Incredimail 2011 Annual Report Download - page 27

Products under Development
Our research and development activities are conducted internally by our Chief Technology Officer and a 69 person research and development staff. Our
research and development efforts are focused on the development of upgraded software, new features and the enhancement, and enabling new platforms for our
existing product suite.
In 2011 we increased our development investment effort, and refocused this effort so as to enhance our product pipeline. The initial results of this effort are
apparent by the products and features released during the past year. We intend to continue this effort in 2012 by introducing additional products and focusing on
adapting our existing products for use on mobile platforms, including the iPhone, iPad and possibly Android based platforms as well.
Sales, Marketing and Distribution
Our products are distributed and sold throughout the world in more than 100 countries. The following table shows the estimated distribution of our registered
users, search generated revenues and products sold by territory in 2011:
(*)
(*)
Tier 1: United States, Canada, United Kingdom & Australia; Tier 2: France, Germany, Netherlands, Italy, Belgium, Switzerland; Tier 3: Other
To date, we have relied mainly on "viral growth," arising from recipients of our users’
emails clicking on the link at the bottom of emails sent with
IncrediMail
®
Xe and then downloading our products and from word-of-
mouth. In addition, during 2008 we employed traditional marketing strategies, consisting
primarily of online advertising, which efforts were met to our satisfaction. These efforts were employed to assist in the initial market penetration of our HiYo product
in the latter part of 2008. Having achieved the objectives originally set out, and in light of the new market conditions and our focus on profitability in 2009, we scaled
back our marketing efforts and remained at a similar level in 2010. In 2011 we supplemented the viral marketing with customer acquisition efforts aimed at
accelerating our growth, increasing the number of registered users, and as a result increasing revenues. We plan to continue this effort, and increase it somewhat, in
2012
We have typically experienced stronger product sales in the first and fourth quarters, principally because our products are purchased in holiday sales in
December or in the after-holiday sales in January. This is especially so regarding our Smilebox photo-
sharing software. This is in addition to the general seasonality
of the Internet as well as e-
commerce being more active in the winter months. Since 2007 and up until the first half of 2011, as search generated revenues accounted
for a growing and more dominant portion of our revenues, the seasonality of our revenues has decreased; however, with the acquisition of Smilebox and the increased
growth in product sales, we can again expect higher seasonality towards those months.
As of December 31, 2011 we had 32 employees in our sales and marketing department.
Intellectual Property
We rely on a combination of patent, copyright, trademark and trade secret laws and confidentiality and invention assignment agreements to protect our
intellectual property rights. However, we do not currently believe that they provide a significant competitive advantage.
Most of the components of our software products were developed solely by us. We have licensed certain components of our software from third parties.
Except for our agreements regarding anti-spam software and some of our content licenses, most of these licenses entailed a one-
time fee or are freeware. We believe
that these components are not material to the overall performance of our software and may be replaced without significant difficulty.
o
Reduces malware, spyware and Trojan viruses that can infect the computer;
o
Safeguards personal information with built
-
in privacy monitor; and
o
Cleans system by removing junk files that take up space on the PC.
Search Generated
Registrations
Revenues
Product Revenues
Tier 1
32
%
42
%
66
%
Tier 2
24
%
43
%
23
%
Tier 3
44
%
15
%
11
%
24