Enom 2010 Annual Report Download - page 56

Table of Contents
Opportunities, Challenges and Risks
To date, we have derived substantially all of our revenue through the sale of advertising in connection with our Content & Media service offering and
through domain name registration subscriptions in our Registrar service offering. Our advertising revenue is primarily generated by performance-based
Internet advertising, such as cost-per-click where an advertiser pays only when a user clicks on its advertisement that is displayed on our owned and operated
websites and our network of customer websites. For the year ended December 31, 2010, the majority of our advertising revenue was generated by our
relationship with Google on a cost-per-click basis. We deliver online advertisements provided by Google on our owned and operated websites as well as on
certain of our customer websites where we share a portion of the advertising revenue. For the years ended December 31, 2009 and 2010, approximately 18%
and 29%, respectively, of our total consolidated revenue was derived from our advertising arrangements with Google. Google maintains the direct
relationships with the advertisers and provides us with cost-per-click advertising services.
Our historical growth in Content & Media revenue has principally come from growth in RPM and page views due to increased volume of commercially
valuable content published. To a lesser extent, Content & Media revenue growth has resulted from customers utilizing our social media tools and from
publishing our content on our network of customer websites, including YouTube. We believe that, in addition to opportunities to grow our revenue and our
page views by creating and publishing more content, there is a substantial long term revenue opportunity with respect to selling online advertisements through
our internal sales force, particularly on our owned and operated websites. During fiscal year 2010, we began to more aggressively hire and expand our internal
advertising sales force, including hiring a chief revenue officer, to exploit this opportunity.
As we continue to create more content, we may face challenges in finding effective distribution outlets. To address this challenge, we recently began to
deploy our content and related advertising capabilities to certain of our customers, such as the online versions of the San Francisco Chronicle and the Houston
Chronicle. Previously these customers had used our platform on their websites for social media applications only. Under the terms of our customer
arrangements, we are entitled to a share of the underlying revenues generated by the advertisements displayed with our content on these websites. We believe
that expanding this business model across our network of customer websites presents a potentially large long-term revenue opportunity. As is the case with
our owned and operated websites, under these arrangements we incur substantially all of our content costs up front. However, because under the revenue
sharing arrangements we are sharing the resulting revenue, there is a risk that these relationships over the long term will not generate sufficient revenue to
meet our financial objectives, including recovering our content creation costs. In addition, the growing presence of other companies that produce online
content, including AOL's Seed.com and Associated Content, which was recently acquired by Yahoo!, may create increased competition for available
distribution opportunities, which would limit our ability to reach a wider audience of consumers.
Our content studio identifies and creates online text articles and videos through a community of freelance content creators and is core to our business
strategy and long term growth initiatives. As of December 31, 2010, our studio had approximately 13,000 freelance content creators, and during the year
ended December 31, 2010, it generated approximately 2 million text articles and videos. Historically, we have made substantial investments in our platform to
support our expanding community of freelance content creators and the growth of our content production and distribution, and expect to continue to make
such investments. As discussed above, we have also seen increasing competition from large Internet companies such as AOL and Yahoo!. Although these
competitive offerings are not directly comparable to all aspects of our content offering, increased competition for freelance content creators could increase our
freelance creator costs and adversely impact our ability to attract and retain content creators.
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