Author Archives: anuj.bhatnagar

The article “Yahoo, Google and Accounting — Web-Search Powerhouses Count Revenue Differently, Making Valuation a Chore” deals with the different methods Yahoo and Google use to report their revenues. In particular, Yahoo and Google treat revenue from small-text advertisements that they place on other companies’ Web sites differently.

Both companies act as technological intermediaries and quasi-advertising agencies, bringing together Web publishers and advertisers. They get paid each time an Internet user clicks on an ad, then give some of that money to the Web publisher on whose site the ad appeared.

Yahoo reports its revenues using the gross method (counting its payment to the publisher as an expense, labeled as a “traffic acquisition cost”), whereas Google only reports the net amount  (after it pays the Web publisher).

Using the gross method enables Yahoo to inflate its revenues and to appear faster growing (revenues grew 168%). If Yahoo had used the net method revenues grew only 94%. In Google’s case it is exactly the other way round. However, when it comes to gross profits, Yahoo’s profits appear smaller whereas Google’s profits appear larger.