Shutterfly 2014 Annual Report Download - page 34

or perceived failure, by us to comply with our posted privacy policies or with any data-related consent
orders, Federal Trade Commission requirements or other federal, state or international privacy-related
laws and regulations could result in proceedings or actions against us by governmental entities or others,
which could potentially harm our business. Further, failure or perceived failure to comply with our policies
or applicable requirements related to the collection, use or security of personal information or other
privacy-related matters could damage our reputation and result in a loss of customers.
International expansion will require management attention and resources and may be unsuccessful, which could
harm our future business development and existing domestic operations.
To date, we have conducted limited international operations, but we intend to expand into
international markets in order to grow our business. These expansion plans will require significant
management attention and resources and may be unsuccessful. We have limited experience adapting our
products to conform to local cultures, standards and policies. We may have to compete with established
local or regional companies which understand the local market better than we do. In addition, to achieve
satisfactory performance for consumers in international locations it may be necessary to locate physical
facilities, such as production facilities, in the foreign market. We do not have experience establishing,
acquiring or operating such facilities overseas. We may not be successful in expanding into any
international markets or in generating revenues from foreign operations. In addition, different privacy,
censorship and liability standards and regulations and different intellectual property laws in foreign
countries may cause our business to be harmed.
The success of our business depends on our ability to adapt to the continued evolution of digital photography.
The digital photography market is rapidly evolving, characterized by changing technologies, intense
price competition, additional competitors, evolving industry standards, frequent new service
announcements and changing consumer demands and behaviors. To the extent that consumer adoption of
digital photography does not continue to grow as expected, our revenue growth would likely suffer.
Moreover, we face significant risks that, if the market for digital photography evolves in ways that we are
not able to address due to changing technologies or consumer behaviors, pricing pressures, or otherwise,
our current products and services may become less attractive, which would result in the loss of customers,
as well as lower net revenues and/or increased expenses.
Purchasers of digital photography products and services may not choose to shop or rent online, which would harm
our net revenues and results of operations.
The online market for digital photography products and services, including photographic and video
equipment rentals, is less developed than the online market for other consumer products. If this market
does not gain widespread acceptance, our business may suffer. Our success will depend in part on our
ability to attract customers who historically have used traditional retail photography services or who have
produced photographs and other products using self-service alternatives, such as printing at home.
Furthermore, we may have to incur significantly higher and more sustained advertising and promotional
expenditures or reduce the prices of our products and services in order to attract additional online
consumers to our websites and convert them into purchasing customers. Specific factors that could prevent
prospective customers from purchasing from us include:
• the inability to physically handle and examine product samples;
• delivery time associated with Internet orders;
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