Scale evidence: Impact from original Yahoo supply

Key Takeaways: We have empirical proof from our Yahoo! Search deal that incremental volume drives up RPMs. With the influx of Yahoo! Traffic into our ecosystem in 2012 we were able to realize a one-time boost to our RPMs driven by injection of scale. In addition, having a bigger marketplace enabled us to increase our innovation which had driven up our RPMs even further over the next couple years.

We believe that injection of Apple volume would enable us to realize RPM lifts from scale and innovation similar to the Yahoo! deal. We would expect that these lifts would help us get to [redacted] of Google on iPad and Mac in the US. In international markets we would be able to get to [redacted] of Google on iPhone.

Notes: RPM increases with scale as advertisers increase bids to be on top in the auction, and algorithms improve with more data. The curve is initially steep as small increases in scale meaningfully improve advertiser participation, making it possible to offset fixed cost of investing in another platform. Product innovation shifts performance to a higher RPM curve, not along the same curve. Most of subsequent performance improvements come from innovation and demand expansion.