Shutterfly 2014 Annual Report Download - page 6

Download and view the complete annual report

Please find page 6 of the 2014 Shutterfly annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 130

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130

In addition to driving lower customer acquisition costs through viral marketing, our customers provide
input on new features, functionalities and products. Close, frequent customer interactions, coupled with
significant investments in sophisticated integrated marketing programs, enable us to fine-tune and tailor
our promotions and website presentation to specific customer segments. Consequently, customers are
presented with a highly personalized shopping experience, which helps foster a unique and deep
relationship with our brands.
Segment Information
Our reportable segments are Consumer and Enterprise.
Consumer
Our Consumer revenues include sales from all of our brands and are derived from the sale of photo-
based products, such as photo books, stationery and greeting cards, other photo-based merchandise, photo
prints, and the related shipping revenues as well as rental revenue from our BorrowLenses brand. Included
in our photo-based merchandise are items such as mugs, iPhone cases, mouse pads, desktop plaques and
puzzles. Photo prints consist of wallet, 4x6, 5x7, 8x10, and large format sizes. In addition, Consumer
revenues also include revenues from advertising and sponsorship activities. We also provide website
services which include our share platform called Share Sites and our recently launched enhanced cloud
service, called ThisLife. Consumer revenues as a percentage of total net revenues were 95% in 2014, 95%
in 2013 and 96% in 2012.
Enterprise
Our Enterprise revenues are derived from the printing and shipping of direct marketing and other
variable data print products and formats. We provide Enterprise services primarily to the direct marketing
industry, which allows us to use available manufacturing capacity during low volume periods and to
leverage our large installed base of digital presses. Enterprise revenues as a percentage of total net
revenues were 5% in 2014, 5% in 2013 and 4% in 2012.
For financial information about each segment, see Part II, Item 7 of this annual report on Form 10-K,
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Basis of
Presentation’’ and Part II, Item 8 of this annual report on Form 10-K, ‘‘Financial Statements and
Supplementary Data — Notes to Consolidated Financial Statements — Note 13 — Segment Reporting.’’
For a discussion of the operational risks associated with each business segment, see Part I, Item 1A of this
annual report on Form 10-K, ‘‘Risk Factors.’’
Business and Marketing Strategy
To support our business strategies within the Consumer segment, we use a variety of integrated
marketing programs, including advertising, direct marketing technologies, and strategic alliances, including
direct marketing over the Internet, e-mail marketing to prospects and existing customers, search engine
marketing, strategic marketing relationships, traditional direct marketing mailings such as postcards and
seasonal catalogs, and a national cable TV campaign during the holiday season. In addition, because many
of our products are either shared over the Internet or given as gifts, the appearance of our brands on the
products and packaging provides ongoing viral advertising. We place targeted advertisements on websites
5