Travelzoo 2007 Annual Report Download - page 43

anticipate changes in the online advertising market or if our business model is not successful, our business could be
materially adversely affected.
We may not be able to obtain sufficient funds to grow our business and any additional financing may be
on terms adverse to your interests.
We intend to continue to grow our business, and intend to fund our current operations and anticipated growth
from the cash flow generated from our operations and our retained earnings. However, these sources may not be
sufficient to meet our needs. We may not be able to obtain financing on commercially reasonable terms, or at all.
If additional financing is not available when required or is not available on acceptable terms, we may be unable
to fund our expansion, successfully promote our brand name, develop or enhance our products and services, take
advantage of business opportunities, or respond to competitive pressures, any of which could have a material
adverse effect on our business.
If we choose to raise additional funds through the issuance of equity securities, you may experience significant
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 financing by issuing debt securities, the terms of these
securities could restrict or prevent us from paying dividends and could limit our flexibility 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. Specifically, 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. In case of another recession,
our business and financial condition could be materially adversely affected.
Our operations could be significantly hindered by the occurrence of a natural disaster or other
catastrophic event.
Our operations are susceptible to outages due to fire, floods, power loss, telecommunications failures, break-
ins and similar events. In addition, a significant 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 significant 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, which could result 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. Any such event could reduce our revenue and harm our
operating results and financial condition. We do not carry business interruption insurance to compensate us for
losses that may occur as a result of any of these events.
Risks Related to Our Markets and Strategy
Our international expansion is expected to result in substantial operating losses, and is subject to other
material risks.
In May 2005, we began operations in the U.K. In 2006 we began operations in Canada, Germany and Spain. In
2007, we began operations in Australia, China, France, Hong Kong, Japan, and Taiwan. Our plan is to expand into
additional countries in Asia Pacific and Europe in the future. We expect our operations in Asia Pacific and Europe
will incur significant losses in the next two to three years primarily as a result of significant expenses related to
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