Digital River 2006 Annual Report Download - page 12

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The Digital River Solution
Our solution combines a robust e-commerce technology platform and a suite of services to help
businesses worldwide grow their online revenues and avoid the costs and risks of running a global e-commerce
operation in-house. We offer a comprehensive e-commerce solution that operates seamlessly as part of a
client’s website. We provide services that facilitate e-commerce transactions and services that help drive traffic
to our clients’ online stores and demand for their products. Our services include design, development and
hosting of online stores, store merchandising, order management, fraud prevention, export controls, tax
compliance and management, digital product delivery via download, physical product fulfillment, multi-lingual
customer service, online marketing services including e-mail marketing, management of paid search programs,
web analytics and, reporting. We also provide our clients with increased product visibility and sales
opportunities through our large network of online channel partners, including retailers and affiliates. We
generate a substantial majority of our revenue on a revenue-share basis, meaning that we are paid a percentage
of the selling price of each product sold at a clients’ online store that is being managed by Digital River
Benefits to Clients
Reduced Total Cost of Ownership and Risk
Utilizing the Digital River solution, businesses can dramatically reduce or eliminate upfront and ongoing
hardware, software, maintenance and support costs associated with developing, customizing, deploying,
maintaining and upgrading an in-house e-commerce solution. They can have a global e-commerce presence
without assuming the costs and risks of developing it themselves and take immediate advantage of the
investments we continually make in our e-commerce systems and associated services. In addition, we help
mitigate the risks of doing e-commerce globally, including risks associated with payment fraud, tax
compliance, regulatory compliance and export and denied parties compliance. Our ongoing investments in the
latest technologies and e-commerce functionality help ensure that our clients maintain pace with industry
advances.
Revenue Growth
We can assist our clients in growing their businesses by (i) facilitating the acquisition of new customers,
improving the retention of existing customers, and increasing the lifetime value of each customer; (ii) extending
their businesses into international markets; and (iii) expanding the visibility and sales of their products through
new online sales channels. We have developed substantial expertise in online marketing and merchandising
which we apply to help our clients increase traffic to their online stores, and improve order close ratios,
average order sizes and repeat purchases, all of which result in higher revenues for our clients’ businesses and
a greater revenue share for Digital River.
We provide the technology and services required to establish, grow and support international sales, both
for U.S-based clients seeking to reach customers overseas, and non-U.S.-based clients looking to access the
U.S. and other markets. Our technology platform enables transactions to be completed in numerous currencies
using a variety of payment options. In addition, we provide localized online content and offer customer service
in a variety of languages, extending our clients’ reach beyond their home markets.
Through our large online marketplace, which we call Digital River oneNetwork
TM
(described in more
detail in the section titled “Strategy”), we provide our clients access to new online sales channels which can
help grow their online businesses. Clients can offer any part of their product catalogs to our network of online
channel partners, including online retailers and affiliates. This increases the exposure these products receive
and can result in higher sales volumes. Our channel partners benefit because we eliminate the need for each of
them to manage hundreds of relationships with product developers while increasing the depth and breadth of
products they can sell, all without requiring the management of physical product inventory.
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