Enom 2011 Annual Report Download - page 26

As the number of available domain names with commercial value diminishes over time, our domain name registration revenue and our overall business
could be adversely impacted.
As the number of domain registrations increases and the number of available domain names with commercial value diminishes over time, and if it
is perceived that the more desirable domain names are generally unavailable, fewer Internet users might register domain names with us. If this occurs, it could
have an adverse effect on our domain name registration revenue and our overall business.
Risks Relating to our Company
We have a history of operating losses and may not be able to operate profitably or sustain positive cash flow in future periods.
We were founded in 2006 and have a limited operating history. We have had a net loss in every year since inception. As of December 31, 2011 , we
had an accumulated deficit of approximately $70.8 million and we may incur net operating losses in the future. Moreover, our cash flows from operating
activities in the future may not be sufficient to fund our desired level of investments in the production of content and the purchase of property and equipment,
domain names and other intangible assets. Our business strategy contemplates making continued investments and expenditures in our content creation and
distribution platform as well as the development and launch of new products and services. In addition, as a public company, we have incurred and will
continue to incur significant legal, accounting and other expenses that we did not incur as a private company. Our ability to generate net income in the future
will depend in large part on our ability to generate and sustain substantially increased revenue levels, while continuing to control our expenses. We may incur
significant losses in the future for a number of reasons, including those discussed in other risk factors and factors that we cannot foresee. Our inability to
generate net income and sufficient positive cash flows would materially and adversely affect our business, revenue, financial condition and results of
operations.
We expect a number of factors to cause our operating results to fluctuate on a quarterly and annual basis, which may make it difficult to predict our
future performance.
Our revenue and operating results could vary significantly from quarter-to-quarter and year-to-year and may fail to match our past performance
because of a variety of factors, many of which are outside of our control. In particular, our operating expenses are fixed and variable and, to the extent
variable, less flexible to manage period-to-period, especially in the short-term. For example, our ability to manage our expenses in the near term period-to-
period is affected by our sales and marketing expenses to refer traffic to or promote our owned and operated websites, generally a variable expense which can
be managed based on operating performance in the near term. This expense has historically represented a relatively small percentage of our operating
expenses. In addition, comparing our operating results on a period-to-period basis may not be meaningful. In addition to other risk factors discussed in this
section, factors that may contribute to the variability of our quarterly and annual results include:
• lower than anticipated levels of traffic to our owned and operated websites and to our customers’ websites;
• our ability to generate revenue from traffic to our owned and operated websites and to our network of customer websites;
• failure of our content to generate sufficient or expected revenue during its estimated useful life to recover its unamortized creation costs, which may
result in increased amortization expenses associated with, among other things, a decrease in the estimated useful life of our content, an impairment
charge associated with our existing content, or expensing future content acquisition costs as incurred;
• creation of content in the future that may have a shorter estimated useful life as compared to our current portfolio of content, or which we license
exclusively to third parties for periods that are less than the estimated useful life of our existing content, which may result in, among other things,
increased content amortization expenses or the expensing of future content acquisition costs as incurred;
• our ability to continue to create and develop content and content formats that attract users to our owned and operated websites and to our network
of customer websites that distribute our content;
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