Shutterfly 2014 Annual Report Download - page 26

Our business could be negatively affected by changes in search engine algorithms and dynamics, or search engine
disintermediation.
We rely on Internet search engines such as Google, Yahoo! and Bing, including through the purchase
of keywords related to photo-based products, to generate traffic to our websites. We obtain a significant
amount of traffic via search engines and, therefore, utilize techniques such as search engine optimization
and search engine marketing to improve our placement in relevant search queries. Search engines,
including Google, Yahoo! and Bing, frequently update and change the logic that determines the placement
and display of results of a user’s search, such that the purchased or algorithmic placement of links to our
websites can be negatively affected. Moreover, a search engine could, for competitive or other purposes,
alter its search algorithms or results causing our websites to place lower in search query results. If a major
search engine changes its algorithms in a manner that negatively affects our paid or unpaid search ranking,
or if competitive dynamics impact the effectiveness of search engine optimization or search engine
marketing in a negative manner, our business and financial performance would be adversely affected,
potentially to a material extent.
We may not succeed in promoting, strengthening and continuing to establish the Shutterfly, Tiny Prints, Wedding
Paper Divas, BorrowLenses and ThisLife 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, BorrowLenses and ThisLife 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 attract new customers, increase the engagement of existing customers with our brands or
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. 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
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