Shutterfly 2012 Annual Report Download - page 24

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We may not succeed in promoting, strengthening and continuing to establish the Shutterfly, Tiny Prints, Wedding
Paper Divas and Treat brands, which would prevent us from acquiring new customers and increasing revenues.
A component of our business strategy is the continued promotion and strengthening of the Shutterfly,
Tiny Prints, Wedding Paper Divas and Treat brands. Due to the competitive nature of the digital
photography products and services markets, if we are unable to successfully promote our brands, we may
fail to substantially increase our net revenues. Customer awareness and the perceived value of our brands
will depend largely on the success of our marketing efforts and our ability to provide a consistent,
high-quality customer experience. To promote our brands, we have incurred, and will continue to incur,
substantial expense related to advertising and other marketing efforts.
Our ability to provide a high-quality customer experience also depends, in large part, on external
factors over which we may have little or no control, including the reliability and performance of our
suppliers and third-party Internet and communication infrastructure providers. For example, some of our
products, such as select photo-based merchandise, are produced and shipped to customers by our third-
party vendors, and we rely on these vendors to properly inspect and ship these products. In addition, we
rely on third-party shippers, including the U.S. Postal Service, United Parcel Service and FedEx, to deliver
our products to customers. Strikes, furloughs, reduced operations or other service interruptions affecting
these shippers could impair our ability to deliver merchandise on a timely basis. Our products are also
subject to damage during delivery and handling by our third-party shippers. Our failure to provide
customers with high-quality products in a timely manner for any reason could substantially harm our
reputation and our efforts to develop trusted brands. The failure of our brand promotion activities could
adversely affect our ability to attract new customers and maintain customer relationships, which would
substantially harm our business and results of operations.
If we are unable to develop, market and sell new products and services that address additional market opportunities,
our results of operations may suffer. In addition, we may need to expand beyond our current customer demographic
to grow our business.
Although historically we have focused our business on consumer markets for silver halide prints, such
as 4x6 prints, and photo-based products, such as photo books, stationery cards and calendars, we
continually evaluate the demand for new products and services and the need to address these trends. In
addition, we believe we may need to address additional markets and expand our customer demographic in
order to further grow our business. We may not successfully expand our existing services or create new
products and services, address new market segments or develop a significantly broader customer base. Any
failure to address additional market opportunities could result in loss of market share, which would harm
our business, financial condition and results of operations.
If we do not successfully develop and maintain a relevant multichannel experience for our customers, our results of
operations may suffer.
Our customers are increasingly using computers, tablets, mobile phones, and other devices to produce
photos and photo-based products online. As part of our multichannel strategy, we are making technology
investments in our websites and recently launched a mobile application for mobile phones and other
electronic devices. If we are unable to make, improve, or develop relevant customer-facing technology in a
timely manner, our ability to compete could be adversely affected and may result in the loss of market
share, which could harm our results of operations. In addition, if our technology systems do not function as
designed, we may experience a loss of confidence, data security breaches or lost sales, which could
adversely affect our reputation and results of operations.
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