Digital River 2002 Annual Report Download - page 10

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We also provide the technology and services needed to support international sales. Our technology platform supports multiple transaction
currencies, payment options and localized content required to successfully sell products in international markets.
In addition, through our large client network, we believe we are uniquely positioned to help our clients grow their online businesses by
providing them with access to new distribution channels and products to sell. Clients can approve their products to be sold on other client sites
and sell products owned and approved for sale by our other clients. In addition, our software and digital products clients also have the
opportunity to increase distribution of their products by offering part or all of their entire online product catalog to our network of online
retailers. This is beneficial to both our software publisher and online retailer clients because we eliminate the burden of developing and
maintaining hundreds of relationships. The online retailers also enjoy access to a much broader inventory of software products, and avoid the
costs and risk of carrying physical inventory.
Deployment Speed
Companies can increase their speed to market by leveraging our outsourced business model, technology platform and remote control tools to
establish their electronic commerce business typically in a matter of days or weeks.
Benefits To End-Users. Our solution emphasizes convenience by allowing end-users, both business and consumer, to purchase products online
from their home or office. By supporting global reach, we can deliver an extremely broad selection of digital and physical products to end-users
in remote locations that cannot support retail stores. In the case of software and digital products, users have the option to quickly and
conveniently download and install products through electronic delivery. Using our sophisticated search engine technology, end-users visiting
retailers’ online Web stores can access virtually our entire inventory of software and digital products. End-users also benefit from the protection
of our download assurance service, through which we guarantee replacement of software in the event of accidental destruction through computer
error or malfunction, and from our 24x7 customer service provided on behalf of our clients.
Strategy
Our objective is to be the global leader in electronic commerce outsourcing for software and digital products publishers and online retailers
through our Software and Digital Commerce Services Division, as well as for manufacturers, distributors and retailers through our E-Business
Services Division. We intend to achieve our objective through the following key strategies:
Software And Digital Commerce Services Division: Develop And Expand Relationships With Software Publishers And Online Retailers. We
plan to continue to build our inventory of software products through additional contractual relationships with software publishers. As of March
1, 2003, we had contracts with approximately 14,000 software publishers and online retailers, representing more than 290,000 software and
digital products. We believe that our ability to provide Web hosting services with our software publisher clients increases our reach to end-users
and provides the basis for long-term relationships with our software publisher clients. We further believe that the large number of software
products that we offer from our software publisher clients will be critical to our ability to deliver a compelling inventory of products to online
retailer clients.
Additionally, we believe that by increasing the number of points of entry to the CNS, we will increase the number of transactions over our
network. Accordingly, in addition to expanding and developing relationships with software publishers, we seek to expand aggressively our
network of online retailer clients. Online retailer clients include traditional store-based and mail-order retailers with a Web presence, online
retailers dedicated to online commerce, as well as high traffic or niche Web site operators desiring to add electronic commerce functionality.
Our model enables us to leverage our clients’ marketing resources to direct traffic to our software network.
E-Business Services Division: Develop And Expand Relationships With Manufacturers, Distributors And Retailers. In late 1998, we began
exploring electronic commerce outsourcing opportunities outside of the software and digital products industry. During 1999, sales and
marketing personnel were hired to develop contractual relationships to sell our electronic commerce outsourcing services to manufacturers,
distributors and retailers. As of March 1, 2003, we were providing electronic commerce services such as Web commerce development and
hosting, transaction processing, fraud screening, digital delivery, integration to physical fulfillment, merchandising services, analytical
marketing and customer service to over 100 enterprise E-Business Services Division client sites. Additionally, in September 2001, December
2001, and March 2002, we purchased certain assets of Orbit Commerce, Inc., Network Commerce, Inc., and CCNow, Inc., respectively,
allowing us to offer web hosting and electronic commerce services to approximately 20,000 small business sites. We believe that our ability to
provide a proven, cost efficient electronic commerce solution, which can typically be implemented in a one to eight week time frame, provides
the basis for a long-term relationship with our E-Business clients. We further believe that additional electronic commerce outsourcing
opportunities may develop as relationships with existing clients expand.
Drive Growth Through Aggressive Merchandising And Marketing. We believe that we have developed technology, expertise and best practices
in the areas of marketing and merchandising that can help our clients grow their online businesses by utilizing numerous, proven tools and
programs and our expanding data warehouse of end-user purchasing information to increase traffic, close ratios, average order sizes and repeat
purchases. For example, in the fourth quarter of 2002, 46 percent of total online revenue for our clients