Travelzoo 2004 Annual Report Download - page 30

services, take advantage of business opportunities, or respond to competitive pressures, any of which could
have a material adverse eÅect on our business.
If we choose to raise additional funds through the issuance of equity securities, you may experience
signiÑcant dilution of your ownership interest, and holders of the additional equity securities may have rights
senior to those of the holders of our common stock. If we obtain additional Ñnancing by issuing debt securities,
the terms of these securities could restrict or prevent us from paying dividends and could limit our Öexibility in
making business decisions.
Our business may be sensitive to recessions.
The demand for online advertising may be linked to the level of economic activity and employment in the
U.S. and abroad. SpeciÑcally, our business is dependent on the demand for online advertising from travel
companies. The last recession decreased consumer travel and caused travel companies to reduce or postpone
their marketing spending generally, and their online marketing spending in particular. If the current economic
recovery does not continue, our business and Ñnancial condition could be materially adversely aÅected.
Our operations could be signiÑcantly hindered by the occurrence of a natural disaster or other
catastrophic event.
Our operations are susceptible to outages due to Ñre, Öoods, power loss, telecommunications failures,
break-ins and similar events. In addition, a signiÑcant portion of our network infrastructure is located in
Northern California, an area susceptible to earthquakes. We do not have multiple site capacity in the event of
any such occurrence. Outages could cause signiÑcant interruptions of our service. In addition, despite our
implementation of network security measures, our servers are vulnerable to computer viruses, physical and
electronic break-ins, and similar disruptions from unauthorized tampering with our computer systems. We do
not carry business interruption insurance to compensate us for losses that may occur as a result of any of these
events.
Technological or other assaults on our service could harm our business.
We are vulnerable to coordinated attempts to overload our systems with data, resulting in denial or
reduction of service to some or all of our users for a period of time. We have experienced denial of service
attacks in the past, and may experience such attempts in the future. We do not carry business interruption
insurance to compensate us for losses that may occur as a result of any of these events. Any such event could
reduce our revenue and harm our operating results and Ñnancial condition.
Risks Related to Our Markets and Strategy
We may not be able to develop awareness of our brand name.
We believe that continuing to build awareness of the Travelzoo brand name is critical to achieving
widespread acceptance of our business. Brand recognition is a key diÅerentiating factor among providers of
online advertising opportunities, and we believe it could become more important as competition in our industry
increases. In order to maintain and build brand awareness, we must succeed in our marketing eÅorts. If we fail
to successfully promote and maintain our brand, incur signiÑcant expenses in promoting our brand and fail to
generate a corresponding increase in revenue as a result of our branding eÅorts, or encounter legal obstacles
which prevent our continued use of our brand name, our business could be materially adversely aÅected.
Our business may be sensitive to events aÅecting the travel industry in general.
Events like the war with Iraq or the terrorist attacks on the United States in 2001 have a negative impact
on the travel industry. We are not in a position to evaluate the net eÅect of these circumstances on our
business. In the longer term, our business might be negatively aÅected by Ñnancial pressures on the travel
industry. However, our business may also beneÑt if travel companies increase their eÅorts to promote special
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