Incredimail 2011 Annual Report Download - page 29

In addition, there is some competition in the area of downloadable email clients, such as: WikMail, Arcsoft Multimedia Email™ 3 and Mind Spark
Products™. In addition, our products also face competition from general email software programs offered to the private market by large Internet and software
companies, such as AOL9 by America Online, Inc., Eudora
®
by QUALCOMM Incorporated (Nasdaq: QCOM), Thunderbird
®
by Mozilla Corporation and Outlook
Express by Microsoft Corporation (Nasdaq: MSFT), some of which may also incorporate certain special features that provide a personalized email experience, some
of them offering creative graphic backgrounds, such as Yahoo! Mail™. Many of the large Internet and software companies offer their email software programs free of
charge. Our PhotoJoy products’
main competitors, in area of providers of wallpapers, screensaver and digital photo management offer the following products: Picasa,
webshots.com and screensavers.com, which offer wallpapers and screensavers both free and premium products for a fee. Competition with these products, reliance on
viral marketing and technical difficulties have resulted in a reduction of the number of downloads, market share, prices and margins.
Many of our competitors have more established brands, products and customer relationships than we do, which could inhibit our market penetration efforts
even if they may not offer a solution that is as simple to use, or that provides a customized and entertaining email experience similar to IncrediMail
®
.
For example,
consumers may choose to receive an extensive package of Internet and email services from a more dominant and recognized company, such as Microsoft Corporation
(Outlook Express) or America Online, Inc. (AOL
®
). If we are unable to achieve continued market penetration, we will be unable to compete effectively.
With respect to our Smilebox photo sharing product, Smilebox competes broadly within the photo services category. Competition includes America Greetings
and Hallmark from the greetings category, Shutterfly, Kodak and Snapfish from the photo products category and services like Flikr, Facebook and Instagram in the
social photo sharing category.
In addition, as a major part of our revenues stem from our offering search properties by means of offering consumer downloadable software, other companies
with consumer downloadable software, albeit with totally different software, are competing by utilizing the same strategy, to offer their search properties.
Finally, many of our other current and potential competitors have significantly greater financial, research and development, manufacturing, and sales and
marketing resources than we have. These competitors could use their greater financial resources to acquire other companies to gain enhanced name recognition and
market share, as well as to develop new technologies, products or features that could effectively compete with our existing product lines. Demand for our products
could be diminished by products and technologies offered by competitors, whether or not their products and technologies are equivalent or superior.
Government Regulation
U.S., U.K., the European Union, Israeli and other jurisdictions have adopted laws that could have an impact on our business, including the ones described in
this section.
There are still relatively few laws or regulations specifically addressing the Internet. In some instances, in the EU particularly, those that have been
implemented are dating rapidly as online practice (and particular social commerce and extent of online interaction and communication) evolves. As a result, the
manner in which existing laws and regulations should be applied to the Internet in general, and how they relate to our business in particular, is unclear in many cases
and varies from county to country. Such uncertainty arises under existing laws regulating matters, including user privacy, defamation, access changes, “net-neutrality”
pricing, advertising, taxation, gambling, sweepstakes, promotions, content regulation, quality of products and services, and intellectual property ownership and
infringement.
To resolve some of the current legal uncertainty, it is possible that new laws and regulations (and associated guidance) will be adopted that will be directly
applicable to our activities. Any existing or new laws, regulations or legislation applicable to us could expose us to potential liability, including significant expenses
necessary to comply with such laws and regulations, and could dampen the growth in use of the Internet in general. In connection with this, some of the countries in
which we operate have increased their enforcement of local laws and therefore the potential impact of failing to comply with local and international legislative
requirements has increased significantly.
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