Incredimail 2013 Annual Report Download - page 49

For a discussion of our intellectual property and how we protect it, see "Business Overview—
Intellectual Property" under Item 4.B
above.
D. TREND INFORMATION
Industry trends expected to affect our revenues, income from continuing operations, profitability and liquidity or capital resources :
For more information on uncertainties, demands, commitments or events that are reasonably likely to have a material effect on our
business, see Item 3 “Key Information—Risk Factors."
1. In recent months the browser companies, particularly Google’
s Chrome, as well as other browsers, have been instituting policy changes
and regulations making it increasingly difficult to change a browser’s settings, including the ability to change a browser’
s default search
settings. Changing such settings has been a major part of the Company’
s monetization model and until now we have been successful in
overcoming these measures; however, it is becoming increasingly difficult to do so. In connection with these efforts by the browser
companies, they are also making an effort to reset the applicable browser’
s settings back to its default setting, causing us to have to
recapture our users on a more concurrent basis. These activities have shortened the average lifetime we see from users utilizing our
search settings. This has reduced the return on investment from our marketing and distribution efforts, although we believe that they
remain sufficiently high for us to grow this part of our business.
2.
New regulations governing the ability to download software from the major software depositories such as the Google Store have limited
our ability to bundle toolbars and other services with the other software. Until this time, we have been successful in working around
these restrictions, but this has negatively affected our distribution to some degree and caused us to find work-
arounds and ways for us
and our software developer partners to offer and download software from alternative sites.
3.
The browsers and certain software depositories have restricted the ability to download multipurpose toolbars. As such, we currently do
not distribute toolbars for those browsers and through those venues and currently are not offering toolbars to new users.
4. In 2013, Google continued to institute further changes to its search partner policies, changing the way Google’
s partners (such as Perion)
acquire and retain customers. Although these changes aim to improve the user experience (which is a goal that we share), they reduced
our return on investment and we currently do not foresee it rebounding in the near future. In addition, we see these changes having long
-
term effects on the search market. We believe that our acquisition of ClientConnect has offered a viable alternative to the relationship
with Google, due to its special relationship with Microsoft, including a less restricive policy environment. In addition, our newly attained
larger size strengthens our bargaining position in negotiating with the search engine companies. Although we have attained a certain
advantage of size and while we have increased our search engine alternatives, the limited number of relevant search engine alternatives
limits our marketing abilities, and as a result reduced the return on investment from our marketing efforts. In addition, these policies
have limited our ability to partner with software developers and distributors that are non-
compliant with the new policies, thereby
restricting our ability to grow our business at the pace we have been accustomed to in past years.
5. To address the multiple threats and changes regarding the long-
term ability to grow search generated revenues, we are investing internal
development efforts as well as focusing some of our acquisition efforts towards creating and acquiring tools and systems that would
enable us to leverage the data we accumulate and offer more focused advertisements to users, thereby creating an alternative revenue
generation model independent of search generated revenue.
6.
There has been a growing usage of portable platforms, including smartphones and tablets, enabling users to enjoy a more graphic and
creative experience without a PC, and we believe that mobile platform distribution has already surpassed that of the desktop. This trend
is most prominently represented by the popularity of the iPhone and its Android mobile platforms, as well as with the popular iPad and
Android tablets. Although this trend is attracting an increasing portion of the market, we believe that the monetization of mobile
platforms still lags significantly behind and desktop monetization is still far greater than that for mobile platforms. However, in order to
address the trend and what we believe to be the inevitability of increased monetization of mobile platforms, we are investing internally
and focusing our acquisition efforts on acquiring technologies enabling us to offer our services on mobile platforms and eventually
generate revenues from these services.
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