TeleNav 2012 Annual Report Download - page 22

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Table of Contents
handsets. Sprint is entitled to expand the number of bundles in which our navigation services are offered. For bundled navigation services, Sprint will
pay us a fixed fee through September 30, 2013 regardless of the number of subscribers (up to specified thresholds). Sprint is not obligated to continue
to bundle our navigation services after September 30, 2013 and we do not expect Sprint to continue to do so in any substantive way. Even if Sprint
does continue to bundle we may not receive meaningful compensation for such distribution of our services or Sprint may cease to bundle our service
with its Simply Everything plan. For example, in April 2013, we entered into an amendment to our agreement with Sprint to continue to bundle our
services for the three months ending September 30, 2013 for consideration of $3.6 million, which was substantially lower than the fee for similar
periods paid in fiscal 2012 and 2013. We do not anticipate that we will receive meaningful revenue from Sprint after September 30, 2013 and that we
will incur net losses as a result.
We do not anticipate that Sprint will elect to continue to bundle our navigation services after September 30, 2013 and pay us a material fee for
such bundling, therefore we believe our financial condition and results of operations will be materially and adversely affected during fiscal 2014 and
possibly beyond. Although we have negotiated revenue sharing for advertising we provide to Sprint customers and premium subscription fees, in the
event Sprint no longer provides us with material compensation for the inclusion of our navigation services in Sprint's bundled service offerings, we
believe that our revenue would decline substantially and our other sources of revenue from Sprint would not offset the shortfall in the near term. Our
relationship with Sprint may also be negatively affected by uncertainty at Sprint regarding its future as an independent company in light of multiple
offers to acquire all or a portion of its shares.
We provide freemium navigation to compete with free offerings and we may not be successful with these new products or convert “free” users to
paid users.
We provide freemium personalized navigation apps on the Apple App Store, the Google Play marketplace and through other marketplaces and
our wireless carrier partners. Freemium offerings are free basic navigation services that are monetized through paid upgrades to premium products, as
well as through advertising. We may not achieve substantial end user acceptance of these products, and even if end users download and use the
freemium products, we may not be successful in converting those “free” users into paid users, particularly since we have begun to offer voice-guided
navigation in our freemium offerings. Our freemium offerings offer planning features and other features unrelated to pure navigation that we do not
have substantial experience in designing or marketing. These features may deter users who are looking for a pure navigation offering. We have
limited experience in marketing our products and services directly to end users or generating advertising revenue. To the extent that our number of
active subscribers is low, we may not be able to fulfill sufficient advertising orders to generate meaningful advertising revenue from a freemium
model. Bad reviews from end users who dislike our freemium offerings may dissuade other end users from downloading our freemium offerings or
converting to paid users. We may not be successful in gaining visibility among end users without incurring significant expenses to market our
products and services to those users. In addition, we do not have experience in converting users of free applications to paid users or in generating
revenue from full featured products solely through advertising revenue. If we are unable to achieve high visibility among end users on a cost effective
basis or fail to convince those end users to convert to paid products and revenue producing services, we may be unable to sustain our revenue and
profitability and we may incur losses in the future.
We may not successfully generate advertising revenue as a result of our recent acquisition of ThinkNear or from our navigation services if we are
unable to attract and retain advertisers.
Although we began providing advertising to some of our end users in 2010, to date, we have not generated material revenue from advertising.
In October 2012, we acquired ThinkNear, a privately-held California-based hyper-
local mobile advertising company. In order to grow our advertising
business, we need to identify and attract a sufficient number of advertisers for the available ad placements in our navigation services or through
display ads offered by ThinkNear. The mobile advertising market is highly competitive, and advertisers have many options through which to
purchase mobile advertising. Our business will require us to attract and retain a large number of advertisers and will also require us to maintain the
ability to purchase a large volume of inventory at competitively attractive rates. Increased competition from other mobile advertising companies and
technology developers could impair our ability to secure advertiser revenue. Increased competition could also limit our ability to purchase inventory
for advertising placements at an economically attractive rate. To date, we have had to demonstrate to prospective advertisers the benefits of placing
advertisements in driving routes or with POI searches as there is not a widely accepted belief that end user impressions or unique “drive to” cost per
action advertising in a navigation setting are more likely to result in a purchase. We do not have substantial experience in selling advertising and
supporting advertisers and may not be able to develop these capabilities successfully. We may not be successful recruiting the number of sales
personnel we need to scale or effectively train them to sell mobile advertising. Sales personnel may also be slow to ramp up their sales pipelines,
negatively impacting our ability to grow. We may not succeed in attracting and retaining a critical mass of advertisers and ad placements and may not
be successful in demonstrating the value of advertising in our navigation services. If we fail to do so, we may be unable to generate a material level
of revenue from advertising to offset the costs of providing free navigation.
Mobile connected device users may choose not to allow advertising on their devices.
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