Enom 2010 Annual Report Download - page 25

Table of Contents
use our content, products and services. Also, if our services continue to be less effective or economically attractive for customers seeking to engage in
advertising through these devices and this segment of Internet traffic grows at the expense of traditional computer Internet access, we will experience
difficulty attracting website visitors and attracting and retaining customers and our operating results and business will be harmed.
We are dependent upon the quality of traffic in our network to provide value to online advertisers, and any failure in our quality control could have a
material adverse effect on the value of our websites to our third-party advertisement distribution providers and online advertisers and adversely affect our
revenue.
We use technology and processes to monitor the quality of and to identify any anomalous metrics associated with, the Internet traffic that we deliver to
online advertisers and our network of customer websites. These metrics may be indicative of low quality clicks such as non-human processes, including
robots, spiders or other software; the mechanical automation of clicking; and other types of invalid clicks or click fraud. Even with such monitoring in place,
there is a risk that a certain amount of low-quality traffic, or traffic that is deemed to be invalid by online advertisers, will be delivered to such online
advertisers. As a result, we may be required to credit future amounts owed to us by our advertisers. Furthermore, low-quality or invalid traffic may be
detrimental to our relationships with third-party advertisement distribution providers and online advertisers, and could adversely affect our revenue.
The expansion of our owned and operated websites into new areas of consumer interest, products, services and technologies subjects us to additional
business, legal, financial and competitive risks.
An important element of our business strategy is to grow our network of owned and operated websites to cover new areas of consumer interest, expand
into new business lines and develop additional services, products and technologies. In directing our focus into new areas, we face numerous risks and
challenges, including increased capital requirements, long development cycles, new competitors and the requirement to develop new strategic relationships.
We cannot assure you that our strategy will result in increased net sales or net income. Furthermore, growth into new areas may require changes to our
existing business model and cost structure, modifications to our infrastructure and exposure to new regulatory and legal risks, any of which may require
expertise in areas in which we have little or no experience. If we cannot generate revenue as a result of our expansion into new areas that are greater than the
cost of such expansion, our operating results could be harmed.
As a creator and a distributor of Internet content, we face potential liability and expenses for legal claims based on the nature and content of the materials
that we create or distribute, or that are accessible via our owned and operated websites and our network of customer websites. If we are required to pay
damages or expenses in connection with these legal claims, our operating results and business may be harmed.
We rely on the work product of freelance content creators to create original content for our owned and operated websites and for our network of
customer websites and for use in our marketing messages. As a creator and distributor of original content and third-party provided content, we face potential
liability based on a variety of theories, including defamation, negligence, unlawful practice of a licensed profession, copyright or trademark infringement or
other legal theories based on the nature, creation or distribution of this information, and under various laws, including the Lanham Act and the Copyright Act.
We may also be exposed to similar liability in connection with content that we do not create but that is posted to our owned and operated websites and to our
network of customer websites by users and other third parties through forums, comments, personas and other social media features. In addition, it is also
possible that visitors to our owned and operated websites and to our network of customer websites could make claims against us for losses incurred in reliance
upon information provided on our owned and operated websites or our network of customer websites. These claims,
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