertising.
 
    Yahoo! may not be successful in implementing its growth plan or continuing
to operate its business as anticipated.
 
YAHOO! ANTICIPATES INCREASED OPERATING EXPENSES AND MAY EXPERIENCE LOSSES
 
    As of December 31, 1998, Yahoo! had an accumulated deficit of $8,442,000.
Because of Yahoo!'s limited operating history and the uncertain nature of the
rapidly-changing markets it serves, the accurate prediction of future results of
operations is difficult or impossible. In addition, Yahoo! believes that
period-to-period comparisons of operating results are not meaningful. The
results for any period should not be relied upon as an indication of future
performance. In particular, although Yahoo! experienced strong revenue growth
during 1998, Yahoo! does not believe that this level of revenue growth will be
sustained in future periods. Yahoo! currently expects that its operating
expenses will continue to increase significantly as the sales and marketing
operations are expanded and Yahoo! continues 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, Yahoo! may experience significant losses on a
quarterly and annual basis.
 
QUARTERLY OPERATING RESULTS MAY FLUCTUATE; ADVERTISING REVENUE IS SEASONAL;
  RELIANCE ON SHORT-TERM ADVERTISING CONTRACTS
 
    Yahoo! derives the majority of its revenues from the sale of advertisements
under short-term contracts, which are difficult to forecast accurately. Its
expense levels are based in part on its expectations concerning future revenue
and, to a large extent, are fixed. Yahoo! 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 its financial results. As noted above, Yahoo!
expects its operating expenses to increase significantly over the near term. To
the extent its expenses increase but its revenues do not, its business,
operating results, and financial condition will be materially and adversely
affected.
 
    Operating results may fluctuate significantly in the future as a result of a
variety of factors, many of which are outside its control. These factors
include:
 
- -  the level of usage of the Internet;
 
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<PAGE>
- -  demand for Internet advertising;
 
- -  the addition or loss of advertisers;
 
- -  the level of user traffic on Yahoo! online media properties;
 
- -  the advertising budgeting cycles of individual advertisers;
 
- -  the mix of types of advertising Yahoo! sells (targeted advertising generally
   has higher rates);
 
- -  the amount and timing of capital expenditures and other costs relating to the
   expansion of its operations;
 
- -  the introduction of new products or services by Yahoo! or its 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 online media properties that
   Yahoo! may develop;
 
- -  costs incurred with respect to acquisitions;
 
- -  negative general economic conditions and resulting effects on media spending;
   and
 
- -  economic conditions specific to the Internet and online media.
 
    As a strategic response to changes in the competitive environment, Yahoo!
may from time to time make certain pricing, service or marketing decisions that
may adversely affect its profitability in a given quarterly or annual period.
 
    Advertising revenue is subject to seasonal fluctuations. Historically,
advertisers have spent less in the first and third calendar quarters. The level
of advertising on Yahoo!'s online properties is also seasonal. User traffic on
Yahoo! online media properties has historically been lower during the summer and
during year-end vacation and holiday periods.
 
    A key element of Yahoo!'s strategy is to generate advertising revenues
through sponsored services and placements by third parties in its online media
properties in addition to banner advertising. In connection with these
arrangements, Yahoo! may receive sponsorship fees as well as a portion of
transaction revenues received by the sponsor from business originated through
the Yahoo! placement, in return for minimum levels of user impressions to be
provided by the Company. These arrangements expose Yahoo! to potentially
significant financial risks, including:
 
- -  the risk that Yahoo! fails to deliver required minimum levels of user
   impressions or "click throughs" (in which case, these agreements typically
   provide for adjustments to the fees payable thereunder or "make good"
   periods);
 
- -  the risk that sponsors do not renew the agreements at the end of their term
   or that they renew at lower rates; and
 
- -  the risk that the arrangements do not generate anticipated levels of shared
   transaction revenue, or that sponsors default on the payment commitments in
   such agreements (as has occurred in the past).
 
    As a result of these financial risks, Yahoo! cannot guarantee that it will
achieve significant revenue from these sponsorship arrangements. In addition,
because Yahoo! has limited experience with these arrangements, Yahoo! is unable
to determine what effect they will have on gross margins and results of
operations. Although transaction-based fees have not to date represented a
material portion of its net
 
                                       14

<PAGE>
revenues, if and to the extent such revenues become significant, there could be
greater variations in its quarterly operating results.
 
    Due to these factors, in some future quarter, Yahoo!'s operating results may
fall below the expectations of securities analysts and investors. In such an
event, the trading price of Yahoo!'s common stock would likely be materially and
adversely affected.
 
DEPENDENCE ON CONTINUED GROWTH IN USE OF THE INTERNET; TECHNOLOGICAL CHANGE
 
    Yahoo!'s future success is dependent upon continued growth in the use of the
Internet and the Web in order to support the sale of advertising on its online
media properties. 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 lack of acceptable security technologies,
potentially inadequate development of the necessary infrastructure, or timely
development and commercialization of performance improvements. To the extent
that the Internet continues to experience significant growth in the number of
users and level of use, the Internet infrastructure may not be able to support
the demands placed upon it by such growth and the performance or reliability of
the Web may be adversely affected.
 
    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. To the extent that
higher bandwidth Internet access becomes more widely available through cable
modems or other technologies, Yahoo! may be required to make significant changes
to the design and content of its online properties in order to compete
effectively. Failure to effectively adapt to these or any other technological
developments could adversely affect its business, operating results, and
financial condition.
 
YAHOO!'S MARKET IS STILL DEVELOPING; UNPROVEN ACCEPTANCE OF YAHOO!'S PRODUCTS
  AND MEDIA PROPERTIES
 
    The markets for Yahoo!'s 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. It is difficult for Yahoo! to predict
whether, or how fast, these markets will grow. Yahoo! cannot guarantee either
that the market for its products and media properties will continue to develop
or that demand for its products or media properties will be sustainable. If the
market develops more slowly than expected or becomes saturated with competitors,
or if its products and media properties do not sustain market acceptance, its
business, operating results, and financial condition will be materially and
adversely affected.
 
RISKS ASSOCIATED WITH BRAND DEVELOPMENT
 
    Yahoo! believes that establishing and maintaining the Yahoo! brand is a
critical aspect of its efforts to attract and expand its user and advertiser
base. Yahoo! also believes 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 its success in providing high-quality products and services. In order
to attract and retain Internet users and to promote and maintain the Yahoo!
brand, Yahoo! 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 its services, or if any third party undertakes
illegal or harmful actions utilizing its community, communications or commerce
services, Yahoo! could suffer substantial adverse publicity and impairment of
its brand and reputation. If Yahoo! is unable to provide high-quality products
and services or otherwise fails to promote and maintain its brand, or if Yahoo!
incurs excessive expenses in
 
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<PAGE>
an attempt to improve its products and services or promote and maintain its
brand, its business, operating results, and financial condition will be
materially and adversely affected.
 
RELIANCE ON ADVERTISING REVENUES AND UNCERTAIN ADOPTION OF THE WEB AS AN
  ADVERTISING MEDIUM
 
    Yahoo! derives a majority of its revenues from the sale of advertisements on
its Web pages under short-term contracts. Most of its advertising customers have
limited experience with the Web as an advertising medium. Yahoo!'s continuing
ability to generate significant advertising revenues will depend upon, among
other things:
 
- -  advertisers' acceptance of the Web as an effective and sustainable
   advertising medium;
 
- -  the development of a large base of users of its services possessing
   demographic characteristics attractive to advertisers; and
 
- -  its 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. Yahoo! cannot be certain that such
standards will develop sufficiently to support Web-based advertising as a
significant advertising medium. In addition, adverse economic conditions can
significantly impact advertisers ability and willingness to spend additional
amounts on advertising generally, and on Web-based advertising specifically. Nor
can Yahoo! be certain that the advertisers will determine that banner
advertising, which comprises the majority of its revenues, is an effective
advertising medium. Yahoo! has begun to implement permission-based direct
advertising. Failure to successfully implement such direct advertising could
have an adverse effect on the Company's business, operating results and
financial position. Further, the Company 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 advertising from an Internet user's desktop. Such software,
if generally adopted by users, may have a materially adverse effect upon the
viability of advertising on the Internet. Yahoo!'s 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. Yahoo! relies primarily on its 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, Yahoo! may not be able to sustain or increase current advertising sales
levels. Failure to do so will have a material adverse effect on its business,
operating results, and financial position.
 
YAHOO! DEPENDS SUBSTANTIALLY ON THIRD PARTIES
 
    Yahoo! depends substantially upon third parties for several critical
elements of its business including, among others, technology and infrastructure,
content development, and distribution activities.
 
TECHNOLOGY AND INFRASTRUCTURE.  In May 1998, Yahoo! entered into an agreement
with Inktomi under which Inktomi will provide text-based Web search results to
complement its directory and navigational guide. Yahoo! will depend
substantially upon ongoing maintenance and technical support from Inktomi to
ensure accurate and rapid presentation of such search results to its customers.
If Inktomi were to prematurely terminate their agreement with Yahoo! or fail to
renew it, Yahoo! would have to make substantial expenditures to develop or
license replacement technology. This also could result in lower levels of use of
its navigational services. Yahoo! relies on a private third-party provider,
Frontier GlobalCenter, Inc., for its principal Internet connections. Email and
other service Internet connections are provided 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
 
                                       16

<PAGE>
material adverse effect on its business, operating results, and financial
condition. Yahoo! licenses technology and related databases from third parties
for certain elements of Yahoo! properties, including, among others, technology
underlying the delivery of news, stock quotes and current financial information,
street mapping, telephone listings, and similar services. Yahoo! has experienced
and expects to continue to experience interruptions and delays in service and
availability for such elements, including recent interruptions in its mail
services. Furthermore, Yahoo! is dependent on hardware suppliers for prompt
delivery, installation, and service of servers and other equipment to deliver
its products and services. Any errors, failures, or delays experienced in
connection with these third-party technologies and information services could
negatively impact its relationship with users and adversely affect its brand and
its business, and could expose Yahoo! to liabilities to third parties.
 
CONTENT DEVELOPMENT.  A key element of its strategy involves the implementation
of Yahoo!-branded media properties targeted for interest areas, demographic
groups, and geographic areas. In these efforts, Yahoo! relies on content
development and localization efforts of third parties. For example, Yahoo! has
entered into an agreement with Ziff-Davis under which Ziff-Davis publishes an
online publication and a print magazine under the Yahoo! brand. Yahoo! also
expects to rely on third-party affiliates, including SOFTBANK in Japan and
Korea, to localize, maintain, and promote these services and to sell advertising
in local markets. Yahoo! cannot guarantee that its current or future third-party
affiliates will effectively implement these properties, or that their efforts
will result in significant revenue to Yahoo!. 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 Yahoo! to
integrate third parties' content with its services, which can require
significant programming and design efforts. In addition, Yahoo! has granted
exclusivity provisions to certain third parties, and may in the future grant
additional exclusivity provisions. Such exclusivity provisions may have the
effect of preventing Yahoo!, while they are in force, from accepting advertising
or sponsorship arrangements within a particular subject matter with respect to
portions of its network of media properties.
 
DISTRIBUTION RELATIONSHIPS.  In order to create traffic for its online
properties and make them more attractive to advertisers and consumers, Yahoo!
has certain distribution agreements and informal relationships with leading Web
browser providers such as Microsoft, operators of online networks and leading
Web sites, and computer manufacturers, such as Hewlett Packard and Gateway 2000.
Yahoo! believes these arrangements are important to the promotion of its online
media properties, particularly among new Web users who may first access the Web
through these browsers, services, Web sites, or computers. Its business
relationships with these companies are intended to increase the use and
visibility of Yahoo!. These distribution arrangements typically are not
exclusive, and may be terminated upon certain conditions with little or no
notice. Success of its online properties in international markets may require
Yahoo! to establish relationships with ISPs and other telecommunications
companies in various countries and regional markets, many of which have a
dominant market share in their territories. In addition, in the future, Yahoo!
may be required to establish relationships with providers of broad-band
services. Even if sufficient distribution opportunities are available to Yahoo!
in the U.S. or abroad, third parties that provide distribution may assess fees
or otherwise impose additional conditions on the listing of Yahoo! or its other
online properties. Any failure to cost-effectively obtain distribution could
have a material adverse effect on its business, results of operations, and
financial condition.
 
    Yahoo! recently announced a co-branding and distribution arrangement with
AT&T (which replaced Yahoo!'s previous agreement with MCI Internet) under which
Yahoo! will provide a Web-based online service in conjunction with dial-up
Internet access provided by AT&T WorldNet Service. In this arrangement, Yahoo!
will depend on AT&T for, among other things, effective marketing and promotion
efforts and the provision of competitive Internet access service to customers.
Any failure by AT&T in these respects could materially impair the benefits
Yahoo! expects to receive from
 
                                       17

<PAGE>
this arrangement, and could negatively affect the Yahoo! brand. In addition, the
acquisition of Excite by @Home Network (a company whose largest stockholder will
be AT&T upon consummation of AT&T's acquisition of TCI) could adversely impact
this arrangement.
 
YAHOO! MAY NOT BE ABLE TO SUCCESSFULLY ENHANCE ITS PROPERTIES OR DEVELOP NEW
  PROPERTIES
 
    To remain competitive, Yahoo! must continue to enhance and improve the
functionality, features, and content of the Yahoo! main site, as well as its
other branded media properties. Yahoo! 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 its Web-based email services, message boards,
stock portfolios and Yahoo! Clubs community features, require significantly
greater expenses than its general services. Yahoo! cannot guarantee that these
additional expenses will be offset by additional revenues from personalized
services.
 
    Its future success also depends in part upon the timely processing of Web
site listings submitted by users and Web content providers, which have increased
substantially in recent periods. Yahoo! has, from time to time, experienced
significant delays in the processing of submissions. Further delays could have a
material adverse effect on its goodwill among Web users and content providers,
and on its business.
 
    A key element of its 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.
Yahoo! may not be successful in developing, introducing, and marketing such
products or media properties and such properties may not achieve market
acceptance, enhance its 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 its brand name. Its ability to successfully develop additional
targeted media properties depends on use of Yahoo! to promote such properties.
If use of Yahoo! does not continue to grow, its ability to establish other
targeted properties would be adversely affected. If Yahoo! fails to effectively
develop and introduce such new properties, or such properties fail to achieve
market acceptance, its business, results of operations, and financial condition
could be adversely affected.
 
RISKS OF EQUITY INVESTMENTS IN OTHER COMPANIES
 
    Yahoo! has made equity investments in affiliated companies that are involved
in complementary businesses, including the commercialization of Yahoo!-branded
online properties, such as versions of Yahoo! localized for foreign markets.
These affiliated companies typically are in an early stage of development and
may be expected to incur substantial losses. Any investments in such companies
may not result in any return, nor can there be any assurance as to the timing of
any such return, or that Yahoo! may lose its entire investment. As a result,
Yahoo! has recorded and expects to continue to record a share of the losses in
such affiliates attributable to its ownership. Yahoo!'s investment in
non-affiliated companies involved in the development of technologies or services
that are complementary or related to the Company's business include GeoCities,
broadcast.com, CDnow, E-Loan and Impulse! Buy Network. Yahoo! intends to
continue to make significant additional investments in such companies in the
future. Losses resulting from such investments could have a material adverse
effect on its operating results.
 
MANAGEMENT OF POTENTIAL GROWTH AND INTEGRATION OF ACQUISITIONS
 
    Yahoo!'s recent growth has placed a significant strain on its managerial,
operational, and financial resources. To manage its growth, Yahoo! must continue
to implement and improve its operational and
 
                                       18

<PAGE>
financial systems and to expand, train, and manage its employee base. The
process of managing advertising within large, high traffic Web sites such as
those in the Yahoo! network is an increasingly important and complex task.
Yahoo! relies on both internal and licensed third-party advertising inventory
management and analysis systems. To the extent that Yahoo! does not have the
appropriate advertising inventory or any extended failure of its advertising
management system results in incorrect advertising insertions, Yahoo! may be
exposed to "make good" obligations with its advertising customers, which, by
displacing advertising inventory, could defer advertising revenues. Failure of
its 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 its relationships with advertisers.
Yahoo!'s systems, procedures, or controls may not be adequate to support its
operations, particularly with regard to support and service. Its management may
not be able to achieve the rapid execution necessary to fully exploit its market
opportunity. Any inability to effectively manage growth could have a material
adverse effect on its business, operating results, and financial condition.
 
    As part of its business strategy, Yahoo! has completed several acquisitions
and expects to enter into additional business combinations and acquisitions.
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 its ongoing business and distraction of
   management;
 
- -  the difficulty of incorporating acquired technology or content and rights
   into its products and media properties;
 
- -  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 could
   result 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.
 
    Yahoo! may not be successful in addressing these risks or any other problems
encountered in connection with such acquisitions.
 
RISKS RELATED TO THE GEOCITIES MERGER
 
    THE MARKET PRICE OF YAHOO! COMMON STOCK COULD DECLINE AS A RESULT OF THE
MERGER.  The market price of Yahoo! common stock could decline as a result of
the merger if:
 
- -  the integration of Yahoo! and GeoCities is unsuccessful;
 
- -  the combined company does not achieve the perceived benefits of the merger as
   rapidly or to the extent anticipated by financial analysts; or
 
- -  the effect of the merger on the combined company financial results is not
   consistent with the expectations of financial analysts.
 
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<PAGE>
    THE MERGER IS INTENDED TO QUALIFY AS A POOLING OF INTERESTS AND FINANCIAL
RESULTS WOULD BE NEGATIVELY AFFECTED BY THE FAILURE TO SO QUALIFY.  Yahoo!
intends to account for the merger under the pooling of interest accounting and
financial reporting rules. To qualify the merger as a pooling of interests for
accounting purposes, Yahoo! and GeoCities and their respective affiliates must
meet the criteria for pooling of interests accounting established in opinions
published by the Accounting Principals Board and interpreted by the Financial
Accounting Standards Board and the Commission. These opinions are complex and
the interpretation of them is subject to change. Consummation of the merger is
conditioned, among other things, upon the receipt by Yahoo! of a letter from its
independent accountants and GeoCities' independent accountants that, subject to
customary qualifications, they concur with management's conclusion that no
conditions exist that would preclude Yahoo! and GeoCities from being parties to
a business combination that would be accounted for as a pooling of interests.
 
    However, the availability of pooling of interests accounting treatment for
the merger depends in part, upon circumstances and events occurring after the
effective time. 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. Further, affiliates of
Yahoo! and GeoCities must not sell, or otherwise reduce their risk with respect
to, any shares of either Yahoo! and GeoCities capital stock, except for a de
minimus number as defined by certain Commission rules and regulations, during
the period beginning 30 days before the effective time and continuing until the
day that Yahoo! publicly announces financial results covering at least 30 days
of combined operations of Yahoo! and GeoCities after the merger. If the merger
is completed and the effective time occurs during May 1999, Yahoo! expects that
such combined financial results would be published in July 1999. If affiliates
of Yahoo! or GeoCities sell their shares of Yahoo! common stock prior to that
time despite a contractual obligation not to do so, the merger may not qualify
for accounting as a pooling of interests for financial reporting purposes. The
failure of the merger to qualify for pooling of interests accounting treatment
for financial reporting purposes for any reason would materially and adversely
affect Yahoo!'s reported earnings and likely, the price of Yahoo!'s common
stock.
 
    RISKS ASSOCIATED WITH A FAILURE TO CONSUMMATE THE MERGER.  The consummation
of the merger is subject to a number of conditions including, without
limitation, approval by the stockholders of GeoCities and certain regulatory
approvals. Yahoo! cannot provide any assurance that all conditions upon which
the merger is contingent will be met. If the merger is not consummated for any
reason, the trading price of Yahoo! stock could be materially adversely
affected. In addition, if the merger is not consummated, then the attention and
effort devoted to the integration of the two companies will have significantly
diverted management's attention from other important issues, and could have a
material adverse impact on Yahoo! in the future.
 
