Enom 2011 Annual Report Download - page 21

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 creative professionals 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, whether brought in
the United States or abroad, could divert management time and attention away from our business and result in significant costs to investigate and defend,
regardless of the merit of these claims. If we become subject to these or similar types of claims and are not successful in our defense, we may be forced to pay
substantial damages. While we run our content through a rigorous quality control process, including an automated plagiarism program, there is no guarantee
that we will avoid future liability and potential expenses for legal claims based on the content of the materials that we create or distribute. Should the content
distributed through our owned and operated websites and our network of customer websites violate the intellectual property rights of others or otherwise give
rise to claims against us, we could be subject to substantial liability, which could have a negative impact on our business, revenue and financial condition.
We may face liability in connection with our undeveloped owned and operated websites and our customers’ undeveloped websites whose domain names
may be identical or similar to another party’s trademark or the name of a living or deceased person.
A number of our owned and operated websites and our network of customer websites are undeveloped or minimally developed properties that
primarily contain advertising listings and links. As part of our registration process, we perform searches, analysis and screenings to determine if the domain
names of our owned and operated websites in combination with the advertisements displayed on those sites violate the trademark or other rights owned by
third parties. Despite these efforts, we may inadvertently register the domain names of properties that are identical or similar to another party’s trademark or
the name of a living or deceased person. Moreover, our efforts are inherently limited due to the fact that the advertisements displayed on our undeveloped
websites are delivered by third parties and the advertisements may vary over time or based on the location of the viewer. We may face primary or secondary
liability in the United States under the Anticybersquatting Consumer Protection Act or under general theories of trademark infringement or dilution, unfair
competition or under rights of publicity with respect to the domain names used for our owned and operated websites. If we fail to comply with these laws and
regulations, we could be exposed to claims for damages, financial penalties and reputational harm, which could increase our costs of operations, reduce our
profits or cause us to forgo opportunities that would otherwise support our growth.
We may not succeed in establishing our businesses internationally, which may limit our future growth.
One potential area of growth for us is in the international markets. We have launched a site in the United Kingdom, recently launched a beta version
of eHow en Español (a Spanish language site that targets both the U.S. Hispanic market, as well as the larger Spanish-speaking market worldwide) and are
exploring launches in certain other countries. We have also been investing in translation capabilities for our technologies. We recently acquired a Spanish
language content creation business platform located in Argentina. Operating internationally, where we have limited experience, exposes us to additional risks
and operating costs. We cannot be certain that we will be successful in introducing or marketing our services internationally or that our services will gain
market acceptance or that growth in commercial use of the Internet internationally will continue. There are risks inherent in conducting business in
international markets, including the need to localize our products and services to foreign customers’ preferences and customs, difficulties in managing
operations due to language barriers, distance, staffing and cultural differences, application of foreign laws and regulations to us, tariffs and other trade
barriers, fluctuations in currency
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