Enom 2014 Annual Report Download - page 16

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Additionally, while we use proprietary technology and algorithms designed to predict consumer demand and return on
investment to create and distribute our content cost-effectively, the ultimate returns on our investment in content creation are difficult
to predict and may not be sustained in future periods at the same level as in past periods. Furthermore, our proprietary technology and
algorithms are dependent on analyzing existing Internet search traffic data, and our analysis may be impaired by changes in Internet
traffic or search engines’ methodologies, which we do not control. Another method we employ to attract and acquire new, and retain
existing, visitors is search engine optimization (“SEO”), which involves developing content to rank well in search engine results. Our
ability to successfully manage SEO efforts across our owned and operated online properties and our customers’ online properties is
dependent on our timely and effective modification of SEO practices implemented in response to periodic changes in search engine
algorithms and methodologies and changes in search query trends. Historically, we have been unable to generate a significant amount
of traffic to our online properties outside of our SEO efforts. If we do not successfully manage and modify our SEO efforts, we could
experience substantial declines in traffic to the online properties that publish our content, which would result in lower conversion rates
and less repeat business. Even if we succeed in driving traffic to our and our customers’ online properties, we may not be able to
effectively monetize this traffic or otherwise retain visitors, which could result in lower advertising revenue from our owned and
operated online properties and decreases in the number of customers publishing our content to their online properties. Any failure to
identify, create and distribute high-quality content or to effectively monetize traffic to our online properties would adversely affect our
business, financial condition and results of operations.
In order to grow our online marketplaces, we must expand our customer base, which will require us to appeal to customers who
have historically used other means of commerce to purchase similar products or who may already use our competitors’ offerings. We
may incur significant expenses related to customer acquisition and the net sales from new customers may not ultimately exceed the
cost of acquiring these customers. Our ability to attract new customers to our marketplaces also depends, in part, on our ability to
establish and maintain relationships with the various channels used by our current and prospective customers, including social media
sites, search engines, and other online services, in order to drive traffic to our online properties. If we are unable to develop or
maintain these relationships, our ability to attract new customers would suffer. Additionally, we believe that many of the new
customers for our marketplaces originate from word-of-mouth and other non-paid referrals from existing customers. If we fail to
deliver an enjoyable shopping experience or if our customers do not perceive the products sold through our marketplaces to be of high
value and quality, we may experience difficulties retaining our existing customers and attracting new customers through referrals,
which would require us to incur significantly higher marketing expenses to attract new customers. If the number of transactions
generated by our current customer base declines, or we are unable to attract new customers to our marketplaces, we may experience
lower customer growth than expected and our business, financial condition and results of operations could be materially and adversely
affected.
We face significant competition, which we expect will continue to intensify, and we may not be able to maintain or improve our
competitive position or market share.
We operate in highly competitive and still developing markets. The industries in which we compete are characterized by rapid
technological change, various business models and frequent disruption of incumbents by innovative entrants. There can be no
assurance that we will be able to compete successfully against current or future competitors and a failure to increase, or the loss of,
market share, would likely seriously harm our business, financial condition and results of operations.
Content & Media
We face intense competition for our Content & Media service offering from a wide range of competitors. We compete for
advertisers and customers on the basis of a number of factors including return on marketing expenditures, price of our offerings and
the ability to deliver large amounts, or precise types, of segmented customer traffic. Our current principal competitors include:
• Online Marketing and Media Companies. We compete with other Internet marketing and media companies, such as AOL,
IAC and various startup companies as well as leading online media companies such as Yahoo!, for online marketing
budgets. Most of these competitors compete with us across several areas of consumer interest, such as do-it-yourself,
health and healthy living, home and garden, arts and crafts, beauty and fashion, golf, outdoors and humor.
• Social Media Outlets. We compete with social media outlets such as Facebook, Twitter and Pinterest, where brands and
advertisers are focusing a significant portion of their online advertising spend in order to connect with their customers.
• Specialized and Enthusiast Online Properties. We compete with companies that provide specialized consumer
information online, particularly in the do-it-yourself, health and healthy living, home and garden, arts and crafts, beauty
and fashion, golf, outdoors and humor categories, as well as enthusiast online properties in specific categories, including
message boards, blogs and other enthusiast websites maintained by individuals and other Internet companies.