RISK OF CAPACITY CONSTRAINTS AND SYSTEMS FAILURES
 
    Yahoo! is dependent on its ability to effectively serve a high volume of use
of its online media properties. Accordingly, the performance of its online media
properties is critical to its reputation, its ability to attract advertisers to
its Web sites, and to achieve market acceptance of its products and media
properties. Any system failure that causes an interruption or an increase in
response time of its products and media properties could result in less traffic
to its Web sites and, if sustained or repeated, could reduce the attractiveness
of its products and media properties to advertisers and licensees. An increase
in the volume of queries conducted through its products and media properties
could strain the capacity of the software or hardware Yahoo! has deployed, which
could lead to slower response time or system failures. In addition, as the
number of Web pages and users increase, its products and media properties and
infrastructure may not be able to scale accordingly. Personalized information
services, such as Web-based email and calendaring services and posting of
photographs, involve increasingly complex technical and operational challenges
that may strain its development and operational
 
                                       20

<PAGE>
resources. Yahoo! may not be able to successfully implement and scale such
services to the extent required by any growth in the number of users of such
services. Failure to do so may affect the goodwill of users of these services,
or negatively affect its brand and reputation.
 
    Yahoo! is dependent on third parties for much of its technology and
infrastructure. See "Yahoo! Depends Substantially on Third Parties" above.
 
    Yahoo!'s operations are susceptible to outages due to fire, floods, power
loss, telecommunications failures, break-ins, and similar events. In addition,
substantially all of its network infrastructure is located in Northern
California, an area susceptible to earthquakes. Yahoo! does not have multiple
site capacity in the event of any such occurrence. Despite its implementation of
network security measures, its servers are vulnerable to computer viruses,
break-ins, and similar disruptions from unauthorized tampering with its computer
systems. Yahoo! does not carry sufficient business interruption insurance to
compensate for losses that may occur as a result of any of these events. Such
events could have a material adverse effect on its business, operating results,
and financial condition.
 
DEPENDENCE ON KEY PERSONNEL
 
    Yahoo! is substantially dependent on the continued services of its key
personnel. Yahoo! expects that it will need to hire additional personnel in all
areas. The competition for such personnel in its industry is intense,
particularly in the San Francisco Bay Area, where its corporate headquarters are
located. At times, Yahoo! has experienced difficulties in hiring personnel with
the right training or experience, particularly in technical areas. Yahoo! does
not maintain key person life insurance for any of its personnel. If Yahoo! does
not succeed in attracting new personnel, or retaining and motivating existing
personnel, its business will be adversely affected.
 
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES
 
    There are currently few laws or regulations directly applicable to access to
or commerce on the Internet. Due to the increasing popularity and use of the
Internet, it is possible that laws and regulations may be adopted, covering
issues such as user privacy, defamation, pricing, taxation, content regulation,
quality of products and services, and intellectual property ownership and
infringement. Such legislation could expose Yahoo! to substantial liability.
Such legislation could also dampen the growth in use of the Web, decrease the
acceptance of the Web as a communications and commercial medium, or require
Yahoo! to incur significant expense in complying with any new regulations. 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 its 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. Because the growing popularity and
use of the Web has burdened the existing telecommunications infrastructure and
many areas with high Web use have begun to experience interruptions in phone
service, local telephone carriers, such as Pacific Bell, have petitioned the FCC
to regulate ISPs and OSPs and to impose access fees. Increased regulation or the
imposition of access fees could substantially increase the costs of
communicating on the Web, potentially decreasing the demand for its products and
media properties. 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. Such proposals, if adopted, could substantially impair the
growth of electronic commerce, and could adversely affect the Company's
opportunity to derive financial benefit from such activities. Also, Congress
recently passed (and the President has signed into law) the Digital Millenium
Copyright Act, which is intended to reduce the liability of online service
providers for listing or linking to third-party Web sites that include materials
that infringe copyrights. Congress also recently passed (and the President has
signed into law) the Children's Online Protection Act and the Children's Online
Privacy
 
                                       21

<PAGE>
Act, which will 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. Further, Congress recently passed (and the
President has signed into law) the Protection of Children from Sexual Predators
Act, which mandates that electronic communication service providers report facts
or circumstances from which a violation of child pornography laws is apparent.
Yahoo! is currently reviewing these pieces of legislation, and cannot currently
predict the effect, if any, that such legislation will have on its business.
There can be no assurance that such legislation will not impose significant
additional costs on its business or subject Yahoo! to additional liabilities. In
addition, a number of other countries have announced or are considering
additional regulation. For example, a recent European Commission privacy
directive restricts the use of personal information without the consent of both
the individual and that individual's government. Such restrictions could
jeopardize the future of e-commerce in and with the European Union. In addition,
the European Commission is expected in the near future to propose a directive
concerning the liability of online service providers for activities that take
place using their services. Such laws and regulations could fundamentally impair
its ability to provide Internet navigation or other services, or substantially
increase the cost of doing so. Moreover, the applicability to the Internet of
existing laws governing issues such as property ownership, copyright,
defamation, obscenity, and personal privacy is uncertain. Yahoo! may be subject
to claims that its services violate such laws. Any such new legislation or
regulation in the United States or abroad or the application of existing laws
and regulations to the Internet could have a material adverse effect on its
business, operating results, 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 Yahoo! for violations of their laws. Yahoo! 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 its
business, results of operations, and financial condition.
 
LIABILITY FOR THE COMPANY'S SERVICES
 
    Yahoo! hosts a wide variety of information, community, communications and
commerce services that enable individuals to exchange information, generate
content, conduct business and engage in various online activities. The laws
relating to the liability of providers of these online services for activities
of their users is currently unsettled. Claims could be made against Yahoo! for
defamation, negligence, copyright or trademark infringement, personal injury or
other theories based on the nature and content of information that may be posted
online by its users. Such claims have been brought, and sometimes successfully
pressed, against online service providers in the past. In addition, Yahoo! could
be exposed to liability with respect to the selection of listings that may be
accessible through its Yahoo!-branded products and media properties, or through
content and materials that may be posted by users in classifieds, message board,
clubs, chat room, or other interactive community-building services. Such claims
might include, among others, that by providing hypertext links to Web sites
operated by third parties, Yahoo! is liable for copyright or trademark
infringement or other wrongful actions by such third parties through such Web
sites, or that Yahoo! is responsible for legal injury caused by statements made
to, actions taken by or content generated by, participants in its message board
services, Yahoo! Clubs, or other community building services. It is also
possible that if any information provided through its services, such as stock
quotes, analyst estimates or other trading information, contains errors, third
parties could make claims against Yahoo! for losses incurred in reliance on such
information. Yahoo! offers Web-based email services, which expose Yahoo! to
potential risks, such as liabilities or claims resulting from unsolicited email
(spamming), lost or misdirected messages, illegal or fraudulent use of email, or
interruptions or delays in email service. Investigating and defending such
claims is expensive, even to the extent such claims do not result in liability.
 
                                       22

<PAGE>
    Yahoo! also periodically enters into arrangements to offer third-party
products and services under the Yahoo! brand or via distribution on Yahoo!
properties. Yahoo! recently announced an arrangement with broadcast.com, an
Internet-based broadcast network, whereby links to broadcast.com's site and
content will be distributed via Yahoo! properties. These business arrangements
involve additional legal risks, such as potential liabilities for content posted
by free home page users or made available by other third-party providers. Yahoo!
may be subject to claims concerning such services or content by virtue of its
involvement in marketing, branding or providing access to such services, even if
Yahoo! does not itself host, operate, or provide such services. While its
agreements with these parties often provide that Yahoo! will be indemnified
against such liabilities, such indemnification may not be adequate.
 
    In October 1998, Yahoo! acquired Yoyodyne Entertainment, Inc., a direct
marketing firm. Yoyodyne's business involves substantial use of sweepstakes,
contests and similar promotional events in order to solicit user registration
and involvement in direct marketing relationships. Sweepstakes and contests are
subject to extensive government regulation throughout the world, including
different regulatory programs under states and territories in the United States,
and may be subject to laws governing lotteries and gambling. Although Yahoo!
intends to operate these events to fall within exemptions from such laws, such
exemptions may not be available. In addition, Yahoo! anticipates that in the
near future substantial additional federal, state and international regulations
may be adopted relating to user privacy and the collection and utilization of
user information. To the extent that Yahoo! does not effectively comply with
such regulations, or if such regulations materially impair its ability to
effectively utilize direct marketing, its business, results of operations, and
financial condition could be materially and adversely affected.
 
POTENTIAL COMMERCE-RELATED LIABILITIES AND EXPENSES
 
    As part of its business, Yahoo! enters into agreements with sponsors,
content providers, service providers, and merchants under which Yahoo! is
entitled to receive a share of revenue from the purchase of goods and services
by users of its online properties. Such arrangements may expose Yahoo! to
additional legal risks and uncertainties, including potential liabilities to
consumers of such products and services. Although Yahoo! carries general
liability insurance, its insurance may not cover potential claims of this type
or may not be adequate to indemnify the Company for all liabilities that may be
imposed.
 
    Yahoo! 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
Yahoo! to certain additional risks and expenses, including those 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.
 
    In June 1998, Yahoo! completed the acquisition of Viaweb Inc., a provider of
software and reporting tools for the operation of online commerce Web sites.
Yahoo! uses the Viaweb technology to host and promote online stores on behalf of
third-party merchants, the operation and maintenance of which will be largely
under the independent control of such merchants. These activities expose Yahoo!
to a number of additional risks and uncertainties, including:
 
- -  potential liabilities for illegal activities that may be conducted by
   participating merchants;
 
- -  products liability or other tort claims relating to goods or services sold
   through hosted commerce sites;
 
- -  consumer fraud and false or deceptive advertising or sales practices;
 
- -  breach of contract claims relating to merchant transactions;
 
                                       23

<PAGE>
- -  claims that materials included in merchant sites or sold by merchants through
   these sites infringe third-party patents, copyrights, trademarks or other
   intellectual property rights, or are libelous, defamatory or in breach of
   third-party confidentiality or privacy rights;
 
- -  claims relating to any failure of merchants to appropriately collect and
   remit sales or other taxes arising from e-commerce transactions; and
 
- -  claims that may be brought by merchants as a result of their exclusion from
   its commerce services or losses resulting from any downtime or other
   performance failures in its hosting services.
 
    Although Yahoo! maintains liability insurance, insurance may not cover these
claims or may not be adequate. Even to the extent such claims do not result in
material liability, investigating and defending such claims is expensive.
 
    Yahoo! intends to significantly expand its online stores in the future, as
well as the services it offers to online store merchants, and to the extent that
it fails to do so successfully, its overall business will be adversely affected.
 
    In September 1998, Yahoo! launched Yahoo! Auctions, a free service that
hosts online auctions for a wide variety of goods and services. Auction services
expose the Company to a number of significant additional risks. For example,
while Yahoo! does not pre-screen the types of goods offered on Yahoo! Auctions,
Yahoo! is aware that certain goods, such as alcohol, tobacco, firearms, adult
material and other goods that may be subject to regulation by local, state or
federal authorities may be traded on Yahoo! Auctions. Yahoo! might not be able
to prevent the unlawful exchange of goods on its service, and may be subject to
civil or criminal liability for unlawful activities carried out by users through
its service. In addition, while Yahoo! takes no responsibility for delivery of
payment or goods to any user of Yahoo! Auctions, Yahoo! anticipates that users
who did not receive the purchase price or the goods that were to have been
exchanged may register complaints with Yahoo! or seek to hold Yahoo! liable.
Yahoo! also anticipates that it will receive complaints from buyers as to the
quality of the goods purchased through Yahoo! Auctions, as well as complaints
alleging that comments posted by participants of the service concerning other
participants are unfair or defamatory. Any claims or litigation arising from
Yahoo! Auctions could be costly. Any negative publicity generated as a result of
fraudulent or deceptive conduct by users of Yahoo! Auctions could damage its
reputation and diminish the value of its brand name. Yahoo! has also received in
the past, and anticipates that it will receive in the future, communications
alleging that certain items sold through Yahoo! Auctions, or text and images
posted by users in auction listings, infringe third-party copyrights, trademarks
or other intellectual property rights. While its user policies prohibit the sale
of goods and posting of materials which may infringe third-party intellectual
property rights, an allegation of infringement may result in costly litigation.
 
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 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th 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 in the process of
assessing the Year 2000 issue and expects to complete the program by the spring
of 1999. Yahoo! has not incurred material costs to date in this 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. Although
Yahoo! currently believes that its systems are Year 2000 compliant in all
material respects, its current systems and products may contain undetected
errors or defects with Year 2000 date functions that may result in material
costs. Although Yahoo! is not aware of any material operational issues or costs
associated with preparing its internal systems for the Year 2000, Yahoo! may
experience serious unanticipated negative consequences
 
                                       24

<PAGE>
(such as significant downtime for one or more Yahoo! media properties) or
material costs caused by undetected errors or defects in the technology used in
its internal systems. In addition, Yahoo! utilizes third-party equipment,
software and content, including non-information technology systems ("non-IT
systems"), such as its security system, building equipment and non-IT systems
embedded microcontrollers that may not be Year 2000 compliant. Yahoo! is in the
process of developing a plan to assess whether these third parties are
adequately addressing the Year 2000 issue and whether any of its non-IT systems
have material Year 2000 compliance problems. Failure of such third-party
equipment, software or content to operate properly with regard to the year 2000
and thereafter could require Yahoo! to incur unanticipated expenses to remedy
any problems, which could have a material adverse effect on its business,
results of operations, and financial condition. Yahoo! is in the process of
developing a comprehensive contingency plan to address situations that may
result if Yahoo! is unable to achieve Year 2000 readiness of its critical
operations. Finally, Yahoo! is also subject to external forces that might
generally affect industry and commerce, such as utility or transportation
company Year 2000 compliance failures and related service interruptions.
Furthermore, the purchasing patterns of advertisers may be affected by Year 2000
issues as companies expend significant resources to correct their current
systems for Year 2000 compliance. Yahoo! does not currently have any information
about the Year 2000 status of its advertising customers. However, these
expenditures may result in reduced funds available for Web advertising or
sponsorship of Web services, which could have a material adverse effect on its
business, results of operations, and financial condition.
 
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND EXPANSION
 
    A key part of its strategy is to develop Yahoo!-branded online properties in
international markets. Yahoo! has developed and operates, through joint ventures
with SOFTBANK and related entities, versions of Yahoo! localized for Japan,
Germany, France, the United Kingdom, and Korea. Yahoo! operates localized or
mirror versions of Yahoo! through wholly-owned subsidiaries in Australia,
Denmark, Italy, Norway, Singapore, Spain and Sweden. Yahoo! also offers Yahoo!
guides in Spanish and Mandarin Chinese.
 
    To date, Yahoo! has only limited experience in developing localized versions
of its products and marketing and operating its products and services
internationally. Yahoo! relies on the efforts and abilities of its foreign
business partners in such activities. Yahoo! also believes that in light of
substantial anticipated competition, Yahoo! will need to move quickly into
international markets in order to effectively obtain market share, and may not
be able to do so. Yahoo! expects to continue to experience higher costs as a
percentage of revenues in connection with international online properties.
International markets Yahoo! has selected may not develop at a rate that
supports its level of investment. In particular, international markets may be
slower in adoption of the Internet as an advertising and commerce medium. Yahoo!
may experience difficulty in managing international operations as a result of
distance as well as language and cultural differences. Yahoo! or its partners
may not be able to successfully market and operate its products and services in
foreign markets. In addition, in a number of international markets, Yahoo! faces
substantial competition from ISPs or other entrenched telecommunications
companies, some of which have a dominant market share in their territories and
which may be monopolies, that offer or may offer their own navigational service,
impairing Yahoo!'s ability to compete in such markets.
 
    In addition to uncertainty about Yahoo!'s ability to continue to generate
revenues from its foreign operations and expand its 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;
 
                                       25

<PAGE>
- -  longer payment cycles;
 
- -  currency exchange rate fluctuations;
 
- -  problems in collecting accounts receivable;
 
- -  political instability;
 
- -  export restrictions;
 
- -  export controls relating to encryption technology;
 
- -  seasonal reductions in business activity in certain other parts of the world;
   and
 
- -  potentially adverse tax consequences.
 
    One or more of these factors could have a material adverse effect on
Yahoo!'s future international operations and, consequently, on Yahoo!'s
business, operating results, and financial condition.
 
CONCENTRATION OF STOCK OWNERSHIP
 
    As of December 31, 1998, Yahoo!'s directors and executive officers, and
their affiliates beneficially owned approximately 57% of the outstanding stock.
As of December 31, 1998, SOFTBANK owned approximately 30% of Yahoo!'s
outstanding stock. As a result of their ownership, the directors, executive
officers, and significant shareholders (including 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 the Company.
 
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
 
    Yahoo!'s 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 the Company without further action by the
shareholders and may adversely affect the voting and other rights of the holders
of common stock. Yahoo! has no present plans to issue shares of Preferred Stock.
Further, certain provisions of its 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 the Company, which could have an
adverse effect on the market price of the stock. In addition, its charter
documents do not permit cumulative voting and provide that, at such time as
Yahoo! has at least six directors, its board of directors will be divided into
two classes, each of which serves for a staggered two-year term, which may make
it more difficult for a third-party to gain control of the board of directors.
 
SHARES ELIGIBLE FOR FUTURE SALE
 
    As of December 31, 1998, Yahoo! had outstanding approximately 199,019,000
shares of common stock, and options to purchase a total of approximately
52,849,000 shares of common stock under its stock option plans, including shares
issued and options assumed in the recent acquisitions of Viaweb, WebCal,
Yoyodyne and HyperParallel. Of these shares, an estimated number of 2,570,000
shares recently issued in connection with acquisitions and investments have been
available for resale pursuant to registration statements previously filed by
Yahoo! with the Commission. Sales of substantial amounts
 
                                       26

<PAGE>
of such shares in the public market or the prospect of such sales could
adversely affect the market price of its common stock.
 

I
TEM 2.  PROPERTIES
 
    Yahoo!'s headquarters facility is located in three offices in Santa Clara,
California. The Company occupies these leased facilities which aggregate
approximately 170,000 square feet. Office space for the Company's international
subsidiaries is leased in Coppenhagen, Hong Kong, London, Madrid, Milan, Munich,
Paris, Seoul, Singapore, Stockholm, Sydney, and Taipei. The Company also leases
sales offices in Atlanta, Boston, Chicago, Dallas, Detroit, Los Angeles, Miami,
New York, and San Francisco. The Company's principal Web server equipment and
operations are maintained by GlobalCenter in Mountain View, California.
 
    The Company believes that its existing facilities are adequate to meet
current requirements, and that suitable additional or substitute space will be
available as needed to accommodate any further physical expansion of corporate
operations and for any additional sales offices.
 

ITEM 3.  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 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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
    No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 1998.
 

                                    PART II
 

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
  MATTERS
 
    Yahoo! Inc. Common Stock is quoted on the NASDAQ National Market System
under the symbol YHOO. The following table sets forth the range of high and low
closing sales prices for each period indicated, adjusted for the three-for-two
stock split effective September 1997 and the two-for-one stock splits effective
August 1998 and February 1999:
 

<TABLE>
<CAPTION>
                                        1998                  1997                  1996
                                --------------------  --------------------  --------------------
                                  HIGH        LOW       HIGH        LOW       HIGH        LOW
                                ---------  ---------  ---------  ---------  ---------  ---------
<S>                             <C>        <C>        <C>        <C>        <C>        <C>
First quarter.................  $   23.27  $   14.52  $    6.07  $    2.92     --         --
Second quarter................  $   39.38  $   23.31  $    6.54  $    4.57  $    5.50  $    3.04
Third quarter.................  $   65.75  $   34.50  $   13.85  $    5.58  $    4.00  $    2.63
Fourth quarter................  $  137.75  $   52.41  $   17.75  $    9.50  $    3.77  $    2.83
</TABLE>

 
    The Company had approximately 2,350 shareholders of record as of December
31, 1998. The Company has not declared or paid any cash dividends on its Common
Stock and presently intends to retain its future earnings, if any, to fund the
development and growth of its business and, therefore, does not anticipate
paying any cash dividends in the foreseeable future.
 
