Rosetta Stone 2011 Annual Report Download - page 25

Table of Contents
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 must continue to update our marketing communications in order to maintain and enhance our brand awareness and the
value of our brand. Failure to do so may result in a decrease in brand value and related sales.
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.
If one or more of the search engines or other online sources on which we rely for website traffic were to modify its general methodology for how it
displays our websites, resulting in fewer consumers clicking through to our websites, our sales could suffer. If any free search engine on which we rely begins
charging fees for listing or placement, or if one or more of the search engines or other online sources on which we rely for purchased listings, modifies or
terminates its relationship with us, our expenses could rise, we could lose customers and traffic to our websites could decrease.
Our expansion into international markets may not succeed and imposes special risks.
Our business strategy contemplates continued expansion into international markets. We are currently expanding our direct sales channels in Europe, Asia
and Latin America. In addition, we are expanding our indirect sales channels in Europe, Asia and Latin America through retailer and distributor arrangements
with third parties. If we are unable to expand our international operations successfully and in a timely manner, our ability to pursue our growth strategy will
be impaired. Such expansion may be more difficult or take longer than we anticipate, and we may not be able to successfully market, sell, deliver and support
our products and services internationally to the extent we expect.
Our international operations and our efforts to increase sales in international markets are subject to a number of risks that are in addition to or different
than those affecting our U.S. operations, including:
difficulty in staffing and managing geographically dispersed operations and culturally diverse work forces and increased travel, infrastructure and
legal compliance costs associated with multiple international locations;
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