Travelzoo 2007 Annual Report Download - page 42

awareness among Internet users and travel companies. If our revenues grow at a slower rate than we anticipate, or if
our spending levels exceed our expectations or cannot be adjusted to reflect slower revenue growth, we may not
generate sufficient revenues to sustain profitability. Any of these developments could result in a significant decrease
in the trading price of our common stock.
Fluctuations in our operating results may negatively impact our stock price.
Our quarterly operating results may fluctuate significantly in the future due to a variety of factors that could
affect our revenues or our expenses in any particular quarter. You should not rely on quarter-to-quarter comparisons
of our results of operations as an indication of future performance. Factors that may affect our quarterly results
include:
• mismatches between resource allocation and client demand due to difficulties in predicting client demand in
a new market;
• changes in general economic conditions that could affect marketing efforts generally and online marketing
efforts in particular;
• the magnitude and timing of marketing initiatives, including our acquisition of new subscribers and our
expansion efforts in other regions;
• the introduction, development, timing, competitive pricing and market acceptance of our products and
services and those of our competitors;
• our ability to attract and retain key personnel;
• our ability to manage our anticipated growth and expansion;
• our ability to attract traffic to our Web sites;
• technical difficulties or system downtime affecting the Internet generally or the operation of our products
and services specifically;
• payments which we may make to previous stockholders of Travelzoo.com Corporation who failed to submit
requests for shares in Travelzoo Inc. within the required time period; and
• volatility of our operating results in new markets.
We may significantly increase our operating expenses related to advertising campaigns for Travelzoo for a
certain period if we see a unique opportunity for a brand marketing campaign, if we find it necessary to respond to
increased brand marketing by a competitor, or if we decide to accelerate our acquisition of new subscribers.
If revenues fall below our expectations in any quarter and we are unable to quickly reduce our operating
expenses in response, our operating results would be lower than expected and our stock price may fall.
We depend on two clients for a substantial part of our revenues.
In the fiscal year ended December 31, 2007, two clients accounted for 15% and 11% of our revenues. The
agreements with these clients are in the form of multiple insertion orders from groups of entities under common
control, in either the Company’s standard form or in the client’s form. The loss of either client may result in a
significant decrease in our revenues, which could have a material adverse effect on our business.
Our business model may not be adaptable to a changing market.
Our current revenue model depends on advertising fees paid by travel companies. If current clients decide not
to continue advertising their offers with us and we are unable to replace them with new clients, our business may be
adversely affected. To be successful, we must provide online marketing solutions that achieve broad market
acceptance by travel companies. In addition, we must attract sufficient Internet users with attractive demographic
characteristics to our products. It is possible that we will be required to further adapt our business model in response
to changes in the online advertising market or if our current business model is not successful. If we are not able to
10