                                       27

<PAGE>
    Yahoo! Inc. made the following unregistered sales of the Company's Common
Stock during the quarter ended December 31, 1998:
 

<TABLE>
<CAPTION>
                                                                            PERSONS OR CLASS             EXEMPTION
                                      NAME OF                                OF PERSONS TO                  FROM
TRANSACTION       AMOUNT OF       UNDERWRITER OR      CONSIDERATION       WHOM THE SECURITIES           REGISTRATION
    DATE       SECURITIES SOLD    PLACEMENT AGENT       RECEIVED               WERE SOLD                  CLAIMED
- ------------  -----------------  -----------------  -----------------  --------------------------  ----------------------
<S>           <C>                <C>                <C>                <C>                         <C>
10/20/98....  509,514 Shares              None                (1)
              (1)                                                      Stockholders of Yoyodyne    Section 4(2) of the
                                                                       Entertainment, Inc.         Securities Act of
                                                                                                   1933, as amended
 
12/17/98....  74,856 Shares (2)           None                (2)      Stockholders of             Section 4(2) of the
                                                                       HyperParallel, Inc.         Securities Act of
                                                                                                   1933, as amended
</TABLE>

 
- ------------------------------
 
(1) Pursuant to an Agreement and Plan of Merger dated as of October 9, 1998, by
    and among Yahoo!, YO Acquisition Corporation, a wholly-owned subsidiary of
    Yahoo!, and Yoyodyne Entertainment, Inc. ("Yoyodyne"), on October 20, 1998
    (the effective date of the acquisition), all outstanding shares of Yoyodyne
    capital stock were converted into 509,514 shares of Yahoo! Common Stock. The
    resale of these shares has been registered on a Registration Statement on
    Form S-3 filed with the Securities and Exchange Commission on November 19,
    1998 and amended on January 22, 1999.
 
(2) Pursuant to an Agreement and Plan of Reorganization dated December 10, 1998,
    by and among Yahoo!, Hype Acquisition Corporation, a wholly-owned subsidiary
    of Yahoo!, and HyperParallel Inc. ("HyperParallel"), on December 17, 1998
    (the effective date of the acquisition), all outstanding shares of
    HyperParallel capital stock were converted into 74,856 shares of Yahoo!
    Common Stock. 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.
 

ITEM 6.  SELECTED FINANCIAL DATA
 
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                      -----------------------------------------------------
                                                                        1998          1997           1996           1995
                                                                      ---------    ----------     ----------     ----------
 
<S>                                                                   <C>          <C>            <C>            <C>
STATEMENTS OF OPERATIONS DATA:
  Net revenues......................................................  $ 203,270    $   70,450     $   21,490     $    1,620
  Gross profit......................................................    176,528        59,565         16,768          1,339
  Total operating expenses..........................................    147,760        90,347         27,702          2,428
  Net income (loss).................................................     25,588(a)    (25,520)(b)     (6,427)        (1,016)
  Net income (loss) per share--basic*...............................       0.14         (0.15)         (0.04)         (0.01)
  Net income (loss) per share--diluted*.............................  $    0.11(a) $    (0.15)(b) $    (0.04)    $    (0.01)
  Shares used in per share calculation--basic*......................    184,060       174,672        157,300        109,468
  Shares used in per share calculation--diluted*....................    224,100       174,672        157,300        109,468
</TABLE>

 

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                      ------------------------------------------
                                                                        1998       1997       1996       1995
                                                                      ---------  ---------  ---------  ---------
 
<S>                                                                   <C>        <C>        <C>        <C>
BALANCE SHEETS DATA:
Cash, cash equivalents, and short and long-term investments in
  marketable debt securities........................................  $ 482,426  $ 108,045  $ 106,695  $   6,167
Working capital.....................................................    387,256     84,050     92,790      5,620
Total assets........................................................    621,884    143,512    116,205      7,489
Shareholders' equity................................................  $ 536,210  $ 118,358  $ 105,916  $   5,975
</TABLE>

 
- ------------------------------
 
Note: The selected financial data for the four years ended December 31, 1998 has
      been restated to reflect the acquisition of Yoyodyne Entertainment, Inc.
      which was accounted for as a pooling of interests.
 
*   Reflects the two-for-one stock splits effective August 1998 and February
    1999.
 
(a) Net income and net income per share include non-recurring charges of $19.4
    million incurred in connection with the June 1998 acquisition of Viaweb
    Inc., the October 1998 acquisition of Yoyodyne Entertainment, Inc., and the
    December 1998
 
                                       28

<PAGE>
    acquisition of HyperParallel, Inc., and amortization of $4.9 million on
    intangible assets. Pro forma net income and net income per share--diluted,
    excluding these expenses, would have been $49.9 million and $0.22,
    respectively.
 
(b) Net loss and net loss per share include non-recurring charges of $21.2
    million related to the Yahoo! Marketplace restructuring and $3.9 million
    incurred in connection with the October 1997 acquisition of Four11
    Corporation. Pro forma net loss and net loss per share--diluted, excluding
    these expenses, would have been $0.4 million and $0.00, respectively.
 

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
  OF OPERATIONS
 
    EXCEPT FOR HISTORICAL INFORMATION, THE DISCUSSION IN THIS REPORT (INCLUDING,
WITHOUT LIMITATION, THE DISCUSSION UNDER THE HEADING "RESULTS OF OPERATIONS")
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED BELOW, AND THE RISKS DISCUSSED UNDER THE CAPTION,
"RISK FACTORS" IN ITEM 1 OF THIS ANNUAL REPORT ON FORM 10-K.
 
OVERVIEW
 
    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. 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 October 20, 1997, the Company completed the acquisition of Four11
Corporation ("Four11"), a privately-held online communications and Internet
directory company. Under the terms of the acquisition, which was accounted for
as a pooling of interests, the Company exchanged 6,022,880 shares of Yahoo!
Common Stock for all of Four11's outstanding shares and assumed 593,344 options
and warrants to purchase Yahoo! Common Stock. During the quarter ended December
31, 1997, the Company recorded a one-time charge of $3.9 million for the
acquisition. These costs consisted of investment banking fees, legal and
accounting fees, redundancy costs, and certain other expenses directly related
to the acquisition. The consolidated financial statements for the three years
ended December 31, 1998 and the accompanying notes reflect the Company's
financial position and the results of operations as if Four11 was a wholly-owned
subsidiary of the Company since inception.
 
    On June 10, 1998, the Company completed the acquisition of all outstanding
shares of Viaweb Inc. ("Viaweb"), a provider of software and services for
hosting online stores, through the issuance of 1,574,364 shares of Yahoo! Common
Stock. All outstanding options to purchase Viaweb common stock were converted
into options to purchase 244,504 shares of Yahoo! Common Stock. 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 is allocated to the assets acquired and
liabilities assumed based on their estimated fair values at the date of the
acquisition. Results of operations for Viaweb have been included with those of
the Company for periods subsequent to the date of acquisition.
 
    The total purchase price of the acquisition was $48.6 million including
acquisition expenses of $1.8 million. Of the purchase price, $15.0 million was
assigned to in-process research and development and expensed upon the
consummation of the acquisition. The purchase price was allocated to the assets
acquired and liabilities assumed based on their estimated fair values as
determined by the Company and pursuant to discussions with the Staff of the
Securities and Exchange Commission (the "Staff").
 
                                       29

<PAGE>
    Among the factors considered in discussions with the Staff in determining
the amount of the allocation of the purchase price to in-process research and
development were various factors such as estimating the stage of development of
each in-process research and development project at the date of acquisition,
estimating cash flows resulting from the expected revenues generated from such
projects, and discounting the net cash flows, in addition to other assumptions.
The remaining identified intangibles, including the value of purchased
technology and other intangibles will be amortized on a straight-line basis over
three and seven years, respectively. Amortization expense of purchased
technology and other intangible assets was $2.9 million and $2.0 million,
respectively, for the year ended December 31, 1998. In addition, other factors
were considered in discussions with the Staff in determining the value assigned
to purchased in-process technology such as research projects in areas supporting
the online store technology (including significant enhancement to the ability of
the product to support multiple users and multiple servers), developing
functionality to support the ability to process credit card orders, and
enhancing the product's user interface by developing functionality that would
allow the product to be used outside of the United States. If none of these
projects is successfully developed, the Company's sales and profitability may be
adversely affected in future periods. Additionally, the failure of any
particular individual project in process could impair the value of other
intangible assets acquired. The Company began to benefit from the purchased
in-process technology in late 1998.
 
    On July 17, 1998, the Company completed the acquisition of WebCal
Corporation ("WebCal"), a privately-held developer and marketer of Web-based
calendaring and scheduling products, and publisher of EventCal, a comprehensive
database of world-wide public events. Under the terms of the acquisition, which
was accounted for as a pooling of interests, the Company exchanged 541,908
shares of Yahoo! Common Stock for all of WebCal's outstanding shares. The
historical operations of WebCal are not material to the Company's financial
position or results of operations, therefore, prior period financial statements
have not been restated for this acquisition.
 
    On October 20, 1998, the Company acquired Yoyodyne Entertainment, Inc.
("Yoyodyne"), a privately-held, direct marketing services company. Under the
terms of the acquisition, which was accounted for as a pooling of interests, the
Company exchanged 561,244 shares of Yahoo! Common Stock and options and warrants
to purchase Yahoo! Common Stock for all of Yoyodyne's outstanding shares,
options, and warrants. The consolidated financial statements for the three years
ended December 31, 1998 and the accompanying notes reflect the Company's
financial position and the results of operations as if Yoyodyne was a
wholly-owned subsidiary of the Company since inception. During October 1998, the
Company recorded a one-time charge of $2.1 million for acquisition-related
costs. These costs consisted of broker fees, legal and accounting fees, and
certain other expenses directly related to the acquisition.
 
    On December 17, 1998, the Company completed the acquisition of all
outstanding shares of HyperParallel, Inc. ("HyperParallel"), a direct marketing
company specializing in data analysis, through the issuance of 74,856 shares of
Yahoo! Common Stock and cash, totaling $8.1 million. The acquisition was
accounted for as a purchase in accordance with APB 16. Under the purchase method
of accounting, the purchase price is allocated to the assets acquired and
liabilities assumed based on their estimated fair values at the date of the
acquisition. The excess purchase price over the estimated fair value of the
assets acquired and liabilities assumed has been allocated to goodwill. Results
of operations for HyperParallel have been included with those of the Company for
periods subsequent to the date of acquisition. The Company estimated that the
economic useful lives of current technology and goodwill were three and seven
years, respectively. The Company recorded a charge to earnings of $2.3 million
for in-process research and development that had not yet reached technological
feasibility and had no alternative future use. Factors considered in estimating
the allocation of purchase price to in-process research and development were
estimating cash flows resulting from the expected revenues to be generated from
the project, and discounting the net cash flows, in addition to other
assumptions.
 
                                       30

<PAGE>
If this project is not successfully developed, the Company's sales and
profitability may be adversely affected in future periods.
 
    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 21,254,000 shares of Yahoo! Common Stock
for approximately 31,403,000 shares of GeoCities common stock. Additionally, the
Company will convert approximately 8,894,000 GeoCities stock options into
approximately 6,019,000 Yahoo! stock options. The acquisition is expected to be
completed in the second quarter of 1999 and is subject to certain conditions,
regulatory approval, and approval by GeoCities stockholders. The Company expects
to record a one-time charge in the second quarter of 1999 relating to expenses
incurred with this transaction. GeoCities' operating results for the years ended
December 31, 1998, 1997, and 1996 included revenues of approximately $18.4
million, $4.6 million, and $0.3 million, respectively, and net losses of
approximately $19.8 million, $8.9 million, and $3.0 million, respectively.
 
    The Company's revenues are derived principally from the sale of banner and
sponsorship advertisements. The Company's standard rates for banner advertising
currently range from approximately $6.00 per thousand impressions for run of
network to approximately $90.00 per thousand impressions for highly targeted
audiences and properties. To date, the duration of the Company's banner
advertising commitments has ranged from one week to two years. Sponsorship
advertising contracts have longer terms (ranging from three months to two years)
than standard banner advertising contracts and also involve more integration
with Yahoo! services, such as the placement of buttons that provide users with
direct links to the advertiser's Web site. Advertising revenues on both banner
and sponsorship contracts are recognized ratably over the period in which the
advertisement is displayed, provided that no significant Company obligations
remain at the end of a period and collection of the resulting receivable is
probable. Company obligations typically include guarantees of minimum number of
"impressions," or times that an advertisement appears in pages viewed by users
of the Company's online properties. To the extent minimum guaranteed impressions
are not met, the Company defers recognition of the corresponding revenues until
the remaining guaranteed impression levels are achieved. The Company also earns
revenue on sponsorship contracts from fees relating to the design, coordination,
and integration of customers' content and links into Yahoo! online media
properties. These development fees are recognized as revenue once the related
activities have been performed and the customer's Web links are available on
Yahoo! online media properties. A number of the Company's agreements provide
that Yahoo! receive revenues from electronic commerce transactions. Currently,
these revenues are recognized by the Company upon notification from the
advertiser of revenues earned by Yahoo!. Revenues from barter transactions are
recognized during the period in which the advertisements are displayed in Yahoo!
properties. Barter transactions are recorded at the fair value of the goods or
services provided or received, whichever is more readily determinable in the
circumstances. To date, revenues from development fees, electronic commerce
transactions, and barter transactions have each been less than 10% of net
revenues.
 
    In August 1996, the Company entered into agreements with Visa International
Service Association ("VISA") and another party (together, the "Visa Group") to
establish a limited liability company, Yahoo! Marketplace L.L.C., to develop and
operate a navigational service focused on information and resources for the
purchase of consumer products and services over the Internet. During July 1997,
prior to the completion of significant business activities and public launch of
the property, the Company and VISA entered into an agreement under which the
Visa Group released the Company from certain obligations and claims. In
connection with this agreement, Yahoo! issued 2,797,924 shares of Yahoo! Common
Stock to the Visa Group, for which the Company recorded a one-time, non-cash,
pre-tax charge of $21.2 million in the second quarter ended June 30, 1997.
 
                                       31

<PAGE>
RESULTS OF OPERATIONS
 
    NET REVENUES.  Net revenues were $203.3 million, $70.5 million , and $21.5
million for the years ended December 31, 1998, 1997, and 1996, respectively. The
increases from year to year are 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 3,800
customers advertised on the Company's online media properties during 1998 as
compared to approximately 2,600 and 700 in 1997 and 1996, respectively. No one
customer accounted for 10% or more of net revenues during the years ended
December 31, 1998 and 1997, and SOFTBANK and its related companies ("SOFTBANK")
accounted for 11% of net revenues during 1996. Advertising purchases by
SOFTBANK, a 30% shareholder of the Company at December 31, 1998, accounted for
approximately 5% and 4% of net revenues during the years ended December 31, 1998
and 1997, respectively. Contracted prices on these orders are comparable to
those given to other major customers of the Company. International revenues have
accounted for less than 10% of net revenues during the years ended December 31,
1998, 1997, and 1996. 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, prize awards, equipment
depreciation, and compensation. Cost of revenues were $26.7 million for the year
ended December 31, 1998, or 13% of net revenues, as compared to $10.9 million,
or 15% of net revenues, and $4.7 million, or 22% of net revenues, for the years
ended December 31, 1997 and 1996, respectively. The absolute dollar increases in
cost of revenues from year to year are 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 technology
purchased in the Viaweb acquisition. 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 167 million page
views per day in December 1998 compared with an average of approximately 65
million page views per day in December 1997 and an average of approximately 20
million page views per day in December 1996. Yahoo! Japan, an unconsolidated
joint venture of the Company that began operations in April 1996, is included in
these page views figures and accounted for an average of approximately 13
million per day in December 1998, an average of approximately 5 million per day
in December 1997, and an average of approximately 1.4 million per day in
December 1996. The Company anticipates that its content and Internet connection
expenses will continue to increase in absolute dollars for the foreseeable
future. The Company currently anticipates cost of revenues will be in the range
of 10% to 13% of net revenues for 1999, however, anticipated spending levels may
vary as a result of acquisitions and future business combinations.
 
    SALES AND MARKETING.  Sales and marketing expenses were $92.4 million for
the year ended December 31, 1998, or 45% of net revenues. For the years ended
December 31, 1997 and 1996, sales and marketing expenses were $45.8 million and
$16.2 million, or 65% and 75% of net revenues, respectively. 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 year-to-year increases in absolute
dollars are primarily attributable
 
                                       32

<PAGE>
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
Germany, France, and the United Kingdom during 1996, Sweden, Australia,
Singapore, Korea, Denmark, and Norway during 1997, and Italy, Hong Kong, and
Spain as well as Yahoo! guides in Spanish and Mandarin Chinese languages during
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. As a percentage of net revenues, the Company currently
anticipates that sales and marketing expenses will be in the range of 40% to 43%
for 1999, however, anticipated spending levels may vary as a result of
acquisitions and future business combinations.
 
    PRODUCT DEVELOPMENT.  Product development expenses were $22.7 million, or
11% of net revenues for the year ended December 31, 1998 compared to $12.1
million and $5.7 million, or 17% and 27% of net revenues for the years ended
December 31, 1997 and 1996, respectively. Product development expenses consist
primarily of employee compensation relating to developing and enhancing the
features and functionality of Yahoo! online media properties. The year-to-year
increases in absolute dollars are primarily attributable to increases in the
number of engineers that develop and enhance Yahoo! online media properties. To
date, all internal product development costs have been expensed as incurred. 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. As a percentage of net revenues, the Company currently anticipates that
product development expenses will range from 10% to 12% during 1999, however,
anticipated spending levels may vary as a result of acquisitions and future
business combinations.
 
    GENERAL AND ADMINISTRATIVE.  General and administrative expenses were $11.2
million, or 6% of net revenues for the year ended December 31, 1998 compared to
$7.4 million and $5.8 million, or 10% and 27% of net revenues for the years
ended December 31, 1997 and 1996, respectively. General and administrative
expenses consist primarily of compensation and fees for professional services,
and the year-to-year increases in absolute dollars are 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. As a
percentage of net revenues, the Company currently anticipates that general and
administrative expenses will approximate 5% during 1999, however, anticipated
spending levels may vary as a result of acquisitions and future business
combinations.
 
    AMORTIZATION OF INTANGIBLES.  As part of the Viaweb acquisition, the Company
recorded an intangible asset related to goodwill in the amount of $24.3 million.
This asset is being amortized over a seven-year period beginning in June 1998.
 
    OTHER--NON-RECURRING COSTS.  During June 1998, the Company completed the
acquisition of all outstanding shares of Viaweb through the issuance of
1,574,364 shares of Yahoo! Common Stock. All outstanding options to purchase
Viaweb common stock were converted into options to purchase 244,504 shares of
Yahoo! Common Stock. During the quarter ended June 30, 1998, the Company
recorded a non-recurring charge of $15.0 million for in-process research and
development that had not yet reached technological feasibility and had no
alternative future use. On October 20, 1998, the Company completed the
acquisition of all outstanding shares, options, and warrants of Yoyodyne through
the issuance of 561,244 shares of Yahoo! Common Stock and options and warrants
to purchase Yahoo! Common Stock. During the quarter ended December 31, 1998, the
Company recorded a one-time charge of approximately $2.1 million for expenses
incurred with the transaction. During December 1998, the Company completed the
acquisition of all outstanding shares of HyperParallel
 
                                       33

<PAGE>
through the issuance of 74,856 shares of Yahoo! Common Stock and some cash.
During the quarter ended December 31, 1998, the Company recorded a non-recurring
charge of $2.3 million for in-process research and development that had not yet
reached technological feasibility and had no alternative future use.
 
    During July 1997, the Company and VISA entered into an agreement under which
the Visa Group released the Company from certain obligations and claims. In
connection with this agreement, Yahoo! issued 2,797,924 shares of Yahoo! Common
Stock to the Visa Group, for which the Company recorded a one-time, non-cash,
pre-tax charge of $21.2 million in the second quarter ended June 30, 1997. In
conjunction with the October 1997 acquisition of Four11 Corporation, the Company
recorded a one-time charge of $3.9 million which consisted of investment banking
fees, legal and accounting fees, redundancy costs, and certain other expenses
directly related to the acquisition.
 
