TeleNav 2015 Annual Report Download - page 21

Table of Contents
The success of our automotive navigation products may be affected by the number of vehicle models offered with our navigation solutions, as
well as overall demand for new vehicles.
Our ability to succeed long term in the automotive industry depends on our ability to expand the number of models offered with our
navigation solution by our current automobile manufacturers. We are also dependent upon our ability to attract new automobile manufacturers
and OEMs. For automobile manufacturers with whom we have established relationships, such as Ford, our success depends on continued
production and sale of new vehicles with, and adoption by, end users of our products offered by such automobile manufacturers, when our
product are not standard features. As we move forward, our existing automobile manufacturers and OEMs may not include our solutions in
future year vehicles or territories, which would negatively affect our revenue from these products. Production and sale of new vehicles are
subject to delay from forces outside of our control, such as natural disasters, parts shortages and work stoppages, as well as general economic
conditions.
Strategic transactions in the mapping and automotive industries could jeopardize our map pricing and, in turn, our competitive pricing for
our automotive customers.
Audi, BMW and Mercedes recently announced their acquisition of Nokia’s HERE map business. Though the auto manufacturers have
stated that HERE's map business will remain autonomous and continue to serve other auto manufacturers, there is a risk that HERE will increase
its prices for maps to competitors of the group of companies that acquired HERE. If HERE increases the price of maps, our gross margins, most
notably in our automotive business, may be adversely affected by such increase in map costs.
We may not successfully generate advertising revenue as a result of our 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 and the percentage of our revenue represented by advertising
has grown rapidly, advertising was 11% and 8% of our total revenue during fiscal 2015 and 2014, respectively. In October 2012, we acquired
Thinknear, a privately held California-based hyper-
local mobile advertising company. To date, the margins of our advertising business have been
well below those we experience in our automotive navigation and mobile navigation businesses. Furthermore, we believe the advertising
business can be subject to varying buying patterns and seasonality which can impact our ability to grow our revenue. For example, in fiscal
2015, we experienced sequential quarters of increasing and decreasing revenue levels. In order to grow our advertising business, we need to
identify and attract a significant number of advertisers through our Thinknear platform. 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. 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 mobile advertising. 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. Even if we
are able to increase our advertising revenue, we may not be able to improve the margins of our advertising business if we do not generate
additional ad impression space within our own applications, such as Scout. If we are unable to improve the margins of our advertising business,
it may not become profitable and may impair our ability to become profitable as a whole and invest in new opportunities.
Our legacy wireless carrier mobile navigation business is declining and as it continues to decline until it becomes an insignificant portion of
our business, our revenue and net income or loss will continue to be adversely affected.
We have historically been substantially dependent on two wireless carrier customers for a large portion of our revenue. Sprint ceased
paying us for mobile navigation provided to its subscribers in bundles on September 30, 2013. Our other large wireless carrier customers have
also experienced declines in monthly recurring revenue from subscriptions for mobile navigation. In fiscal 2015 and 2014 , AT&T represented
15% and 24% of our total revenue, respectively. In the last three fiscal years, AT&T subscribers have materially decreased their subscriptions
for, and usage of, our paid navigation services and our revenue from our relationship with AT&T has declined accordingly. We anticipate that
AT&T subscribers, and subscribers of other carriers who pay monthly recurring charges for our services, will continue to decrease their
subscriptions for paid navigation services in favor of free or freemium offerings and that our revenue from our relationship with AT&T will
continue to decline. AT&T may determine that the cost of offering our service to its subscribers outweighs the benefits if the drop off of
subscribers continues. Our failure to maintain our relationship with AT&T would substantially harm our business and we cannot assure you that
we and AT&T will be able to reduce subscriber erosion. We anticipate that even if AT&T remains a wireless carrier customer, our revenue from
AT&T will continue to decline substantially during fiscal 2016 and possibly beyond.
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