Enom 2011 Annual Report Download - page 17

Software and Lithium, in the integrated social media space where we offer our social media applications.
•Specialized and Enthusiast Websites. We compete with companies that provide specialized consumer information websites, particularly in the do-
it-yourself, health, home and garden, beauty and fashion, golf, outdoors and humor categories, as well as enthusiast websites in specific categories,
including message boards, blogs and other enthusiast websites maintained by individuals and other Internet companies.
•Distributed Content Creation Platforms. We compete with companies that employ a content creation model with aspects similar to our platform,
such as the use of freelance creative professionals.
We may be subject to increased competition with any of these types of businesses in the future to the extent that they seek to devote increased
resources to more directly address the online market for the professional creation of commercially valuable content at scale. For example, if Google chose to
compete more directly with us, we may face the prospect of the loss of business or other adverse financial consequences given that Google possesses a
significantly greater consumer base, financial resources, distribution channels and patent portfolio. In addition, should Google decide to directly compete with
us in areas such as content creation, it may decide for competitive reasons to terminate or not renew our commercial agreements and, in such an event, we
may experience a rapid decline in our revenue from the loss of our source for cost-per-click advertising on our owned and operated websites and on our
network of customer websites. In addition, Google’s access to more comprehensive data regarding user search queries through its search algorithms would
give it a significant competitive advantage over everyone in the industry, including us. If this data is used competitively by Google, sold to online publishers
or given away for free, our business may face increased competition from companies, including Google, with substantially greater resources, brand
recognition and established market presence.
In addition to Google, many of our current and other potential competitors enjoy substantial competitive advantages, such as greater name
recognition, longer operating histories, substantially greater financial, technical and other resources and, in some cases, the ability to combine their online
marketing products with traditional offline media such as newspapers or magazines. These companies may use these advantages to offer products and services
similar to ours at a lower price, develop different products to compete with our current offerings and respond more quickly and effectively than we can to new
or changing opportunities, technologies, standards or customer requirements. For example, both AOL and Yahoo! may have access to proprietary search data
which could be utilized to assist them in their content creation processes. In addition, many of our current and potential competitors have established
marketing relationships with and access to larger customer bases. As the markets for online and social media expand, we expect new competitors, business
models and solutions to emerge, some of which may be superior to ours. Even if our platform is more effective than the products and services offered by our
competitors, potential customers might adopt competitive products and services in lieu of using our services. For all of these reasons, we may not be able to
compete successfully against our current and potential competitors.
Our Content & Media service offering primarily generates its revenue from advertising, and the reduction in spending by or loss of advertisers could
seriously harm our business.
We generated 48% and 52% of our revenue for the years ended December 31, 2010 and 2011, respectively, from advertising. One component of
our platform that we use to generate advertiser interest in our content is our system of monetization tools, which is designed to match content with
advertisements in a manner that maximizes revenue yield and end-user experience. Advertisers will not continue to do business with us if their investment in
advertising with us does not generate sales leads, and ultimately customers, or if we do not deliver their advertisements in an appropriate and effective
manner. The failure of our yield-optimized monetization technology to effectively match advertisements with our content in a manner that results in increased
revenue for our advertisers would have an adverse impact on our ability to maintain or increase our revenue from advertising.
We rely on third-party ad-providers, such as Google, to provide advertisements on our owned and operated websites and on our network of
customer websites. Even if our content is effectively matched with such ad content, we cannot assure our current advertisers will fulfill their obligations under
their existing contracts, continue to provide advertisements beyond the terms of their existing contracts or enter into any additional contracts. If any of our
advertisers, but in particular Google, decided not to continue advertising on our owned and operated websites and on our network of customer websites, we
could experience a rapid decline in our revenue over a relatively short period of time.
In addition, our customers who receive a portion of the revenue generated from advertisements matched with our content displayed on their
websites, may not continue to do business with us if our content does not generate increased revenue for them. If we are unable to remain competitive and
provide value to advertisers they may stop placing advertisements with us or with our network of customer websites, which would negatively harm our
business, revenue, financial condition and results
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