    INVESTMENT INCOME, NET.  Investment income, net of expense, was $14.6
million for the year ended December 31, 1998 compared to $4.5 million and $4.0
million for the years ended December 31, 1997 and 1996, respectively. The
increase from 1997 to 1998 is primarily attributable to a higher average
investment balance, principally due to proceeds of $250.0 million received by
the Company on July 14, 1998 from a private placement of shares to SOFTBANK.
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 $68,000 for the year
ended December 31, 1998 compared to $727,000 and $540,000 for the years ended
December 31, 1997 and 1996, respectively. The decrease from 1997 to 1998 is
primarily attributable to near break-even results in the European and Korean
joint ventures in the aggregate. The increase from 1996 to 1997 is primarily
attributable to the staggered launch dates of the joint ventures. Yahoo! Europe
operations began during the third quarter of 1996 and Yahoo! Korea operations
started in the third quarter of 1997. 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. When, and if, the consolidated subsidiaries become
profitable, the minority interests adjustment on the statement of operations
will reduce the Company's net income by the minority partners' share of the
subsidiaries' net income.
 
    INCOME TAXES.  Yahoo! recorded an income tax provision of $17.8 million in
1998. At December 31, 1998, the Company had net operating loss carryforwards and
research tax credit carryforwards, which if not utilized, will begin to expire
in 2003 through 2010. Deferred tax assets totaled $152.7 million of which
approximately $141 million relates to net operating loss carryforwards and tax
credit carryforwards from the exercise of stock options. When recognized, the
tax benefit of the loss and credit carryforwards is accounted for as a credit to
additional paid-in capital rather than as a reduction of income tax expense. The
Company has a valuation allowance of $135.1 million for deferred tax assets for
which realization is not more-likely-than-not. The Company's 1998 estimated
income tax rate was impacted during the year by the release of the prior year's
valuation allowance, nondeductible acquisition-related charges, and
pre-acquisition losses of companies acquired in 1998.
 
    NET INCOME (LOSS).  The Company recorded net income of $25.6 million or
$0.11 per share diluted for the year ended December 31,1998 compared to net
losses of $25.5 million and $6.4 million, or $0.15, and $0.04 per share diluted
for the years ended December 31, 1997 and 1996, respectively. Excluding the
effect of the non-recurring charge of $19.4 million incurred in connection with
various 1998 acquisitions and the amortization of $2.9 million and $2.0 million
from the purchased technology and intangible assets acquired in the purchase of
Viaweb, the Company earned $49.9 million or $0.22 per share diluted for the year
ended December 31, 1998. Excluding the effect of the one-time, non-cash, pre-tax
charge of $21.2 million recorded for the restructuring of the Yahoo! Marketplace
agreements with the Visa Group and the one-time charge of $3.9 million recorded
for costs incurred
 
                                       34

<PAGE>
for the acquisition of Four11, the Company's net loss was $0.4 million or $0.00
per share diluted for the year ended December 31, 1997.
 
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 December 31, 1998, the Company had cash and cash
equivalents and investments in marketable debt securities totaling $482.4
million compared to $108.0 million at December 31, 1997. For the year ended
December 31, 1998, cash provided by operating activities was $110.3 million
compared to cash provided by operating activities of $0.5 million and cash used
for operating activities of $2.4 million for the years ended December 31, 1997
and 1996, respectively.
 
    For the year ended December 31, 1998, cash provided by operating activities
of $110.3 million was primarily due to earnings, before non-recurring charges of
$17.3 million and depreciation and amortization of $10.2 million, increases in
deferred revenue (due to invoicing and cash receipts in excess of revenue) and
accrued liabilities, and tax benefits from stock option plans. 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 year ended December 31, 1997, cash provided by
operating activities of $0.5 million was primarily due to increases in accrued
liabilities and deferred revenue, substantially offset by increases in prepaid
expenses and other assets, which resulted primarily from a $5.0 million one-time
non-refundable license payment to Netscape under the Netscape Guide by Yahoo!
agreement and a $2.9 million payment to Netscape under the international
Netscape Net Search program agreement. For the year ended December 31, 1996,
cash used by operating activities was $2.4 million.
 
    Cash used in investing activities was $329.9 million for the year ended
December 31, 1998. Purchases (net of sales and maturities) of investments in
marketable securities and other assets during the period were $312.8 million and
capital expenditures totaled $11.9 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 provided by investing activities was $19.6
million for the year ended December 31, 1997. Sales and maturities (net of
purchases) of investments in marketable securities during the period were $27.9
million and capital expenditures totaled $6.7 million. Cash used in investing
activities was $76.2 million for the year ended December 31, 1996. Purchases
(net of sales and maturities) of investments in marketable securities and other
assets during the period were $72.0 million and capital expenditures totaled
$3.4 million.
 
    For the year ended December 31, 1998, cash provided by financing activities
of $281.3 million was due primarily to the issuance of Common Stock to SOFTBANK
in the amount of $250.0 million during July 1998 and the issuance of Common
Stock pursuant to the exercise of stock options. For the year ended December 31,
1997, cash provided by financing activities of $9.6 million was due primarily to
the issuance of Common Stock pursuant to the exercise of stock options. For the
year ended December 31, 1996, cash provided by financing activities of $107.2
million was primarily due to the March 1996 issuance of 5.1 million shares of
Convertible Series C Preferred Stock for aggregate proceeds of $63.8 million,
the April 1996 initial public offering of 17.9 million shares of Common Stock
for net proceeds of $35.1 million, and other issuances of Common Stock.
 
    The Company currently has no material commitments other than those under
operating lease agreements. 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
 
                                       35

<PAGE>
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 21st
century dates from 20th century dates. These date code fields will need to
distinguish 21st century dates from 20th 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. The Company is in the
process of assessing the Year 2000 issue and expects to complete the program by
the spring of 1999. The Company has not incurred material costs to date in this
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.
Although Yahoo! currently believes that its systems are Year 2000 compliant in
all material respects, the current systems and products may contain undetected
errors or defects with Year 2000 date functions that may result in material
costs. Although Yahoo! is not aware of any material operational issues or costs
associated with preparing its internal systems for the Year 2000, the Company
may experience serious unanticipated negative consequences (such as significant
downtime for one or more Yahoo! Media properties) or material costs caused by
undetected errors or defects in the technology used in its internal systems. In
addition, the Company utilizes third-party equipment, software and content,
including non-information technology systems ("non-IT systems"), such as its
security system, building equipment, and non-IT systems embedded
microcontrollers that may not be Year 2000 compliant. The Company is in the
process of developing a plan to assess whether these third parties are
adequately addressing the Year 2000 issue and whether any of its non-IT systems
have material Year 2000 compliance problems. Failure of such third-party
equipment, software, or content to operate properly with regard to the year 2000
and thereafter could require the Company to incur unanticipated expenses to
remedy any problems, which could have a material adverse effect on its business,
results of operations, and financial condition. Yahoo! is in the process of
fully developing a comprehensive contingency plan to address situations that may
result if it is unable to achieve Year 2000 readiness of its critical
operations. Finally, the Company is also subject to external forces that might
generally affect industry and commerce, such as utility or transportation
company Year 2000 compliance failures and related service interruptions.
Furthermore, the purchasing patterns of advertisers may be affected by Year 2000
issues as companies expend significant resources to correct their current
systems for Year 2000 compliance. The Company does not currently have any
information about the Year 2000 status of its advertising customers. However,
these expenditures may result in reduced funds available for Web advertising or
sponsorship of Web services, which could have a material adverse effect on the
Company's business, results of operations, and financial condition.
 

I
TEM 7A.  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
 
                                       36

<PAGE>
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 1998 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.
 
                                       37

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 

<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                                  PAGE
- ----------------------------------------------------------------------------------------  ---------
<S>                                                                                       <C>        <C>
Consolidated Financial Statements:
 
  Report of Independent Accountants.....................................................     39
 
  Consolidated Balance Sheets at December 31, 1998 and 1997.............................     40
 
  Consolidated Statements of Operations for each of the three years in the period ended
    December 31, 1998...................................................................     41
 
  Consolidated Statements of Shareholders' Equity for each of the three years in the
    period ended December 31, 1998......................................................     42
 
  Consolidated Statements of Cash Flows for each of the three years in the period ended
    December 31, 1998...................................................................     43
 
  Notes to Consolidated Financial Statements............................................     44
 
  Financial Statement Schedules:
 
    II--Valuation and Qualifying Accounts for each of the three years in the period
      ended December 31, 1998...........................................................     61
 
All other schedules are omitted because they are not applicable or the required information is
  shown in the Consolidated Financial Statements or Notes thereto.
 
Supplementary Financial Data:
  Quarterly Financial Data (unaudited) for the two years ended December 31, 1998........     62
</TABLE>

 
                                       38

<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Shareholders of Yahoo! Inc.
 
    In our opinion, the consolidated financial statements listed in the
accompanying index present fairly, in all material respects, the financial
position of Yahoo! Inc. and its subsidiaries at December 31, 1998 and 1997, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
 
/s/ PricewaterhouseCoopers LLP
San Jose, California
January 8, 1999, except as to the stock split described in Note 1

and Note 10, which are as of February 8, 1999
 
                                       39

<PAGE>
                                  YAHOO! INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
                        (IN THOUSANDS, EXCEPT PAR VALUE)

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                          --------------------
                                                                            1998       1997
                                                                          ---------  ---------
<S>                                                                       <C>        <C>
                                            ASSETS
Current assets:
  Cash and cash equivalents.............................................  $ 125,474  $  63,571
  Short-term investments in marketable securities.......................    308,025     27,772
  Accounts receivable, net of allowance of $4,967 in 1998 and $2,598 in
    1997................................................................     24,831     11,163
  Prepaid expenses and other current assets.............................      8,909      5,982
                                                                          ---------  ---------
      Total current assets..............................................    467,239    108,488
 
Long-term investments in marketable securities..........................     90,266     16,702
Property and equipment, net.............................................     15,189      7,364
Other assets............................................................     49,190     10,958
                                                                          ---------  ---------
      Total assets......................................................  $ 621,884  $ 143,512
                                                                          ---------  ---------
                                                                          ---------  ---------
 
<CAPTION>
                             LIABILITIES AND SHAREHOLDERS' EQUITY
<S>                                                                       <C>        <C>
Current liabilities:
  Accounts payable......................................................  $   6,302  $   5,256
  Accrued expenses and other current liabilities........................     34,419     12,685
  Deferred revenue......................................................     38,301      5,085
  Due to related parties................................................        961      1,412
                                                                          ---------  ---------
      Total current liabilities.........................................     79,983     24,438
                                                                          ---------  ---------
 
Deferred tax liability..................................................      4,443     --
Commitments and contingencies (Note 9)
Minority interests in consolidated subsidiaries.........................      1,248        716
 
Shareholders' equity:
  Preferred Stock, $0.001 par value; 10,000 shares authorized; none
    issued or outstanding in 1998 and 1997..............................     --         --
  Common Stock, $0.00017 par value; 900,000 shares authorized; 199,019
    issued and outstanding in 1998 and 180,408 issued and outstanding in
    1997................................................................         23         20
  Additional paid-in capital............................................    522,997    151,744
  Accumulated deficit...................................................     (8,442)   (32,963)
  Accumulated other comprehensive income (loss).........................     21,632       (443)
                                                                          ---------  ---------
      Total shareholders' equity........................................    536,210    118,358
                                                                          ---------  ---------
      Total liabilities and shareholders' equity........................  $ 621,884  $ 143,512
                                                                          ---------  ---------
                                                                          ---------  ---------
</TABLE>

 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       40

<PAGE>
                                  YAHOO! INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
 
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                                -------------------------------
                                                                  1998       1997       1996
                                                                ---------  ---------  ---------
<S>                                                             <C>        <C>        <C>
Net revenues..................................................  $ 203,270  $  70,450  $  21,490
Cost of revenues..............................................     26,742     10,885      4,722
                                                                ---------  ---------  ---------
Gross profit..................................................    176,528     59,565     16,768
                                                                ---------  ---------  ---------
Operating expenses:
  Sales and marketing.........................................     92,380     45,778     16,168
  Product development.........................................     22,742     12,082      5,700
  General and administrative..................................     11,210      7,392      5,834
  Amortization of intangibles.................................      2,028     --         --
  Other--non-recurring costs..................................     19,400     25,095     --
                                                                ---------  ---------  ---------
      Total operating expenses................................    147,760     90,347     27,702
                                                                ---------  ---------  ---------
Income (loss) from operations.................................     28,768    (30,782)   (10,934)
Investment income, net........................................     14,579      4,535      3,967
Minority interests in operations of consolidated
  subsidiaries................................................         68        727        540
                                                                ---------  ---------  ---------
Income (loss) before income taxes.............................     43,415    (25,520)    (6,427)
Provision for income taxes....................................     17,827     --         --
                                                                ---------  ---------  ---------
Net income (loss).............................................  $  25,588  $ (25,520) $  (6,427)
                                                                ---------  ---------  ---------
                                                                ---------  ---------  ---------
Net income (loss) per share--basic............................  $    0.14  $   (0.15) $   (0.04)
                                                                ---------  ---------  ---------
                                                                ---------  ---------  ---------
Net income (loss) per share--diluted..........................  $    0.11  $   (0.15) $   (0.04)
                                                                ---------  ---------  ---------
                                                                ---------  ---------  ---------
Shares used in per share calculation--basic...................    184,060    174,672    157,300
                                                                ---------  ---------  ---------
                                                                ---------  ---------  ---------
Shares used in per share calculation--diluted.................    224,100    174,672    157,300
                                                                ---------  ---------  ---------
                                                                ---------  ---------  ---------
</TABLE>

 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       41

<PAGE>
                                  YAHOO! INC.
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                     PREFERRED STOCK           COMMON STOCK       ADDITIONAL
                                                  ----------------------  ----------------------    PAID-IN    ACCUMULATED
                                                   SHARES      AMOUNT      SHARES      AMOUNT       CAPITAL      DEFICIT
                                                  ---------  -----------  ---------  -----------  -----------  ------------
<S>                                               <C>        <C>          <C>        <C>          <C>          <C>
Balance at December 31, 1995....................      7,738   $       8      65,693   $       1    $   6,982    $   (1,016)
Comprehensive income (loss):
  Net loss......................................     --          --          --          --           --            (6,427)
  Other comprehensive income (loss), net of tax:
    Foreign currency translation adjustment.....
  Other comprehensive income (loss).............     --          --          --          --           --            --
      Comprehensive income (loss)...............
Issuance of Convertible Series C Preferred
  Stock.........................................      5,100           5      --          --           63,745        --
Sale of Common Stock, net of issuance costs.....     --          --          17,940           3       35,103        --
Conversion of Convertible Preferred Stock to
  Common Stock..................................    (12,838)        (13)     77,028          13       --            --
Issuance of Common Stock, net of issuance
  costs.........................................     --          --           1,887      --            7,368        --
Issuance of Common Stock pursuant to exercise of
  options.......................................     --          --           2,978           1            9        --
Compensation expense on option grants and
  warrant issuances.............................     --          --          --          --              197        --
                                                  ---------       -----   ---------         ---   -----------  ------------
Balance at December 31, 1996....................     --          --         165,526          18      113,404        (7,443)
Comprehensive income (loss):
  Net loss......................................     --          --          --          --           --           (25,520)
  Other comprehensive income (loss), net of tax:
    Foreign currency translation adjustment.....
  Other comprehensive income (loss).............     --          --          --          --           --            --
      Comprehensive income (loss)...............
Issuance of Common Stock pursuant to exercise of
  warrants......................................     --          --           1,395      --           --            --
Issuance of Common Stock for acquisitions and
  investments...................................     --          --             461      --            6,400        --
Issuance of Common Stock pursuant to Visa Group
  Agreement.....................................     --          --           2,798           1       21,049        --
Issuance of Common Stock for employee stock
  plans and other...............................     --          --          10,228           1        7,515        --
Write-up of investment in Yahoo! Japan..........     --          --          --          --            1,700        --
Compensation and other expense on option grants
  and warrant issuances.........................     --          --          --          --            1,676        --
                                                  ---------       -----   ---------         ---   -----------  ------------
Balance at December 31, 1997....................     --          --         180,408          20      151,744       (32,963)
Comprehensive income (loss):
  Net income....................................     --          --          --          --           --            25,588
  Other comprehensive income (loss), net of tax:
    Net unrealized gains on securities..........
    Foreign currency translation adjustment.....
  Other comprehensive income (loss).............     --          --          --          --           --            --
      Comprehensive income (loss)...............
Issuance of Common Stock pursuant to exercise of
  warrants......................................     --          --             191      --              196        --
Issuance of Common Stock for acquisitions.......     --          --           2,289      --           54,195        --
Sale of Common Stock, net of issuance costs.....     --          --           5,454           1      249,448        --
Issuance of Common Stock for employee stock
  plans.........................................     --          --          10,677           2       31,032        --
Compensation expense on option grants...........     --          --          --          --              926        --
Tax benefits from stock options.................     --          --          --          --           35,456        --
Accumulated deficit from acquisition............     --          --          --          --           --            (1,067)
                                                  ---------       -----   ---------         ---   -----------  ------------
Balance at December 31, 1998....................     --       $  --         199,019   $      23    $ 522,997    $   (8,442)
                                                  ---------       -----   ---------         ---   -----------  ------------
                                                  ---------       -----   ---------         ---   -----------  ------------
 
<CAPTION>
                                                    ACCUMULATED
                                                       OTHER
                                                   COMPREHENSIVE              COMPREHENSIVE
                                                   INCOME (LOSS)     TOTAL    INCOME (LOSS)
                                                  ---------------  ---------  --------------
<S>                                               <C>              <C>        <C>
Balance at December 31, 1995....................     $  --         $   5,975
Comprehensive income (loss):
  Net loss......................................        --            (6,427)   $   (6,427)
  Other comprehensive income (loss), net of tax:
    Foreign currency translation adjustment.....                                       (63)
                                                                              --------------
  Other comprehensive income (loss).............           (63)          (63)          (63)
                                                                              --------------
      Comprehensive income (loss)...............                                $   (6,490)
                                                                              --------------
                                                                              --------------
Issuance of Convertible Series C Preferred
  Stock.........................................        --            63,750
Sale of Common Stock, net of issuance costs.....        --            35,106
Conversion of Convertible Preferred Stock to
  Common Stock..................................        --            --
Issuance of Common Stock, net of issuance
  costs.........................................        --             7,368
Issuance of Common Stock pursuant to exercise of
  options.......................................        --                10
Compensation expense on option grants and
  warrant issuances.............................        --               197
                                                  ---------------  ---------
Balance at December 31, 1996....................           (63)      105,916
Comprehensive income (loss):
  Net loss......................................        --           (25,520)   $  (25,520)
  Other comprehensive income (loss), net of tax:
    Foreign currency translation adjustment.....                                      (380)
                                                                              --------------
  Other comprehensive income (loss).............          (380)         (380)         (380)
                                                                              --------------
      Comprehensive income (loss)...............                                $  (25,900)
                                                                              --------------
                                                                              --------------
Issuance of Common Stock pursuant to exercise of
  warrants......................................        --            --
Issuance of Common Stock for acquisitions and
  investments...................................        --             6,400
Issuance of Common Stock pursuant to Visa Group
  Agreement.....................................        --            21,050
Issuance of Common Stock for employee stock
  plans and other...............................        --             7,516
Write-up of investment in Yahoo! Japan..........        --             1,700
Compensation and other expense on option grants
  and warrant issuances.........................        --             1,676
                                                  ---------------  ---------
Balance at December 31, 1997....................          (443)      118,358
Comprehensive income (loss):
  Net income....................................        --            25,588    $   25,588
  Other comprehensive income (loss), net of tax:
    Net unrealized gains on securities..........                                    21,787
    Foreign currency translation adjustment.....                                       288
                                                                              --------------
  Other comprehensive income (loss).............        22,075        22,075        22,075
                                                                              --------------
      Comprehensive income (loss)...............                                $   47,663
                                                                              --------------
                                                                              --------------
Issuance of Common Stock pursuant to exercise of
  warrants......................................        --               196
Issuance of Common Stock for acquisitions.......        --            54,195
Sale of Common Stock, net of issuance costs.....        --           249,449
Issuance of Common Stock for employee stock
  plans.........................................        --            31,034
Compensation expense on option grants...........        --               926
Tax benefits from stock options.................        --            35,456
Accumulated deficit from acquisition............        --            (1,067)
                                                  ---------------  ---------
Balance at December 31, 1998....................     $  21,632     $ 536,210
                                                  ---------------  ---------
                                                  ---------------  ---------
</TABLE>

 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       42

<PAGE>
                                  YAHOO! INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31,
                                                               -------------------------------
                                                                 1998       1997       1996
                                                               ---------  ---------  ---------
<S>                                                            <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)..........................................  $  25,588  $ (25,520) $  (6,427)
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
    Depreciation and amortization............................     10,215      2,737        639
    Tax benefits from stock options..........................     17,827     --         --
    Non-cash charges related to stock option grants and
      warrant issuances......................................        926      1,676        197
    Minority interests in operations of consolidated
      subsidiaries...........................................        (68)      (727)      (540)
    Purchased in-process research and development............     17,300     --         --
    Other non-cash charge....................................     --         21,245     --
    Changes in assets and liabilities:
      Accounts receivable, net...............................    (13,616)    (5,963)    (4,269)
      Prepaid expenses.......................................      2,144     (6,110)      (386)
      Accounts payable.......................................        515      2,425      1,386
      Accrued expenses and other current liabilities.........     16,688      7,404      4,393
      Deferred revenue.......................................     33,210      2,983      1,665
      Due to related parties.................................       (451)       330        948
                                                               ---------  ---------  ---------
  Net cash provided by (used in) operating activities........    110,278        480     (2,394)
                                                               ---------  ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property and equipment......................    (11,911)    (6,722)    (3,442)
  Cash acquired in acquisitions..............................        199     --         --
  Purchases of marketable securities.........................   (471,135)   (58,753)  (115,247)
  Proceeds from sales and maturities of marketable
    securities...............................................    158,350     86,678     43,240
  Other investments..........................................     (5,445)    (1,649)      (729)
                                                               ---------  ---------  ---------
  Net cash provided by (used in) investing activities........   (329,942)    19,554    (76,178)
                                                               ---------  ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of Common Stock, net................    280,679      7,516     42,484
  Proceeds from issuance of Convertible Preferred Stock......     --         --         63,750
  Proceeds from minority investors...........................        600        999      1,050
  Other......................................................     --          1,106       (128)
                                                               ---------  ---------  ---------
  Net cash provided by financing activities..................    281,279      9,621    107,156
                                                               ---------  ---------  ---------
Effect of exchange rate changes on cash and cash
  equivalents................................................        288       (380)       (63)
                                                               ---------  ---------  ---------
Net change in cash and cash equivalents......................     61,903     29,275     28,521
Cash and cash equivalents at beginning of year...............     63,571     34,296      5,775
                                                               ---------  ---------  ---------
Cash and cash equivalents at end of year.....................  $ 125,474  $  63,571  $  34,296
                                                               ---------  ---------  ---------
                                                               ---------  ---------  ---------
</TABLE>

 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                       43

<PAGE>
                                  YAHOO! INC.
 

