Priceline 2011 Annual Report Download - page 19

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Our business could be negatively affected by changes in search engine algorithms and dynamics or termination of
traffic-generating arrangements.
We utilize Internet search engines and other travel demand aggregation websites, principally through the purchase of
travel-related keywords, to generate traffic to our websites. Booking.com, Agoda and rentalcars.com, in particular, rely to a
significant extent upon Google to generate business and, to a much lesser extent, other search engines and other travel demand
aggregation websites. Search engines such as Google frequently update and change the logic which determines the placement
and display of results of a user's search, such that the placement of links to our sites, and particularly those of Booking.com,
Agoda, rentalcars.com and their affiliates, can be negatively affected. In a similar way, a significant amount of Booking.com,
Agoda and rentalcars.com's business is directed to our own websites through participation in pay-per-click advertising
campaigns on Internet search engines whose pricing and operating dynamics can experience rapid change commercially,
technically and competitively. In addition, we purchase web traffic from a number of sources, including some operated by our
competitors, in the form of pay-per-click arrangements that can be terminated with little or no notice. If one or more of such
arrangements is terminated, or if a major search engine, such as Google, changes its algorithms in a manner that negatively
affects the search engine ranking of our brands or our third-party distribution partners or changes its pricing, operating or
competitive dynamics in a negative manner, our business, results of operations and financial condition would be adversely
affected.
In addition, Booking.com, Agoda and rentalcars.com rely on various third party distribution channels (i.e., affiliates)
to distribute hotel room reservations. Should one or more of such third parties cease distribution of Booking.com, Agoda and
rentalcars.com reservations, or suffer deterioration in its search engine ranking, due to changes in search engine algorithms or
otherwise, our business could be negatively affected.
Capacity constraints and system failures could harm our business.
We have experienced rapid growth in customer traffic, the number of hotels on our extranets and the geographic
breadth of our operations. If our systems cannot be expanded to cope with increased demand or fails to perform, we could
experience unanticipated disruptions in service, slower response times, decreased customer service and customer satisfaction
and delays in the introduction of new services, any of which could impair our reputation, damage our brands and materially and
adversely affect our revenues. While we do maintain redundant systems and hosting services for some of our business, it is
possible that we could experience an interruption in our business, and we do not carry business interruption insurance sufficient
to compensate us for losses that may occur.
A substantial amount of our computer hardware for operating our services is currently located at hosting facilities
around the world. These systems and operations are vulnerable to damage or interruption from human error, floods, fires,
power loss, telecommunication failures and similar events. They are also subject to break-ins, sabotage, intentional acts of
vandalism and similar misconduct. Despite any precautions we may take, the occurrence of any disruption of service due to
any such misconduct, natural disaster or other unanticipated problems at such facilities, or the failure by such facility to provide
our required data communications capacity could result in lengthy interruptions or delays in our services. Any system failure
that causes an interruption or delay in service could impair our reputation, damage our brand name and have a material adverse
effect on our business, results of operations and financial condition.
We rely on certain third party computer systems and third party service providers, including global distribution
systems and computerized central reservation systems of the airline, hotel and rental car industries to satisfy demand for airline
tickets and priceline.com hotel room and rental car reservations. Any interruption in these third party services systems or
deterioration in their performance could prevent us from booking airline, hotel and rental car reservations and have a material
adverse effect on our business. Our agreements with some third party service providers are terminable upon short notice and
often do not provide recourse for service interruptions. In the event our arrangement with any of such third parties is
terminated, we may not be able to find an alternative source of systems support on a timely basis or on commercially
reasonable terms and, as a result, it could have a material adverse effect on our business, results of operations and financial
condition.
We depend upon various third parties to process credit card transactions around the world. In addition, we rely on a
third party to provide credit card numbers which we use as a payment mechanism for merchant hotel transactions. If any such
third party were wholly or partially compromised, our cash flows could be disrupted or we may not be able to generate
merchant hotel transactions until such a time as a replacement processes could be put in place with a different vendor.