Rosetta Stone 2009 Annual Report Download - page 23

Table of Contents
Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing expenditures.
Our future growth and profitability will depend in large part upon the effectiveness and efficiency of our marketing expenditures, including our ability to:
create greater awareness of our brands and our language learning solutions;
select the right market, media and specific media vehicle in which to advertise;
identify the most effective and efficient level of spending in each market, media and specific media vehicle;
determine the appropriate creative message and media mix for advertising, marketing and promotional expenditures;
effectively manage marketing costs, including creative and media expenses, in order to maintain acceptable customer acquisition costs;
drive traffic to our websites, call centers, kiosks and distribution channels; and
convert customer inquiries into actual orders.
Our planned marketing expenditures may not result in increased revenue or generate sufficient levels of product and brand name awareness, and we may
not be able to increase our net sales at the same rate as we increase our advertising expenditures.
Much of our radio, television and print advertising has been through the purchase of "remnant" advertising segments. These segments are random time
slots and publication dates that have remained unsold and are offered at discounts to advertisers who are willing to be flexible with respect to time slots. There
is a limited supply of this type of advertising and the availability of such advertising may decline or the cost of such advertising may increase. In addition, if
we increase our marketing budget we cannot assure you that we can increase the amount of remnant advertising at the discounted prices we have obtained in
the past. If any of these events occur, we may be forced to purchase time slots and publication dates at higher prices, which will increase our costs.
Our business depends on our Rosetta Stone brand, and if we are not able to maintain and enhance our brand, our business and operating results may be
harmed.
We believe that market awareness of our Rosetta Stone brand in the United States has contributed significantly to the success of our business. We also
believe that maintaining and enhancing the Rosetta Stone brand is critical to maintaining our competitive advantage. As we continue to grow in size, expand
our products and services and extend our geographic reach, maintaining the quality and consistency of our language learning solutions, and thus the quality of
our brand, may be more difficult. In addition, software piracy and trademark infringement may harm our Rosetta Stone brand by undermining our reputation
for quality software programs.
We depend on search engines and other online sources to attract visitors to our websites, and if we are unable to attract these visitors and convert them
into customers in a cost-effective manner, our business and financial results may be harmed.
Our success depends on our ability to attract online consumers to our websites and convert them into customers in a cost-effective manner. We depend,
in part, on search engines and other online sources for our website traffic. We are included in search results as a result of both paid search listings, where we
purchase specific search terms that will result in the inclusion of our listing, and algorithmic searches that depend upon the searchable content on our sites.
Search engines and other online sources revise their algorithms from time to time in an attempt to optimize their search results.
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