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    THE COMPANY.  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.
 
    On October 20, 1998 and 1997, the Company consummated its acquisitions of
Yoyodyne Entertainment, Inc. ("Yoyodyne") and Four11 Corporation ("Four11"),
respectively, upon which Yoyodyne's and Four11's shareholders exchanged all of
their shares for shares of the Company's Common Stock in business combinations
that were accounted for as pooling of interests. The consolidated financial
statements for the three years ended December 31, 1998 and the accompanying
notes reflect the Company's financial position and the results of operations as
if Yoyodyne and Four11 were wholly-owned subsidiaries of the Company since
inception.
 
    Components of the consolidated results of operations of Yahoo! and of Four11
and Yoyodyne prior to their acquisitions by Yahoo! are as follows (in
thousands):
 

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                                 -------------------------------
                                                   1998       1997       1996
                                                 ---------  ---------  ---------
<S>                                              <C>        <C>        <C>
NET REVENUES
  Yahoo!.......................................  $ 201,446  $  65,460  $  19,073
  Four11.......................................     --          1,951        624
  Yoyodyne.....................................      1,824      3,039      1,793
                                                 ---------  ---------  ---------
                                                 $ 203,270  $  70,450  $  21,490
                                                 ---------  ---------  ---------
                                                 ---------  ---------  ---------
NET INCOME (LOSS)
  Yahoo!.......................................  $  30,216  $ (19,973) $  (2,334)
  Four11.......................................     --         (2,914)    (1,951)
  Yoyodyne.....................................     (4,628)    (2,633)    (2,142)
                                                 ---------  ---------  ---------
                                                 $  25,588  $ (25,520) $  (6,427)
                                                 ---------  ---------  ---------
                                                 ---------  ---------  ---------
</TABLE>

 
    STOCK SPLITS.  During July 1998, the Company's Board of Directors approved a
two-for-one Common Stock split. Shareholders of record on July 17, 1998 (the
record date) received one additional share for every share held on that date.
The shares were distributed on July 31, 1998 and the stock split was effective
on August 3, 1998. 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 consolidated
financial statements and notes thereto for all periods presented have been
adjusted to reflect the two-for-one common stock splits.
 
    PRINCIPLES OF CONSOLIDATION.  The consolidated financial statements include
the accounts of Yahoo! Inc. and its majority-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated. The equity and net
loss attributable to the minority shareholder interests that related to the
Company's subsidiaries, are shown separately in the consolidated balance sheets
and consolidated statements of operations, respectively. Losses in excess of the
minority interest equity would be charged against the Company. Investments in
entities owned 20% or more but less than
 
                                       44

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 1  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
majority owned and not otherwise controlled by the Company are accounted for
under the equity method.
 
    RECLASSIFICATIONS.  Certain prior years' balances have been reclassified to
conform with the current year's presentation.
 
    REVENUE RECOGNITION.  The Company's revenues are derived principally from
the sale of banner and sponsorship advertisements. The Company's standard rates
for banner advertising currently range from approximately $6.00 per thousand
impressions for run of network to approximately $90.00 per thousand impressions
for highly targeted audiences and properties. To date, the duration of the
Company's banner advertising commitments has ranged from one week to two years.
Sponsorship advertising contracts have longer terms (ranging from three months
to two years) than standard banner advertising contracts and also involve more
integration with Yahoo! services, such as the placement of buttons that provide
users with direct links to the advertiser's Web site. Advertising revenues on
both banner and sponsorship contracts are recognized ratably over the period in
which the advertisement is displayed, provided that no significant Company
obligations remain at the end of a period and collection of the resulting
receivable is probable. Company obligations typically include guarantees of
minimum number of "impressions," or times that an advertisement appears in pages
viewed by users of the Company's online properties. To the extent minimum
guaranteed impressions are not met, the Company defers recognition of the
corresponding revenues until the remaining guaranteed impression levels are
achieved.
 
    The Company also earns revenue on sponsorship contracts from fees relating
to the design, coordination, and integration of customers' content and links
into Yahoo! online media properties. These development fees are recognized as
revenue once the related activities have been performed and the customer's Web
links are available on Yahoo! online media properties. A number of the Company's
agreements provide that Yahoo! receive revenues from electronic commerce
transactions. Currently, these revenues are recognized by the Company upon
notification from the advertiser of revenues earned by Yahoo!. Revenues from
barter transactions are recognized during the period in which the advertisements
are displayed in Yahoo! properties. Barter transactions are recorded at the fair
value of the goods or services provided or received, whichever is more readily
determinable in the circumstances. To date, revenues from development fees,
electronic commerce transactions, and barter transactions have each been less
than 10% of net revenues.
 
    No one customer accounted for 10% or more of net revenues during 1998 and
1997, and SOFTBANK and its related companies ("SOFTBANK"), a holder of
approximately 30% of the Company's Common Stock at December 31, 1998, accounted
for 11% of net revenues during 1996 (see Note 4).
 
    Deferred revenue is primarily comprised of billings in excess of recognized
revenue relating to advertising contracts and payments received pursuant to
sponsorship advertising contracts in advance of revenue recognition.
 
    PRODUCT DEVELOPMENT.  Costs incurred in the classification and organization
of listings within Yahoo! properties and the development of new products and
enhancements to existing products are charged to expense as incurred. Material
software development costs subsequent to the establishment of technological
feasibility are capitalized. Based upon the Company's product development
process,
 
                                       45

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 1  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
technological feasibility is established upon completion of a working model.
Costs incurred by the Company between completion of the working model and the
point at which the product is ready for general release have been insignificant.
 
    ADVERTISING COSTS.  Advertising production costs are recorded as expense the
first time an advertisement appears. All other advertising costs are expensed as
incurred. The Company does not incur any direct-response advertising costs.
Advertising expense totaled approximately $32.7 million, $10.9 million, and $4.2
million for 1998, 1997, and 1996, respectively.
 
    BENEFIT PLAN.  The Company maintains a 401(k) Profit Sharing Plan (the
"Plan") for its full-time employees. Each participant in the Plan may elect to
contribute from 1% to 17% of his or her annual compensation to the Plan. The
Company matches employee contributions at a rate of 25%. Employee contributions
are fully vested, whereas vesting in matching Company contributions occurs at a
rate of 33.3% per year of employment. During 1998, 1997 and 1996, the Company's
contributions amounted to $584,000, $263,000, and $81,000, respectively.
 
    CASH AND CASH EQUIVALENTS, SHORT AND LONG-TERM INVESTMENTS.  The Company
invests its excess cash in debt instruments of the U.S. Government and its
agencies, and in high-quality corporate issuers. All highly liquid instruments
with an original maturity of three months or less are considered cash
equivalents, those with original maturities greater than three months and
current maturities less than twelve months from the balance sheet date are
considered short-term investments, and those with maturities greater than twelve
months from the balance sheet date are considered long-term investments.
 
    The Company's marketable securities are classified as available-for-sale as
of the balance sheet date and are reported at fair value, with unrealized gains
and losses, net of tax, recorded in shareholders' equity. Realized gains or
losses and permanent declines in value, if any, on available-for-sale securities
will be reported in other income or expense as incurred. As of December 31,
1998, the Company recorded net unrealized gains, net of income taxes, of $21.8
million.
 
    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.
 
    CONCENTRATION OF CREDIT RISK.  Financial instruments that potentially
subject the Company to significant concentration of credit risk consist
primarily of cash, cash equivalents, short and long-term investments, and
accounts receivable. Substantially all of the Company's cash, cash equivalents,
and short and long-term investments are managed by four financial institutions.
Accounts receivable are typically unsecured and are derived from revenues earned
from customers primarily located in the
 
                                       46

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 1  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
United States. The Company performs ongoing credit evaluations of its customers
and maintains reserves for potential credit losses; historically, such losses
have been within management's expectations. At December 31, 1998 and 1997, no
one customer accounted for 10% or more of the accounts receivable balance.
 
    DEPRECIATION AND AMORTIZATION.  Property and equipment, including leasehold
improvements, are stated at cost and depreciated using the straight-line method
over the estimated useful lives of the assets, generally two to five years.
Goodwill and other intangible assets are included in other assets and are
carried at cost less accumulated amortization, which is being provided on a
straight-line basis over the economic lives of the respective assets, generally
three to seven years. The Company periodically evaluates the recoverability of
its long-lived assets based on expected undiscounted cash flows and recognizes
impairments, if any, based on expected discounted future cash flows.
 
    INCOME TAXES.  Income taxes are computed using the asset and liability
method. Under the asset and liability method, deferred income tax assets and
liabilities are determined based on the differences between the financial
reporting and tax bases of assets and liabilities and are measured using the
currently enacted tax rates and laws. A valuation allowance is provided for the
amount of deferred tax assets that, based on available evidence, are not
expected to be realized.
 
    STOCK-BASED COMPENSATION.  The Company accounts for stock-based employee
compensation arrangements in accordance with the provisions of Accounting
Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to
Employees," and complies with the disclosure provisions of Statement of
Financial Accounting Standards ("SFAS') No. 123, "Accounting for Stock-Based
Compensation." Under APB 25, compensation cost is recognized over the vesting
period based on the difference, if any, on the date of grant between the fair
value of the Company's stock and the amount an employee must pay to acquire the
stock.
 
    FOREIGN CURRENCY AND INTERNATIONAL OPERATIONS.  The functional currency of
the Company's international subsidiaries is the local currency. The financial
statements of these subsidiaries are translated to United States dollars using
year-end rates of exchange for assets and liabilities, and average rates of
exchange for the year for revenues, costs, and expenses. Translation gains
(losses), which are deferred and accumulated as a component of shareholders'
equity, were $288,000, ($380,000), and ($63,000) for 1998, 1997, and 1996,
respectively. Net gains and losses resulting from foreign exchange transactions
are included in the consolidated statements of operations and were not
significant during the periods presented. International revenues have accounted
for less than 10% of net revenues in the years ended December 31, 1998, 1997,
and 1996. International assets were not significant at December 31, 1998, 1997,
or 1996.
 
    BASIC AND DILUTED NET INCOME (LOSS) PER SHARE.  Basic net income (loss) per
share is computed using the weighted average number of common shares outstanding
during the period. Diluted net income (loss) 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 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 1998, common equivalent shares
primarily related to shares issuable upon the exercise of stock options and
approximated 40.0 million shares. Common equivalent shares in 1997 and 1996 were
excluded from the computation as their effect was anti-dilutive.
 
                                       47

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 1  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
    USE OF ESTIMATES.  The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reported period. Actual results could differ from those estimates.
 
    COMPREHENSIVE INCOME.  In June 1997, the Financial Accounting Standards
Board ("FASB") issued SFAS 130, "Reporting Comprehensive Income," which was
adopted by the Company in the first quarter of fiscal 1998. SFAS 130 establishes
standards for reporting comprehensive income and its components in a financial
statement. Comprehensive income as defined includes all changes in equity (net
assets) during a period from non-owner sources. Examples of items to be included
in comprehensive income, which are excluded from net income, include foreign
currency translation adjustments and unrealized gains and losses on
available-for-sale securities. Accumulated other comprehensive income, as
presented on the accompanying consolidated balance sheets, consists of the net
unrealized gains on available-for-sale securities, net of tax and the cumulative
translation adjustment.
 
    RECENT ACCOUNTING PRONOUNCEMENTS.  In June 1998, the FASB issued SFAS 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. In March 1998, the American Institute of
Certified Public Accountants issued Statement of Position 98-1 ("SOP 98-1"),
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." This standard requires companies to capitalize qualifying
computer software costs which are incurred during the application development
stage and amortize them over the software's estimated useful life. SOP 98-1 is
effective for fiscal years beginning after December 15, 1998. The Company is
currently evaluating the impact of SOP 98-1 on its financial statements and
related disclosures.
 
                                       48

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 2  BALANCE SHEET COMPONENTS (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                               DECEMBER 31 ,
                                                            --------------------
                                                              1998       1997
                                                            ---------  ---------
<S>                                                         <C>        <C>
Property and equipment:
  Computers and equipment.................................  $  17,254  $   7,383
  Furniture and fixtures..................................      4,465      2,316
  Leasehold improvements..................................      1,790        894
                                                            ---------  ---------
                                                               23,509     10,593
  Less: accumulated depreciation..........................     (8,320)    (3,229)
                                                            ---------  ---------
                                                            $  15,189  $   7,364
                                                            ---------  ---------
                                                            ---------  ---------
Other assets:
  Intangible assets (Note 5)..............................  $  40,731  $   1,530
  Investments in privately-held companies.................      5,445      6,450
  Other...................................................      3,014      2,978
                                                            ---------  ---------
                                                            $  49,190  $  10,958
                                                            ---------  ---------
                                                            ---------  ---------
Accrued expenses and other current liabilities:
  Accrued compensation and related expenses...............  $   9,732  $   2,951
  Accrued content, connect, and other costs...............      7,726      2,909
  Accrued sales and marketing related expenses............      4,947      2,222
  Accrued professional service expenses...................      5,084      1,730
  Other...................................................      6,930      2,873
                                                            ---------  ---------
                                                            $  34,419  $  12,685
                                                            ---------  ---------
                                                            ---------  ---------
</TABLE>

 
NOTE 3  INVESTMENTS
 
    At December 31, 1998, short and long-term investments in marketable
securities were classified as available-for-sale as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                 GROSS        GROSS         GROSS      ESTIMATED
                                               AMORTIZED   UNREALIZED    UNREALIZED       FAIR
                                                 COSTS        GAINS        LOSSES        VALUE
                                               ----------  -----------  -------------  ----------
<S>                                            <C>         <C>          <C>            <C>
U.S. Government and agencies.................  $  331,757   $     611     $  --        $  332,368
Municipal bonds..............................      12,893          81        --            12,974
Corporate debt securities....................       8,584          26        --             8,610
Corporate equity securities..................       7,454      33,885        --            41,339
Other........................................       3,020      --               (20)        3,000
                                               ----------  -----------          ---    ----------
                                               $  363,708   $  34,603     $     (20)   $  398,291
                                               ----------  -----------          ---    ----------
                                               ----------  -----------          ---    ----------
</TABLE>

 
                                       49

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 3  INVESTMENTS (CONTINUED)
    The contractual maturities of debt securities classified as
available-for-sale as of December 31, 1998 are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                                    ESTIMATED
                                                                                    FAIR VALUE
                                                                                    ----------
<S>                                                                                 <C>
Due within one year...............................................................  $  308,025
Due after one year through two years..............................................      48,927
                                                                                    ----------
                                                                                    $  356,952
                                                                                    ----------
                                                                                    ----------
</TABLE>

 
    At December 31, 1997, short and long-term investments in marketable
securities were classified as available-for-sale and consisted of 81% corporate
debt securities, 8% debt securities of the U.S. Government and its agencies, 4%
municipal debt securities, and 7% foreign debt securities. At December 31, 1997,
the fair value of the investments approximated cost.
 
NOTE 4  RELATED PARTY TRANSACTIONS
 
    During 1998, 1997 and 1996, the Company recognized net revenues of
approximately $10.3 million, $3.1 million, and $2.4 million, respectively, on
advertising contracts and publication, development, and licensing arrangements
with SOFTBANK and its related companies (such as E*Trade Group, Inc., Kingston
Technology Company, and E-Loan, Inc.), a holder of approximately 30% of the
Company's Common Stock at December 31, 1998. Prices on these contracts were
comparable to those given to other similar customers of the Company.
Additionally, three SOFTBANK-related companies provided Internet access and
sales and marketing-related services for fees of approximately $3.1 million,
$3.2 million, and $2.3 million during 1998, 1997, and 1996, respectively.
Sequoia Capital, a holder of approximately 3% of the Company's Common Stock at
December 31, 1998, was also an investor in one of these SOFTBANK-related
companies.
 
NOTE 5  ACQUISITIONS
 
    ACQUISITION OF NETCONTROLS.  On July 31, 1997, the Company entered into a
stock purchase agreement to acquire all of the outstanding capital stock of
NetControls, Inc. for 148,668 shares of the Company's Common Stock. The
acquisition was recorded as a purchase for accounting purposes and the majority
of the purchase price of approximately $1.4 million is being amortized over the
three-year estimated useful life of the technology acquired. Upon acquisition,
the historical financial results of NetControls, Inc. were de minimis.
 
    ACQUISITION OF FOUR11.  On October 20, 1997, the Company completed the
acquisition of Four11 Corporation, a privately-held online communications and
Internet directory company. Under the terms of the acquisition, which was
accounted for as a pooling of interests, the Company exchanged 6,022,880 shares
of Yahoo! Common Stock for all of Four11's outstanding shares and assumed
593,344 options and warrants to purchase Yahoo! Common Stock. All outstanding
Four11 preferred shares were converted into Four11 common stock immediately
prior to the acquisition. During the quarter ended December 31, 1997, the
Company recorded a one-time charge of $3.9 million for acquisition-related
costs. These costs consisted of investment banking fees, legal and accounting
fees, redundancy costs, and certain other expenses directly related to the
acquisition.
 
