Travelzoo 2007 Annual Report Download - page 44

subscriber acquisition and other marketing activities. These losses may not have any recognizable tax benefit. We
expect this will have a material negative impact on our operation margins and net income. It is likely that we will not
sustain profitability in 2008. Any of these developments could result in a significant decrease in the trading price of
our common stock. In addition to uncertainty about our ability to generate net income from our foreign operations
and expand our international market position, there are certain risks inherent in doing business internationally,
including:
• trade barriers and changes in trade regulations;
• difficulties in developing, staffing and simultaneously managing foreign operations as a result of distance,
language and cultural differences;
• stringent local labor laws and regulations;
• currency exchange rate fluctuations;
• risks related to government regulation; and
• potentially adverse tax consequences.
We may not be able to continue developing 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 differentiating 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 efforts. If we fail to successfully promote
and maintain our brand, incur significant expenses in promoting our brand and fail to generate a corresponding
increase in revenue as a result of our branding efforts, or encounter legal obstacles which prevent our continued use
of our brand name, our business could be materially adversely affected.
Our business may be sensitive to events affecting the travel industry in general.
Events like the war with Iraq or the terrorist attacks on the U.S. in 2001 have a negative impact on the travel
industry. We are not in a position to evaluate the net effect of these circumstances on our business. In the longer
term, our business might be negatively affected by financial pressures on the travel industry. However, our business
may also benefit if travel companies increase their efforts to promote special offers or other marketing programs. If
such events result in a long-term negative impact on the travel industry, such impact could have a material adverse
effect on our business.
We will not be able to attract travel companies or Internet users if we do not continually enhance and
develop the content and features of our products and services.
To remain competitive, we must continually improve the responsiveness, functionality and features of our
products and services. We may not succeed in developing features, functions, products or services that travel
companies and Internet users find attractive. This could reduce the number of travel companies and Internet users
using our products and materially adversely affect our business.
We may lose business if we fail to keep pace with rapidly changing technologies and clients needs.
Our success is dependent on our ability to develop new and enhanced software, services and related products to
meet rapidly evolving technological requirements for online advertising. Our current technology may not meet the
future technical requirements of travel companies. Trends that could have a critical impact on our success include:
• rapidly changing technology in online advertising;
• evolving industry standards, including both formal and de facto standards relating to online advertising;
• developments and changes relating to the Internet;
• competing products and services that offer increased functionality; and
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