Enom 2011 Annual Report Download - page 14

Item 1A. Risk Factors
In addition to the other information set forth in this Annual Report on Form 10-K, you should consider carefully the risks and uncertainties
described below, which could materially adversely affect our business, financial condition and results of operations.
Risks Relating to our Content & Media Service Offering
We are dependent upon certain material agreements with Google for a significant portion of our revenue. A termination of these agreements, or a failure
to renew them on favorable terms, would adversely affect our business.
We have an extensive relationship with Google and a significant portion of our revenue is derived from cost-per-click performance-based
advertising provided by Google. For the year ended December 31, 2010 and 2011, we derived approximately 29% and 33%, respectively, of our total revenue
from our various advertising and content arrangements with Google. We use Google for cost-per-click advertising and cost-per-impression advertising on our
owned and operated websites and on our network of customer websites, and receive a portion of the revenue generated by advertisements provided by Google
on those websites. Our Google advertising agreement for our developed websites, such as eHow, expires in the third quarter of 2014. Our Google advertising
agreement for our undeveloped websites expires in the second quarter of 2012. In addition, we also utilize Google’s DoubleClick ad-serving platform to
deliver advertisements to our developed websites, which arrangement expires in the third quarter of 2014, and have another revenue-sharing agreement with
respect to revenue generated by our content posted on Google’s YouTube, which expires in the fourth quarter of 2012. In the fourth quarter of 2011, we
entered into a premium multi-channel initiative with Google in connection with the production of premium videos for YouTube, and we expect this initiative
will generate significant revenue throughout 2012. Google, however, has termination rights in these agreements with us, including the right to terminate
before the expiration of the terms upon the occurrence of certain events, including if our content violates the rights of third parties and other breaches of
contractual provisions, a number of which are broadly defined. There can be no assurance that our agreements with Google will be extended or renewed after
their respective expirations or that we will be able to extend or renew our agreements with Google on terms and conditions favorable to us. If our agreements
with Google, in particular the cost-per-click agreement for our developed websites, are terminated we may not be able to enter into agreements with
alternative third-party advertisement providers or ad-serving platforms on acceptable terms or on a timely basis or both. Any termination of our relationships
with Google, and any extension or renewal after the initial term of such agreements on terms and conditions less favorable to us would have a material
adverse effect on our business, financial condition and results of operations.
Our advertising agreements with Google may not continue to generate levels of revenue commensurate with what we have achieved during past
periods. Our ability to generate online advertising revenue from Google depends on its assessment of the quality and performance characteristics of Internet
traffic resulting from online advertisements on our owned and operated websites and on our network of customer websites as well as other components of our
relationship with Google’s advertising technology platforms. We have no control over any of these quality assessments or over Google’s advertising
technology platforms. Google may from time to time change its existing, or establish new, methodologies and metrics for valuing the quality of Internet traffic
and delivering cost-per-click advertisements. Any changes in these methodologies, metrics and advertising technology platforms could decrease the amount of
revenue that we generate from online advertisements. Since most of our agreements with Google contain exclusivity provisions, we are prevented from using
other providers of services similar to those provided by Google. In addition, Google may at any time change or suspend the nature of the service that it
provides to online advertisers and the catalog of advertisers from which online advertisements are sourced. These types of changes or suspensions would
adversely impact our ability to generate revenue from cost-per-click advertising. Any change in the type of services that Google provides to us could have a
material adverse effect on our business, financial condition and results of operations.
If we are unable to continue to drive and retain visitors to our owned and operated websites and to our customer websites by offering high-quality,
engaging and commercially valuable content at scale in a cost-effective manner, our business, financial condition and results of operations could be
adversely affected.
The primary method that we use to attract traffic to our owned and operated websites and to our customer websites and convert these visitors into
repeat users and customers is the content created by our freelance creative professionals. How successful we are in these efforts depends, in part, upon our
continued ability to create and distribute high-quality, commercially valuable content at scale in a cost-effective manner that connects consumers with the
formats and types of
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