                                       50

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 5  ACQUISITIONS (CONTINUED)
    ACQUISITION OF VIAWEB INC.  On June 10, 1998, the Company completed the
acquisition of all outstanding shares of Viaweb, a provider of software and
services for hosting online stores, through the issuance of 1,574,364 shares of
Yahoo! Common Stock. All outstanding options to purchase Viaweb common stock
were converted into options to purchase 244,504 shares of Yahoo! Common Stock.
The acquisition was accounted for as a purchase in accordance with the
provisions of APB 16. Under the purchase method of accounting, the purchase
price is allocated to the assets acquired and liabilities assumed based on their
estimated fair values at the date of the acquisition. Results of operations for
Viaweb have been included with those of the Company for periods subsequent to
the date of acquisition.
 
    The total purchase price of the acquisition was $48.6 million including
acquisition expenses of $1.8 million. The purchase price was allocated to the
assets acquired and liabilities assumed based on their estimated fair values as
determined by the Company and pursuant to discussions with the Staff of the
Securities and Exchange Commission (the "Staff") as follows (in thousands):
 

<TABLE>
<S>                                                                  <C>
In-process research and development................................  $  15,000
Purchased technology...............................................     15,000
Goodwill...........................................................     24,332
Tangible assets acquired...........................................        571
Liabilities assumed................................................       (344)
Deferred tax liability.............................................     (6,000)
                                                                     ---------
                                                                     $  48,559
                                                                     ---------
                                                                     ---------
</TABLE>

 
    Among the factors considered in discussions with the Staff in determining
the amount of the allocation of the purchase price to in-process research and
development were various factors such as estimating the stage of development of
each in-process research and development project at the date of acquisition,
estimating cash flows resulting from the expected revenues generated from such
projects, and discounting the net cash flows, in addition to other assumptions.
The remaining identified intangibles, including the value of purchased
technology and other intangibles will be amortized on a straight-line basis over
three and seven years, respectively. Amortization expense of purchased
technology and other intangible assets was $2.9 million and $2.0 million,
respectively, for the year ended December 31, 1998. A deferred tax liability has
been recognized for the difference between the assigned values for book purposes
and the tax bases of assets in accordance with the provisions of SFAS 109. In
addition, other factors were considered in discussions with the Staff in
determining the value assigned to purchased in-process technology such as
research projects in areas supporting the online store technology (including
significant enhancement to the ability of the product to support multiple users
and multiple servers), developing functionality to support the ability to
process credit card orders, and enhancing the product's user interface by
developing functionality that would allow the product to be used outside of the
United States. If none of these projects is successfully developed, the
Company's sales and profitability may be adversely affected in future periods.
Additionally, the failure of any particular individual project in process could
impair the value of other intangible assets acquired. The Company began to
benefit from the purchased in-process technology in late 1998.
 
    ACQUISITION OF WEBCAL CORPORATION.  On July 17, 1998, the Company completed
the acquisition of WebCal Corporation ("WebCal"), a privately-held developer and
marketer of Web-based calendaring
 
                                       51

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 5  ACQUISITIONS (CONTINUED)
and scheduling products, and publisher of EventCal, a comprehensive database of
world-wide public events. Under the terms of the acquisition, which was
accounted for as a pooling of interests, the Company exchanged 541,908 shares of
Yahoo! Common Stock for all of WebCal's outstanding shares. The historical
operations of WebCal are not material to the Company's financial position or
results of operations, therefore, prior period financial statements have not
been restated for this acquisition. WebCal's accumulated deficit on July 17,
1998 was $1.1 million. Net revenues and pre-tax net loss for WebCal in 1998
through the date of the acquisition approximated $2,000 and $847,000,
respectively.
 
    ACQUISITION OF YOYODYNE ENTERTAINMENT, INC.  On October 20, 1998, the
Company acquired Yoyodyne Entertainment, Inc., a privately-held, direct
marketing services company. Under the terms of the acquisition, which was
accounted for as a pooling of interests, the Company exchanged 561,244 shares of
Yahoo! Common Stock and options and warrants to purchase Yahoo! Common Stock for
all of Yoyodyne's outstanding shares, options, and warrants. The consolidated
financial statements for the three years ended December 31, 1998 and the
accompanying notes reflect the Company's financial position and the results of
operations as if Yoyodyne was a wholly-owned subsidiary of the Company since
inception. During October 1998, the Company recorded a one-time charge of $2.1
million for acquisition-related costs. These costs consisted of broker fees,
legal and accounting fees, and certain other expenses directly related to the
acquisition.
 
    ACQUISITION OF HYPERPARALLEL, INC.  On December 17, 1998, the Company
completed the acquisition of all outstanding shares of HyperParallel, Inc.
("HyperParallel"), a direct marketing company specializing in data analysis,
through the issuance of 74,856 shares of Yahoo! Common Stock and cash, totaling
$8.1 million. The acquisition was accounted for as a purchase in accordance with
APB 16. Under the purchase method of accounting, the purchase price is allocated
to the assets acquired and liabilities assumed based on their estimated fair
values at the date of the acquisition. The excess purchase price over the
estimated fair value of the assets acquired and liabilities assumed has been
allocated to goodwill. Results of operations for HyperParallel have been
included with those of the Company for periods subsequent to the date of
acquisition. The Company estimated that the economic useful lives of current
technology and goodwill were three and seven years, respectively.
 
    The Company recorded a charge to earnings of $2.3 million for in-process
research and development that had not yet reached technological feasibility and
had no alternative future use. Factors considered in estimating the allocation
of purchase price to in-process research and development were estimating cash
flows resulting from the expected revenues to be generated from the project, and
discounting the net cash flows, in addition to other assumptions. If this
project is not successfully developed, the Company's sales and profitability may
be adversely affected in future periods.
 
                                       52

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 5  ACQUISITIONS (CONTINUED)
    UNAUDITED PRO FORMA DISCLOSURES OF SIGNIFICANT ACQUISITIONS.  The following
unaudited pro forma consolidated results of operations give effect to the
acquisitions of Viaweb and HyperParallel as if they occurred as of the beginning
of the period (in thousands, except per share data):
 

<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              DECEMBER 31,
                                                          --------------------
                                                            1998       1997
                                                          ---------  ---------
<S>                                                       <C>        <C>
Net revenues............................................  $ 204,136  $  71,392
Net income (loss).......................................  $  22,290  $ (31,866)
Net income (loss) per share--basic......................  $    0.12  $   (0.18)
Net income (loss) per share--diluted....................  $    0.10  $   (0.18)
Shares used in per share calculation--basic.............    184,835    175,929
Shares used in per share calculation--diluted...........    224,983    175,929
</TABLE>

 
NOTE 6  JOINT VENTURES
 
    YAHOO! JAPAN.  During April 1996, the Company signed a joint venture
agreement with SOFTBANK whereby Yahoo! Japan Corporation was formed to establish
and manage in Japan a Japanese version of the Yahoo! Internet Guide, develop
related Japanese online navigational services, and conduct other related
business. The Company's ownership interest in the joint venture upon inception
was 40%. During November 1997, Yahoo! Japan Corporation completed its initial
public offering, issuing 975 previously unissued shares and raising total
proceeds of approximately $5.5 million. Accordingly, the Company increased its
investment by $1.7 million, recorded as additional paid-in capital, to reflect
the increase in the Company's share of Yahoo! Japan Corporation's net assets.
The investment is being accounted for using the equity method and the Company's
share of net income, to date, has been immaterial. At December 31, 1998, the
carrying value of the investment was $2.9 million and is recorded in other
assets. However, the fair value of the Company's 34% ownership in Yahoo! Japan,
based on the quoted trading price, was approximately $170 million at December
31, 1998.
 
    YAHOO! EUROPE.  On November 1, 1996, the Company signed a joint venture
agreement with a subsidiary of SOFTBANK whereby separate companies were formed
in Germany, the United Kingdom, and France ("Yahoo! Europe") to establish and
manage versions of the Yahoo! Internet Guide for those countries, develop
related online navigational services, and conduct other related business. The
parties have invested a total of $6.0 million in proportion to their respective
equity interests as of December 31, 1998. The Company has a majority share of
approximately 70% in each of the Yahoo! Europe entities, and therefore, has
consolidated their financial results. During 1998, 1997, and 1996, Yahoo! Europe
incurred losses from operations of $409,000, $1,807,000 and $842,000,
respectively. SOFTBANK's interest in the net assets of Yahoo! Europe at December
31, 1998 and 1997, as represented by the minority interest on the balance sheet,
was $883,000 and $405,000, respectively.
 
    YAHOO! KOREA.  During August 1997, the Company signed a joint venture
agreement with SOFTBANK and other SOFTBANK affiliate companies whereby Yahoo!
Korea was formed to develop and operate a Korean version of the Yahoo! Internet
Guide, develop related Korean online navigational services, and conduct other
related business. The parties have invested a total of $1.0 million in
proportion to their respective equity interests. The Company has a majority
share of approximately 60% in the joint venture, and therefore, has consolidated
the financial results, which
 
                                       53

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 6  JOINT VENTURES (CONTINUED)
have been insignificant to date. SOFTBANK's interest in the net assets of Yahoo!
Korea at December 31, 1998 and 1997, as represented by the minority interest on
the balance sheet, was $365,000 and $311,000, respectively.
 
    YAHOO! MARKETPLACE.  On August 26, 1996, the Company entered into agreements
with Visa International Service Association ("VISA") and another party
(together, the "Visa Group") to establish a limited liability company, Yahoo!
Marketplace L.L.C., to develop and operate a navigational service focused on
information and resources for the purchase of consumer products and services
over the Internet. As of December 31, 1996, the parties had invested a total of
$1.0 million. At December 31, 1996, the Company owned approximately 55% of the
equity interest in Yahoo! Marketplace. Yahoo! Marketplace incurred start-up
losses of $246,000 in 1997 and $637,000 in 1996. During July 1997, prior to the
completion of significant business activities and public launch of the property,
the Company and VISA entered into an agreement under which the Visa Group
released the Company from certain obligations and claims. In connection with
this agreement, the Company issued 2,797,924 shares of Yahoo! Common Stock to
the Visa Group, for which the Company recorded a one-time, non-cash, pre-tax
charge of $21.2 million in the second quarter ended June 30, 1997.
 
NOTE 7  SHAREHOLDERS' EQUITY
 
    COMMON STOCK.  On April 11, 1996, the Company completed its initial public
offering of 17.9 million shares of its Common Stock. Net proceeds to the Company
aggregated $35.1 million. As of the closing date of the offering, all of the
Convertible Preferred Stock outstanding was converted into an aggregate of
approximately 77 million shares of Common Stock. On July 14, 1998, the Company
received proceeds of $250.0 million in exchange for 5,453,760 newly issued
shares of Yahoo! Common Stock through a private placement with SOFTBANK. The
shares purchased by SOFTBANK are subject to a pre-existing agreement, entered
into in 1996, that prohibits SOFTBANK from purchasing additional shares of the
Company's capital stock if such purchase would result in SOFTBANK owning more
than 35% of the Company's capital stock (assuming the exercise of all
outstanding options and warrants to purchase capital stock).
 
    STOCK OPTION PLANS.  Pursuant to the consummation of the acquisitions of
Viaweb Inc. and Yoyodyne Entertainment, Inc. during 1998, the Company assumed
the Viaweb 1997 Stock Option Plan (the "Viaweb Plan") and the 1996 Yoyodyne
Stock Option Plan (the "Yoyodyne Plan"), respectively. As of December 31, 1998,
the Company had five stock-based compensation plans which are described below.
 
    The 1995 Stock Plan (the "Stock Plan"), the 1995 Four11 Stock Option Plan
(the "Four11 Plan"), the Viaweb Plan, and the Yoyodyne Plan (collectively the
"Plans") allow for the issuance of incentive stock options, non-qualified stock
options, and stock purchase rights to purchase a maximum of 87.6 million shares
of the Company's Common Stock. Under the Plans, incentive stock options may be
granted to employees, directors, and officers of the Company and non-qualified
stock options and stock purchase rights may be granted to consultants,
employees, directors, and officers of the Company. Options granted under the
Plans are for periods not to exceed ten years, and must be issued at prices not
less than 100% and 85%, for incentive and nonqualified stock options,
respectively, of the fair market value of the stock on the date of grant as
determined by the Board of Directors. Options granted to shareholders who own
greater than 10% of the outstanding stock are for periods not to exceed five
years and must be issued at prices not less than 110% of the fair market value
of the stock
 
                                       54

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 7  SHAREHOLDERS' EQUITY (CONTINUED)
on the date of grant as determined by the Board of Directors. Options granted
under the Stock Plan and the Four11 Plan generally vest 25% after the first year
of service and ratably each month over the remaining thirty-six month period.
Options granted under the Viaweb Plan generally vest 25% on each anniversary
over four years. Options granted under the Yoyodyne Plan have various vesting
periods that do not exceed thirty-six months. Options issued under the Four11
Plan may be exercised prior to vesting and are subject to repurchase in the
event of a voluntary termination, at the original purchase price. At December
31, 1998, shares subject to repurchase under the provisions of the Four11 Plan
were insignificant.
 
    The 1996 Directors' Stock Option Plan (the "Directors' Plan") provides for
the issuance of up to 1.2 million non-statutory stock options to non-employee
directors of the Company. Each person who becomes a non-employee director of the
Company after the date of the Company's initial public offering will
automatically be granted a non-statutory option (the "First Option") to purchase
240,000 shares of Common Stock upon the date on which such person first becomes
a director. Thereafter, each director of the Company will be granted an annual
option (the "Annual Option") to purchase 30,000 shares of Common Stock. Options
under the Directors' Plan will be granted at the fair market value of the stock
on the date of grant as determined by the Board of Directors and will vest in
equal monthly installments over four years, in the case of the First Option, or
at the end of four years in the case of the Annual Option. Options granted under
the Directors' Plan are for periods not to exceed 10 years.
 
    Activity under the Company's stock option plans is summarized as follows (in
thousands, except per share amounts):
 

<TABLE>
<CAPTION>
                                                      AVAILABLE     OPTIONS    WEIGHTED AVERAGE
                                                      FOR GRANT   OUTSTANDING   PRICE PER SHARE
                                                     -----------  -----------  -----------------
<S>                                                  <C>          <C>          <C>
Balance at December 31, 1995.......................      10,279       19,906       $    0.00
 
Additional shares reserved.........................      19,252
Options granted....................................     (22,829)      22,829            1.68
Options canceled...................................       1,845       (1,845)           1.66
Options exercised..................................                   (2,978)           0.00
                                                     -----------  -----------         ------
Balance at December 31, 1996.......................       8,547       37,912            0.94
 
Additional shares reserved.........................      30,000
Options granted....................................     (18,442)      18,442            9.38
Options canceled...................................         356         (356)           2.30
Options exercised..................................                   (9,670)           0.53
                                                     -----------  -----------         ------
Balance at December 31, 1997.......................      20,461       46,328            4.35
 
Additional shares reserved.........................       8,245
Options granted....................................     (19,566)      19,566           54.94
Options canceled...................................       2,494       (2,494)          12.23
Options exercised..................................                  (10,551)           2.89
                                                     -----------  -----------         ------
Balance at December 31, 1998.......................      11,634       52,849       $   22.99
                                                     -----------  -----------         ------
                                                     -----------  -----------         ------
</TABLE>

 
                                       55

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 7  SHAREHOLDERS' EQUITY (CONTINUED)
    The following table summarizes information concerning outstanding and
exercisable options at December 31, 1998 (in thousands, except per share
amounts):
 

<TABLE>
<CAPTION>
                                                    OPTIONS OUTSTANDING               OPTIONS EXERCISABLE
                                         -----------------------------------------  ------------------------
                                                         WEIGHTED       WEIGHTED                  WEIGHTED
                                                          AVERAGE        AVERAGE                   AVERAGE
                                                         REMAINING      EXERCISE                  EXERCISE
                                           NUMBER       CONTRACTUAL       PRICE       NUMBER        PRICE
RANGE OF EXERCISE PRICES                 OUTSTANDING  LIFE (IN YEARS)   PER SHARE   EXERCISABLE   PER SHARE
- ---------------------------------------  -----------  ---------------  -----------  -----------  -----------
<S>                                      <C>          <C>              <C>          <C>          <C>
less than $0.01........................       8,002            6.6      $    0.00        5,187    $    0.00
$0.03-$1.17............................       6,473            7.1           0.60        3,141         0.69
$1.25-$3.21............................       5,940            7.6           2.57        1,765         2.53
$3.33-$8.08............................       5,518            8.3           5.41          912         5.15
$10.78-$13.47..........................       7,711            8.9          12.96        1,766        13.09
$13.94-$29.14..........................       6,100            9.2          20.58          141        14.41
$30.38-$57.75..........................       6,481            9.6          47.12       --           --
$62.41-$135.00.........................       6,624            9.9          95.89       --           --
                                         -----------           ---     -----------  -----------  -----------
                                             52,849            8.4      $   22.99       12,912    $    2.83
                                         -----------           ---     -----------  -----------  -----------
                                         -----------           ---     -----------  -----------  -----------
</TABLE>

 
    Options to purchase approximately 7.9 million shares and 3.3 million shares
were vested at December 31, 1997 and 1996, respectively. The weighted average
exercise prices per share for options vested at December 31, 1997 and 1996 were
$0.99 and less than $0.01, respectively. Through December 31, 1998, Yahoo! and
certain acquired entities recorded compensation expense related to certain stock
options issued with exercise prices below the fair market value of the related
common stock. The Company recorded compensation expense in the amount of
$926,000, $1,215,000, and $164,000 in 1998, 1997, and 1996, respectively.
Approximately $1,017,000 remains to be amortized over the remaining vesting
periods of the options.
 
    EMPLOYEE STOCK PURCHASE PLAN.  Effective March 6, 1996, the Company's Board
of Directors adopted the Employee Stock Purchase Plan (the "Purchase Plan"),
which provides for the issuance of a maximum of 1,800,000 shares of Common
Stock. Eligible employees can have up to 15% of their earnings withheld, up to
certain maximums, to be used to purchase shares of the Company's Common Stock on
every December 31(st) and June 30(th). The price of the Common Stock purchased
under the Purchase Plan will be equal to 85% of the lower of the fair market
value of the Common Stock on the commencement date of each six-month offering
period or the specified purchase date. During 1998, 126,000 shares were
purchased at prices from $14.72 to $36.10 per share. During 1997, 537,000 shares
were purchased at prices from $1.85 to $4.83 per share. There were no shares
issued under the Purchase Plan during 1996. At December 31, 1998, 1,137,000
shares were available under the Purchase Plan for future issuance.
 
    STOCK COMPENSATION.  The Company accounts for stock-based compensation in
accordance with the provisions of APB 25. Had compensation expense been
determined based on the fair value at the
 
                                       56

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 7  SHAREHOLDERS' EQUITY (CONTINUED)
grant dates, as prescribed in SFAS 123, the Company's results would have been as
follows (in thousands, except per share amounts):
 

<TABLE>
<CAPTION>
                                                                 1998        1997       1996
                                                              ----------  ----------  ---------
<S>                                                           <C>         <C>         <C>
Net income (loss):
  As reported...............................................  $   25,588  $  (25,520) $  (6,427)
  Pro forma.................................................  $  (10,291) $  (31,918) $  (7,273)
Net income (loss) per share--basic:
  As reported...............................................  $     0.14  $    (0.15) $   (0.04)
  Pro forma.................................................  $    (0.06) $    (0.18) $   (0.05)
Net income (loss) per share--diluted:
  As reported...............................................  $     0.11  $    (0.15) $   (0.04)
  Pro forma.................................................  $    (0.06) $    (0.18) $   (0.05)
</TABLE>

 
    Prior to the Company's initial public offering, the fair value of each
option grant was determined on the date of grant using the minimum value method.
Subsequent to the offering, the fair value was determined using the
Black-Scholes model. The weighted average fair market value of an option granted
during 1998, 1997, and 1996 was $26.53, $4.34, and $0.79, respectively. Except
for the volatility assumption which was only used under the Black-Scholes model,
the following range of assumptions was used to perform the calculations:
expected life of 36 months in 1998 and 1997, and 30 months in 1996; risk-free
interest rate ranges of 4.2% to 5.6% during 1998, 5.6% to 6.6% during 1997, and
5.1% to 6.5% during 1996; expected volatility of 67% in 1998, 59% in 1997, and
53% in 1996; and no expected dividend yield for the three years ended December
31, 1998. Because additional stock options are expected to be granted each year,
the above pro forma disclosures are not representative of pro forma effects on
reported financial results for future years.
 
NOTE 8  INCOME TAXES
 
    The components of income (loss) before taxes are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                  -------------------------------
                                                    1998       1997       1996
                                                  ---------  ---------  ---------
<S>                                               <C>        <C>        <C>
United States...................................  $  44,718  $ (22,962) $  (5,488)
Foreign.........................................     (1,303)    (2,558)      (939)
                                                  ---------  ---------  ---------
                                                  $  43,415  $ (25,520) $  (6,427)
                                                  ---------  ---------  ---------
                                                  ---------  ---------  ---------
</TABLE>

 
                                       57

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 8  INCOME TAXES (CONTINUED)
    The provision for income taxes in 1998 is composed of the following (in
thousands):
 

<TABLE>
<S>                                                                  <C>
Current:
  Federal..........................................................  $  20,333
  State............................................................      1,937
                                                                     ---------
                                                                        22,270
                                                                     ---------
Deferred:
  Federal..........................................................     (3,616)
  State............................................................       (827)
                                                                     ---------
                                                                        (4,443)
                                                                     ---------
Total provision....................................................  $  17,827
                                                                     ---------
                                                                     ---------
</TABLE>

 
No provision for federal and state income taxes for 1997 and 1996 has been
recorded as the Company incurred net operating losses for these periods.
 
    The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                     -------------------------------
                                                       1998       1997       1996
                                                     ---------  ---------  ---------
<S>                                                  <C>        <C>        <C>
Income tax at the federal statutory rate of 35%....  $  15,195  $  (8,010) $    (817)
State income tax, net of federal benefit...........      1,937     (1,626)      (112)
Non-deductible acquisition-related charges.........      8,521     --         --
Research tax credits...............................     (1,155)    --         --
Change in valuation allowances.....................     (6,770)     8,175        864
Other..............................................         99      1,461         65
                                                     ---------  ---------  ---------
                                                     $  17,827  $  --      $  --
                                                     ---------  ---------  ---------
                                                     ---------  ---------  ---------
</TABLE>

 
                                       58

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 8  INCOME TAXES (CONTINUED)
    Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The components of the net
deferred income tax assets are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                   -------------------------------
                                                     1998       1997       1996
                                                   ---------  ---------  ---------
<S>                                                <C>        <C>        <C>
Deferred income tax assets:
  Net operating loss and credit carryforwards....  $ 148,249  $  25,512  $   4,303
  Nondeductible reserves and expenses............      4,443      3,667      1,468
                                                   ---------  ---------  ---------
  Gross deferred tax assets......................    152,692     29,179      5,771
  Valuation allowance............................   (135,063)   (29,179)    (5,771)
                                                   ---------  ---------  ---------
                                                      17,629     --         --
                                                   ---------  ---------  ---------
Deferred income tax liabilities:
  Unrealized investment gains....................    (12,796)    --         --
  Intangible assets..............................     (4,833)    --         --
                                                   ---------  ---------  ---------
  Gross deferred tax liabilities.................    (17,629)    --         --
                                                   ---------  ---------  ---------
                                                   $  --      $  --      $  --
                                                   ---------  ---------  ---------
                                                   ---------  ---------  ---------
</TABLE>

 
    As of December 31, 1998, the Company's federal and state net operating loss
carryforwards for income tax purposes were approximately $333 million and $181
million, respectively. If not utilized, the federal net operating loss
carryforwards will begin to expire in 2010, and the state net operating loss
carryforwards will begin to expire in 2003. The Company's federal and state
research tax credit carryforwards for income tax purposes are approximately
$10.7 million and $10.1 million, respectively. If not utilized, the federal tax
credit carryforwards will begin to expire in 2010. Approximately $13 million of
net operating loss carryforwards relate to acquired entities and expire
beginning in 2010. Utilization of these net operating loss carryforwards may be
limited by a cumulative stock ownership change of more than 50%, or by other
limitations.
 
    Deferred tax assets of approximately $141 million as of December 31, 1998
pertain to certain net operating loss carryforwards and credit carryforwards
resulting from the exercise of employee stock options. When recognized, the tax
benefit of these loss and credit carryforwards are accounted for as a credit to
additional paid-in capital rather than a reduction of the income tax provision.
Deferred tax assets include approximately $1.6 million related to net operating
loss carryforwards in various foreign jurisdictions. These carryforwards will
expire if not utilized.
 
NOTE 9  COMMITMENTS AND CONTINGENCIES
 
    OPERATING LEASES.  During December 1998, the Company entered into a
non-cancelable operating sublease agreement that will provide the Company with
additional office space at its existing Santa Clara, California location.
Additionally during 1998, the Company entered into various other non-cancelable
operating lease agreements for its sales offices throughout the U.S. and its
international subsidiaries. Future minimum lease payments under non-cancelable
operating leases with initial terms of one year or more are $3.6 million in
1999, $3.3 million in 2000, $2.7 million in 2001, $2.6 million in 2002, $2.5
million in 2003, and $0.6 million thereafter. Certain of the Company's lease
agreements have
 
                                       59

<PAGE>
                                  YAHOO! INC.
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 9  COMMITMENTS AND CONTINGENCIES (CONTINUED)
a five year renewal option from the date of expiration. Total minimum rental
payments aggregate $15.4 million. Rent expense under operating leases totaled
$2.3 million, $1.4 million, and $0.5 million during 1998, 1997, and 1996,
respectively.
 
    LEGAL.  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.
 
NOTE 10  SUBSEQUENT EVENT
 
    GEOCITIES.  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 21,254,000 shares of Yahoo!
Common Stock for approximately 31,403,000 shares of GeoCities common stock.
Additionally, the Company will convert approximately 8,894,000 GeoCities stock
options into approximately 6,019,000 Yahoo! stock options. The acquisition is
expected to be completed in the second quarter of 1999 and is subject to certain
conditions, regulatory approval, and approval by GeoCities stockholders. The
Company expects to record a one-time charge in the second quarter of 1999
relating to expenses incurred with this transaction.
 
    GeoCities' operating results for the years ended December 31, 1998, 1997,
and 1996 included revenues of approximately $18.4 million, $4.6 million, and
$0.3 million, respectively, and net losses of approximately $19.8 million, $8.9
million, and $3.0 million, respectively.
 
                                       60

<PAGE>
 
                SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 
                 YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
 
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                       ADDITIONS
                                ------------------------
                   BALANCE AT   CHARGED TO   CHARGED TO   WRITE-OFFS   BALANCE AT
  ALLOWANCE FOR     BEGINNING    COSTS AND      OTHER       NET OF       END OF
DOUBTFUL ACCOUNTS    OF YEAR     EXPENSES     ACCOUNTS    RECOVERIES      YEAR
- -----------------  -----------  -----------  -----------  -----------  -----------
<S>                <C>          <C>          <C>          <C>          <C>
1998.........       $   2,598    $   5,668    $      --    $   3,299    $   4,967
 
1997.........       $     665    $   2,812    $      --    $     879    $   2,598
 
1996.........       $      84    $     611    $      --    $      30    $     665
</TABLE>

 
                                       61

<PAGE>
                            QUARTERLY FINANCIAL DATA
 
              (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 

<TABLE>
<CAPTION>
                                                                           QUARTER ENDED
                                                      -------------------------------------------------------
                                                                                    SEPTEMBER       DECEMBER
                                                       MARCH 31       JUNE 30           30             31
                                                      -----------    ----------     ----------     ----------
<S>                                                   <C>            <C>            <C>            <C>
1998
Net revenues........................................   $  30,596     $   41,688     $  54,576      $  76,410
Gross profit........................................      26,302         35,904        47,051         67,271
Income (loss) from operations.......................       2,658         (7,860)       13,146         20,824
Income (loss) before income taxes...................       4,341         (5,917)       18,322         26,669
Net income (loss)...................................       3,270         (8,977)(a)    12,771(b)      18,524(c)
Net income (loss) per share--basic *................        0.02          (0.05)         0.07           0.09
Net income (loss) per share--diluted *..............   $    0.02     $    (0.05)(a) $    0.06(b)   $    0.08(c)
 
1997
Net revenues........................................   $  10,731     $   14,432     $  18,703      $  26,584
Gross profit........................................       8,835         11,908        16,028         22,794
Loss from operations................................      (3,029)       (23,641)       (1,320)        (2,792)
Income (loss) before income taxes...................      (1,435)       (22,209)           65         (1,941)
Net income (loss)...................................      (1,435)       (22,209)(d)        65         (1,941)(e)
Net income (loss) per share--basic *................       (0.01)         (0.13)         0.00          (0.01)
Net income (loss) per share--diluted *..............   $   (0.01)    $    (0.13)(d) $    0.00      $   (0.01)(e)
</TABLE>

 
- ------------------------
 
Note: The quarterly financial data for the quarters presented above has been
      restated to reflect the acquisition of Yoyodyne Entertainment, Inc. which
      was accounted for as a pooling of interests.
 
*   Reflects the two-for-one stock splits effective August 1998 and February
    1999.
 
(a) Net loss and net loss per share include a non-recurring charge of $15.0
    million incurred in connection with the June 1998 acquisition of Viaweb Inc.
    and amortization of $0.7 million on related intangible assets. Pro forma net
    income and net income per share--diluted, excluding these expenses, would
    have been $6.7 million and $0.03, respectively.
 
(b) Net income and net income per share include amortization of $2.1 million on
    intangible assets. Pro forma net income and net income per share--diluted,
    excluding these expenses, would have been $14.9 million and $0.06,
    respectively.
 
(c) Net income and net income per share include non-recurring charges of $4.4
    million incurred in connection with the October 1998 acquisition of Yoyodyne
    Entertainment, Inc. and the December 1998 acquisition of HyperParallel,
    Inc., and amortization of $2.1 million on intangible assets. Pro forma net
    income and net income per share--diluted, excluding these expenses, would
    have been $25.0 million and $0.11, respectively.
 
(d) Net loss and net loss per share include a non-recurring charge of $21.2
    million related to the Yahoo! Marketplace restructuring. Pro forma net loss
    and net loss per share--diluted, excluding this expense, would have been
    $1.0 million and $0.01, respectively.
 
(e) Net loss and net loss per share include a non-recurring charge of $3.9
    million incurred in connection with the October 1997 acquisition of Four11
    Corporation. Pro forma net income and net income per share--diluted,
    excluding this expense, would have been $1.9 million and $0.01,
    respectively.
 
                                       62

<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE
 
    None.
 

                                    PART III
 

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
    Incorporated by reference from the information under the caption "Proposal
No. 1--Election of Directors" in the Registrant's Proxy Statement for its 1999
Annual Meeting of Shareholders. The following sets forth certain information
with respect to the other executive officers of Yahoo!:
 
    David Filo (age 32), Chief Yahoo and a founder of the Company, has served as
an officer of the Company since March 1995, and served as a director of the
Company from its founding through February 1996. Mr. Filo co-developed Yahoo! in
1994 while working towards his Ph.D. in electrical engineering at Stanford
University, and co-founded the Company in 1995. Mr. Filo holds a B.S. degree in
computer engineering from Tulane University and a M.S. degree in electrical
engineering from Stanford University.
 
    Farzad Nazem (age 37) was promoted to Chief Technology Officer in January
1998. Prior to that, he served as the Company's Senior Vice President, Product
Development and Site Operations since March 1996. From 1985 to 1996, Mr. Nazem
held a number of technical and executive management positions at Oracle
Corporation, including, most recently, Vice President of Oracle's Media and Web
Server Division and member of the Product Division Management Committee. Prior
to that, Mr. Nazem was a member of the technical staff at SYDIS, Inc. and Rolm
Corporation. Mr. Nazem holds a B.S. in Computer Science from California
Polytechnic State University.
 
    Anil Singh (age 40) was promoted to Vice President, Advertising Sales in
December 1996. Prior to that, Mr. Singh served as the Company's Director of
Sales since November 1995. Prior to joining the Company, Mr. Singh was Vice
President of Sales for Socket Communications from 1994 to 1995. From 1992 to
1994, Mr. Singh was Vice President of Sales for Mountain, Inc. From 1991 to
1992, Mr. Singh was Director of Sales for Novell, Inc. Mr. Singh holds a B.S.
degree in computer science from Imperial College at the University of London,
England.
 
    Gary Valenzuela (age 42) has served as the Company's Senior Vice President,
Finance and Administration, and Chief Financial Officer since February 1996.
From 1994 to 1996, Mr. Valenzuela served as Senior Vice President, Finance and
Administration, and Chief Financial Officer of TGV Software, Inc., a publicly
held developer of TCP/IP software products. Prior to joining TGV, Mr. Valenzuela
was employed by Pyramid Technology Corporation, a then-publicly held
manufacturer of UNIX minicomputers, where he last served as Senior Vice
President, Finance and Chief Financial Officer. Mr. Valenzuela holds a B.S.
degree in Business Administration from San Jose State University, and is a
Certified Public Accountant in the State of California.
 

ITEM 11.  EXECUTIVE COMPENSATION
 
    Incorporated by reference from the information under the captions "Executive
Officer Compensation and Other Matters," "Report of the Compensation Committee
of the Board of Directors on Executive Compensation," "Compensation Committee
Interlocks and Insider Participation," and "Performance Graph" in the
Registrant's Proxy Statement for its 1999 Annual Meeting of Shareholders.
 
                                       63

<PAGE>

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
    Incorporated by reference from the information under the captions "Record
Date; Voting Securities" and "Information Regarding Beneficial Ownership of
Principal Shareholders and Management" in the Registrant's Proxy Statement for
its 1999 Annual Meeting of Shareholders.
 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
    Incorporated by reference from the information under the captions "Certain
Transactions" and "Compensation Committee Interlocks and Insider Participation"
in the Registrant's Proxy Statement for its 1999 Annual Meeting of Shareholders.
 

                                    PART IV
 

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 
(a) The following documents are filed as part of this report:
 
    (1) Consolidated Financial Statements: See Index to Consolidated Financial
       Statements at Item 8 on page 38 of this report.
 
    (2) Financial Statement Schedule: See Index to Consolidated Financial
        Statements at Item 8 on page 38 of this report.
 
    (3) Exhibits are incorporated herein by reference or are filed with this
       report as indicated below (numbered in accordance with Item 601 of
       Regulation S-K):
 

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                                  DESCRIPTION
- -----------  -----------------------------------------------------------------------------------------------------
<C>          <S>
       2.1   Agreement and Plan of Merger, dated as of January 27, 1999 by and among Yahoo! Inc., Home Page
               Acquisition Corp. and GeoCities (without exhibits). (Filed as Exhibit 1 to the GeoCities SC 13D,
               dated February 8, 1999 and incorporated herein by reference.)
       3.1   Amended and Restated Articles of Incorporation of Registrant
       3.2   Amended and Restated Bylaws of Registrant (Filed as Exhibit 3.3 to the Company's Registration
               Statement on Form SB-2, Registration No. 333-2142-LA, declared effective on April 11, 1996 [the
               "SB-2 Registration Statement"], and incorporated herein by reference.)
       3.3   Certificate of Amendment to Bylaws dated January 11, 1999
      10.1   Form of Indemnification Agreement with the Registrant's officers and directors (Filed as Exhibit 10.1
               to the SB-2 Registration Statement and incorporated herein by reference.)
      10.2   1995 Stock Plan, as amended, and form of stock option agreement (Filed as Exhibit 10.2 to the
               Company's Annual Report on Form 10-K for the year ended December 31, 1996 [the "December 31, 1996
               10-K"] and incorporated herein by reference.)
      10.3   Form of Management Continuity Agreement with the Registrant's Executive Officers (Filed as Exhibit
               10.3 to the SB-2 Registration Statement and incorporated herein by reference.)
      10.4   Stock Purchase Agreement dated March 3, 1995 with each of David Filo and Jerry Yang (Filed as Exhibit
               10.4 to the SB-2 Registration Statement and incorporated herein by reference.)
      10.5   Series A Preferred Stock Agreement dated April 7, 1995 between the Registrant and Purchasers of
               Series A Preferred Stock (Filed as Exhibit 10.5 to the SB-2 Registration Statement and incorporated
               herein by reference.)
</TABLE>

 
                                       64

<PAGE>

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                                  DESCRIPTION
- -----------  -----------------------------------------------------------------------------------------------------
<C>          <S>
      10.6   Form of Stock Restriction Agreements dated April 7, 1995 between the Registrant and Jerry Yang and
               David Filo (Filed as Exhibit 10.6 to the SB-2 Registration Statement and incorporated herein by
               reference.)
      10.7   Series B Preferred Stock Agreement dated November 22, 1995 between the Registrant and Purchasers of
               Series B Preferred Stock (Filed as Exhibit 10.7 to the SB-2 Registration Statement and incorporated
               herein by reference.)
      10.8   Series C Preferred Stock Agreement dated March 12, 1996 between the Registrant and SOFTBANK Holdings
               Inc. (Filed as Exhibit 10.8 to the SB-2 Registration Statement and incorporated herein by
               reference.)
      10.9   Second Amended and Restated Investor Rights Agreement dated March 12, 1996 between the Registrant and
               certain shareholders (Filed as Exhibit 10.9 to the SB-2 Registration Statement and incorporated
               herein by reference.)
      10.10  Second Amended and Restated Co-Sale Agreement dated March 12, 1996 between the Registrant and certain
               shareholders (Filed as Exhibit 10.10 to the SB-2 Registration Statement and incorporated herein by
               reference.)
      10.11  Second Amended and Restated Voting Agreement dated March 12, 1996 between the Registrant and certain
               shareholders (Filed as Exhibit 10.11 to the SB-2 Registration Statement and incorporated herein by
               reference.)
      10.12+ Publishing Agreement dated June 2, 1995 between the Registrant and IDG Books Worldwide, Inc. (Filed
               as Exhibit 10.12 to the SB-2 Registration Statement and incorporated herein by reference.)
      10.13  Sublease Agreement dated June 6, 1996 relating to the Registrant's office at 3400 Central Expressway,
               Suite 201, Santa Clara, California (Filed as Exhibit 10.15 to the December 31, 1996 10-K and
               incorporated herein by reference.)
      10.14+ Agreement dated January 15, 1996 between the Registrant and Ziff-Davis Publishing Company (Filed as
               Exhibit 10.19 to the SB-2 Registration Statement and incorporated herein by reference.)
      10.15  1996 Employee Stock Purchase Plan and form of subscription agreement (Filed as Exhibit 10.20 to the
               SB-2 Registration Statement and incorporated herein by reference.)
      10.16  1996 Directors' Stock Option Plan and form of option agreement (Filed as Exhibit 10.21 to the SB-2
               Registration Statement and incorporated herein by reference.)
      10.17+ Yahoo! Canada Affiliation Agreement dated February 29, 1996 between the Registrant and Rogers
               Multi-Media Inc. (Filed as Exhibit 10.23 to the SB-2 Registration Statement and incorporated herein
               by reference.)
      10.18  Standstill and Voting Agreement dated March 12, 1996 between the Registrant and SOFTBANK Holdings
               Inc. (Filed as Exhibit 10.26 to the SB-2 Registration Statement and incorporated herein by
               reference.)
      10.19+ Joint Venture Agreement dated April 1, 1996 by and between Yahoo! Inc. and SOFTBANK Corporation
               (Filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q/A for the quarter ended June
               30, 1996 [the "June 30, 1996 10-Q"] and incorporated herein by reference.)
      10.20+ Yahoo! Japan License Agreement dated April 1, 1996 by and between Yahoo! Inc. and Yahoo! Japan
               Corporation (Filed as Exhibit 10.3 to the June 30, 1996 10-Q and incorporated herein by reference.)
      10.21+ SOFTBANK Letter Agreement dated April 1, 1996 by and between Yahoo! Inc. and SOFTBANK Group (Filed as
               Exhibit 10.4 to the June 30, 1996 10-Q and incorporated herein by reference.)
</TABLE>

 
                                       65

<PAGE>

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                                  DESCRIPTION
- -----------  -----------------------------------------------------------------------------------------------------
<C>          <S>
      10.22+ Joint Venture Agreement dated November 1, 1996 by and between Yahoo! Inc. and SB Holdings (Europe)
               Ltd. (Filed as Exhibit 10.30 to the December 31, 1996 10-K and incorporated herein by reference.)
      10.23+ Yahoo! UK License Agreement dated November 1, 1996 by and between Yahoo! Inc. and Yahoo! UK (Filed as
               Exhibit 10.31 to the December 31, 1996 10-K and incorporated herein by reference.)
      10.24+ Yahoo! Deutschland License Agreement dated November 1, 1996 by and between Yahoo! Inc. and Yahoo!
               Deutschland (Filed as Exhibit 10.32 to the December 31, 1996 10-K and incorporated herein by
               reference.)
      10.25+ Yahoo! France License Agreement dated November 1, 1996 by and between Yahoo! Inc. and Yahoo! France
               (Filed as Exhibit 10.33 to the December 31, 1996 10-K and incorporated herein by reference.)
      10.26  Restructuring Agreement dated as of July 29, 1997 among the Registrant, Visa International Service
               Association, Visa Marketplace, Inc., Sterling Payot Company, and Sterling Payot Capital, L.P.
               (Filed as Exhibit 4.1 to the Company's Current Report on Form 8-K, dated July 29, 1997 and
               incorporated herein by reference.)
      10.27  Joint Venture Agreement, dated August 31, 1997 between Yahoo! Inc., SOFTBANK Korea Corporation,
               SOFTBANK Corporation, and Yahoo! Japan Corporation (Filed as Exhibit 10.1 to the Company's
               Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 [the "September 30, 1997
               10-Q"] and incorporated herein by reference.)
      10.28  Sublease Agreement, dated September 11, 1997 between Yahoo! Inc. and Amdahl Corporation (Filed as
               Exhibit 10.2 to the September 30, 1997 10-Q and incorporated herein by reference.)
      10.29  Four11 Corporation 1995 Stock Option Plan Registrant (Filed as Exhibit 4.2 to the Company's
               Registration Statement on Form S-8, Registration No. 333-39105, dated October 30, 1997, and
               incorporated herein by reference.)
      10.30+ Amendment Agreement dated September 17, 1997 by and between Yahoo! Inc. and SOFTBANK Corporation
               (Filed as Exhibit 10.39 to the Company's Annual Report on Form 10-K for the year ended December 31,
               1997 [the "December 31, 1997 10-K"] and incorporated herein by reference.)
      10.31+ Amendment to Yahoo! Japan License Agreement dated September 17, 1997 by and between Yahoo! Inc. and
               Yahoo! Japan Corporation (Filed as Exhibit 10.40 to the December 31, 1997 10-K and incorporated
               herein by reference.)
      10.32+ Services Agreement dated November 30, 1997 by and between Yahoo! Korea Corporation and SOFTBANK Korea
               Corporation (Filed as Exhibit 10.41 to the December 31, 1997 10-K and incorporated herein by
               reference.)
      10.33+ Yahoo! Korea License Agreement dated November 30, 1997 by and between Yahoo! Inc., Yahoo! Korea
               Corporation, and Yahoo! Japan Corporation (Filed as Exhibit 10.42 to the December 31, 1997 10-K and
               incorporated herein by reference.)
      10.34  Agreement and Plan of Merger dated June 4, 1998 by and among Yahoo! Inc., XY Acquisition Corporation,
               and Viaweb Inc. (Filed as Exhibit 2.1 to the Company's Current Report on Form 8-K, dated June 12,
               and incorporated herein by reference.)
      10.35  Viaweb Inc. 1997 Stock Option Plan and form of Option Agreement thereunder (Filed as Exhibit 4.2 to
               the Company's Registration Statement on Form S-8, Registration No. 333-56781, dated June 12, 1998
               [the "S-8 Registration Statement dated June 12, 1998"], and incorporated herein by reference.)
</TABLE>

 
                                       66

<PAGE>

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                                  DESCRIPTION
- -----------  -----------------------------------------------------------------------------------------------------
<C>          <S>
      10.36  Forms of Viaweb Inc. 1996 Option Agreements (Filed as Exhibit 4.3 to the S-8 Registration Statement,
               dated June 12, 1998, and incorporated herein by reference.)
      10.37  Stock Purchase Agreement dated as of July 7, 1998, between Yahoo! and SOFTBANK Holdings Inc. (Filed
               as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
               [the "June 30, 1998 10-Q"] and incorporated herein by reference.)
      10.38  Amendment to Second Amended and Restated Investor Rights Agreement dated July 7, 1998 among Yahoo!,
               SOFTBANK Holdings Inc., Sequoia Capital VI and Sequioia Technology Partners VI (Filed as Exhibit
               10.2 to the June 30, 1998 10-Q and incorporated herein by reference.)
      10.39  Content License Agreement dated January 8, 1998 between Yahoo! and ZDNet (Filed as Exhibit 10.3 to
               the June 30, 1998 10-Q and incorporated herein by reference.)
      10.40  Agreement and Plan of Merger dated as of October 9, 1998, by and among Yahoo! Inc., YO Acquisition
               Corporation, and Yoyodyne Entertainment, Inc. (Filed as Exhibit 2.1 to the Company's Current Report
               on Form 8-K, dated October 23, 1998 [the "8-K dated June 12, 1998"] and incorporated herein by
               reference.)
      10.41  Amendment to the Agreement and Plan of Merger dated as of October 19, 1998, by and among Yahoo! Inc.,
               YO Acquisition Corporation, and Yoyodyne Entertainment, Inc. (Filed as Exhibit 2.2 to 8-K dated
               June 12, 1998 and incorporated herein by reference.)
      10.42  Yoyodyne Entertainment, Inc. 1996 Stock Option Plan and form of Option Agreement thereunder. (Filed
               as Exhibit 4.1 to the Company's Registration Statement on Form S-8, Registration No. 333-66067,
               dated October 23, 1998 and incorporated herein by reference.)
      16.1   Letter dated March 6, 1996 from Coopers & Lybrand L.L.P., prior accountant of the Registrant (Filed
               as Exhibit 10.25 to the SB-2 Registration Statement and incorporated herein by reference.)
      21.1   List of Subsidiaries
      23.1   Consent of Independent Accountants
      27.1   Financial Data Schedule
</TABLE>

 
- ------------------------
 
+   Confidential treatment granted.
 
    (b) Reports on Form 8-K
       On October 23, 1998, the Company filed a report on Form 8-K, pursuant to

    Items 2 and 7 of such Form, regarding its acquisition of Yoyodyne
    Entertainment, Inc.
       On November 19, 1998, the Company filed an amended report on Form 8-K,
    pursuant to Items 2 and 7 of such Form, which included the supplementary
    consolidated financial statements of Yahoo! Inc.
 
                                       67

<PAGE>

                                   SIGNATURES
 
    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused the report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 25th day of
February, 1999.
 

<TABLE>
<S>                             <C>  <C>
                                YAHOO! INC.
 
                                By:              /s/ TIMOTHY KOOGLE
                                     -----------------------------------------
                                                   Timothy Koogle
                                        CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>

 
                               POWER OF ATTORNEY
 
    KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Timothy Koogle and Gary Valenzuela, his
attorneys-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any amendments to this Report on Form 10-K, and to file the
same, with Exhibits thereto and other documents in connection therewith with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or substitute or substitutes may do or cause to
be done by virtue hereof.
 
    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
 

<TABLE>
<CAPTION>
          SIGNATURE                       TITLE                    DATE
- ------------------------------  --------------------------  -------------------
 
<C>                             <S>                         <C>
                                Chairman and Chief
      /s/ TIMOTHY KOOGLE          Executive Officer
- ------------------------------    (Principal Executive       February 25, 1999
        Timothy Koogle            Officer)
 
       /s/ JEFF MALLETT
- ------------------------------  President, Chief Operating   February 25, 1999
         Jeff Mallett             Officer, and Director
 
                                Senior Vice President,
                                  Finance and
     /s/ GARY VALENZUELA          Administration, and
- ------------------------------    Chief Financial Officer    February 25, 1999
       Gary Valenzuela            (Principal Financial
                                  Officer)
 
     /s/ JAMES J. NELSON        Vice President, Finance
- ------------------------------    (Principal Accounting      February 25, 1999
       James J. Nelson            Officer)
 
       /s/ ERIC HIPPEAU
- ------------------------------  Director                     February 25, 1999
         Eric Hippeau
 
      /s/ ARTHUR H. KERN
- ------------------------------  Director                     February 25, 1999
        Arthur H. Kern
 
      /s/ MICHAEL MORITZ
- ------------------------------  Director                     February 25, 1999
        Michael Moritz
 
        /s/ JERRY YANG
- ------------------------------  Director                     February 25, 1999
          Jerry Yang
</TABLE>

 
                                       68

<PAGE>

                               INDEX TO EXHIBITS
 

<TABLE>
<CAPTION>
  EXHIBIT
  NUMBER                                                   DESCRIPTION
- -----------  --------------------------------------------------------------------------------------------------------
<C>          <S>
 
       3.1   Amended and Restated Articles of Incorporation of Registrant
 
       3.3   Certificate of Amendment to Bylaws dated January 11, 1999
 
      21.1   List of Subsidiaries
 
      23.1   Consent of Independent Accountants
 
      27.1   Financial Data Schedule
</TABLE>

 
                                       69





<PAGE>
                                                                     EXHIBIT 3.1

 
                              AMENDED AND RESTATED
                           ARTICLES OF INCORPORATION
                                       OF
                                  YAHOO! INC.
 
    JEFFREY MALLETT and JOHN PLACE certify that:
 
        1.  They are the President and Secretary, respectively, of YAHOO! INC.,
    a California corporation.
 
        2.  The Articles of Incorporation of this corporation are amended and
    restated to read in their entirety as follows:
 
                                      "I.
 
    The name of this corporation is YAHOO! INC.
 
                                      II.
 
    The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporation Code.
 
                                      III.
 
    (a) This corporation is authorized to issue two classes of shares designated
"Preferred Stock" and "Common Stock," respectively. The total number of shares
which this corporation shall have authority to issue is Nine Hundred Ten Million
(910,000,000), par value of $0.00017 per share. The number of shares of
Preferred Stock authorized to be issued is Ten Million (10,000,000), and the
number of shares of Common Stock authorized to be issued is Nine Hundred Million
(900,000,000). Upon the effective date of the filing of these Amended
 and
Restated Articles of Incorporation, each one (1) share of the corporation's
outstanding Common Stock shall be converted and reconstituted into two (2)
shares of Common Stock (the "Stock Split").
 
    No fractional shares shall be issued as a result of the Stock Split. Each
holder entitled to receive a fraction of a share of Common Stock as a result of
the Stock Split, when all shares of Common Stock held by such holder are
aggregated together, shall, in lieu of a fractional share, receive cash in an
amount equal to the fair market value of the Company's Common Stock on the date
of the filing of these Amended and Restated Articles of Incorporation, as
determined by the corporation's Board of Directors, multiplied by the fraction
of a share of Common Stock to which such holder would otherwise be entitled.
 
    (b) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in these Articles of Incorporation to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and the number of shares constituting
any such series and the designation thereof, or any of them; and to increase or
decrease the number of shares of any series subsequent to the issue of shares of
that series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be so decreased, the
 
                                       1

<PAGE>
shares constituting such decrease shall resume the status which they had prior
to the adoption of the resolution originally fixing the number of shares of such
series.
 
                                      IV.
 
    Shareholders shall not be entitled to cumulate their votes for the election
of directors of the corporation.
 
    This Article IV shall become effective only when the corporation becomes,
and only for so long as the corporation remains, a listed corporation within the
meaning of Section 301.5 of the California Corporations Code.
 
                                       V.
 
    No action shall be taken by the shareholders of the corporation other than
at an annual or special meeting of the shareholders, upon due notice and in
accordance with the provisions of the corporation's bylaws.
 
                                      VI.
 
    (a) On or prior to the date on which the corporation first provides notice
of an annual meeting of the shareholders following the date this Article VI
shall have become effective (and provided that the authorized number of
directors of the corporation shall be not less than six), the Board of Directors
of the corporation shall divide the directors into two classes, as nearly equal
in number as reasonably possible with the term of office of the first class to
expire at the 1997 annual meeting of shareholders or any special meeting in lieu
thereof and the term of office of the second class to expire at the 1998 annual
meeting of shareholders or any special meeting in lieu thereof. At each annual
meeting of shareholders or special meeting in lieu thereof following such
initial classification, directors elected to succeed those directors whose terms
expire shall be elected for a term of office to expire at the second succeeding
annual meeting of shareholders or special meeting in lieu thereof after their
election and until their successors are duly elected and qualified.
 
    (b) Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office even though less than a quorum, or by a sole remaining director.
In the event of any increase or decrease in the authorized number of directors,
(i) each director then serving as such shall nevertheless continue as a director
of the class of which he or she is a member until the expiration of his or her
current term or his or her prior death, retirement, removal or resignation and
(ii) the newly created or eliminated directorships resulting from such increase
or decrease shall, if reasonably possible, be apportioned by the Board of
Directors between the two classes of directors so as to ensure that no one class
has more than one director more than any other class. To the extent reasonably
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
latest dates following such allocation and newly eliminated directorships shall
be subtracted from those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a majority of the directors then in
office, although less than a quorum. In the event of a vacancy in the Board of
Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board of Directors until the vacancy is filled.
 
    (c) This Article VI shall become effective only when the corporation
becomes, and only for so long as the corporation remains, a listed corporation
within the meaning of Section 301.5 of the California Corporations Code.
 
                                       2

<PAGE>
                                      VII.
 
    Section 1.  LIMITATION OF DIRECTORS' LIABILITY.  The liability of the
directors of the corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
 
    Section 2.  INDEMNIFICATION OF CORPORATE AGENTS.  This corporation is
authorized to provide indemnification of agents (as defined in Section 317 of
the California Corporations Code) through bylaw provisions, agreements with
agents, vote of shareholders or disinterested directors or otherwise, in excess
of the indemnification otherwise permitted by such Section 317 of the California
Corporations Code, subject only to the applicable limits set forth in Section
204 of the California Corporations Code with respect to actions for breach of
duty to the corporation and its shareholders.
 
    Section 3.  REPEAL OR MODIFICATION.  Any repeal or modification of the
foregoing provisions of this Article VII shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification."
 
    3.  The foregoing amendment and restatement of these Articles of
Incorporation has been duly approved by the Board of Directors.
 
    4.  In accordance with Sections 902(c) and 903(a)(2) of the California
General Corporation Law, the foregoing amendment may be adopted with approval by
the Board of Directors alone and does not require approval by the outstanding
shares.
 
    We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in the foregoing certificate are true of
our own knowledge. Executed at Santa Clara, California on January 22, 1999.
 

                                          /s/ Jeffrey Mallett
                                          --------------------------------------
                                          JEFFREY MALLETT,
                                          PRESIDENT AND CHIEF OPERATING OFFICER
 
                                          /s/ John Place
                                          --------------------------------------
                                          JOHN PLACE,
                                          SECRETARY
 
                                       3



<PAGE>
                                                                     EXHIBIT 3.3
 
                          CERTIFICATE OF AMENDMENT OF
                        THE AMENDED AND RESTATED BYLAWS
                                       OF
                                  YAHOO! INC.
 
    The undersigned, being the duly acting and appointed Secretary of Yahoo!
Inc., a California corporation, hereby certifies that Article III, Section 3.2
of the Amended and Restated Bylaws of this corporation was amended by the Board
of Directors, effective as of January 11, 1999, as follows:
 
      "Secion 3.2 NUMBER OF DIRECTORS.  The number of directors of the
      corporation shall be not less than four (4) nor more than seven (7). The
      exact number of directors shall be six (6) until changed, within the
      limits specified, by a bylaw amending this Section 3.2, duly adopted by
      the board of directors or by the shareholders. The indefinite number of
      directors may be changed, or a definite number may be fixed without
      provision for an indefinite number, by a duly adopted amendment to the
      articles of incorporation or by an amendment to this bylaw duly adopted by
      the vote or written consent of holders of a majority of the outstanding
      shares entitled to vote; provided, however, that an amendment reducing the
      fixed number or the minimum number of directors to a number less than six
      (6) cannot be adopted if the votes cast against its adoption at a meeting,
      or the
 shares not consenting in the case of an action by written consent,
      are equal to more than sixteen and two-thirds percent (16 2/3%) of the
      outstanding shares entitled to vote thereon. No amendment may change the
      stated maximum number of authorized directors to a number greater than two
      (2) times the stated minimum number of directors minus one (1).
 
      No reduction of the authorized number of directors shall have the effect
      of removing any director before that director's term of office expires."
 

<TABLE>
<S>                                             <C>
Dated: January 11, 1999                         /s/ JOHN PLACE
                                                -------------------------------------------
                                                John Place, Secretary
</TABLE>




<PAGE>
                                                                    EXHIBIT 21.1
 
SUBSIDIARIES OF YAHOO! INC.

<TABLE>
<CAPTION>
NAME                                                      JURISDICTION OF INCORPORATION
- --------------------------------------------------------  --------------------------------------------------------
<S>                                                       <C>
Four11 Corporation                                        California
Yahoo! UK Limited                                         United Kingdom
Yahoo! UK Holdings Limited                                United Kingdom
Yahoo! France Sarl                                        France
Yahoo! (Deutschland) GmbH                                 Germany
Yahoo! Pte Ltd                                            Singapore
NetControls, Inc.                                         Washington
Yahoo! Danmark ApS                                        Denmark
Yahoo! Norway AS                                          Norway
Yet Another Hierarchical Officious Oracle (Stockholm) AB  Sweden
Yahoo! Korea Corporation                                  Korea
Yahoo! International Branch Holdings, Inc.                California
Yahoo! International Subsidiary Holdings, Inc.            California
Yahoo Media SL                                            Spain
Viaweb, Inc.                                              Delaware
Webcal Corporation                                        Delaware
Yoyodyne Entertainment, Inc.                              Delaware
Indigo Acquisition Corporation                            California
 
BRANCHES OF YAHOO! INC.
 
<CAPTION>
 
NAME                                                      JURISDICTION OF REGISTRATION
- --------------------------------------------------------  --------------------------------------------------------
<S>                                                       <C>
Yahoo! Australia & New Zealand                            Australia
Yahoo! Information Company                                Taiwan
Yahoo! Hong Kong                                          Hong Kong
Yahoo! Italy                                              Italy
</TABLE>






<PAGE>
                                                                    EXHIBIT 23.1
 
                       CONSENT OF INDEPENDENT ACCOUNTANTS
 
    We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (No. 333-56779, No.
333-62943, No. 333-67587) and in the Registration Statements on Form S-8 (No.
333-3694, No. 333-39105, No. 333-56781, No. 333-66067) of Yahoo! Inc. of our
report dated January 8, 1999, except as to the stock split described in Note 1
and Note 10, which are as of February 8, 1999, appearing in this Form 10-K.
 
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 24, 1999





<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE YAHOO!
INC. ANNUAL REPORT ON FORM 10-K FOR THE PERIOD ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1998
<PERIOD-START>                             JAN-01-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                         125,474
<SECURITIES>                                   308,025
<RECEIVABLES>                                   29,798
<ALLOWANCES>                                     4,967
<INVENTORY>                                          0
<CURRENT-ASSETS>                               467,239
<PP&E>                                          23,509
<DEPRECIATION>                                   8,320
<TOTAL-ASSETS>                                 621,884
<CURRENT-LIABILITIES>                           79,983
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            23
<OTHER-SE>                                     536,187
<TOTAL-LIABILITY-AND-EQUITY>                   621,884
<SALES>                                              0
<TOTAL-REVENUES>                               203,270
<CGS>                                                0
<TOTAL-COSTS>                                   26,742
<OTHER-EXPENSES>                               147,760
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                                 43,415
<INCOME-TAX>                                    17,827
<INCOME-CONTINUING>                             25,588
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    25,588
<EPS-PRIMARY>                                     0.14<F1>
<EPS-DILUTED>                                     0.11
<FN>
<F1>REFLECTS BASIC EPS ACCORDING TO SFAS 128
</FN>
        

</TABLE>