Enom 2011 Annual Report Download - page 28

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"how to" articles for eHow. However, as we increase the number of longer-form or "feature" articles or premium videos or choose to create other forms of
content formats, and in turn reduce our investment in the shorter-form types of content, our operating margins may suffer as these other forms of content may
be more expensive to create and the corresponding return on investment, if any, could be reduced. In addition, we intend to enter into additional revenue
sharing arrangements with our customers which could cause our operating margins to experience downward pressure if a greater percentage of our revenue
comes from advertisements placed on our network of customer websites compared to advertisements placed on our owned and operated websites.
Additionally, the percentage of advertising fees that we pay to our customers may increase, which would reduce the margin we earn on revenue generated
from those customers.
Our historic revenue growth rate may not be sustainable.
Our revenue increased rapidly in each of the fiscal years ended December 31, 2008 through December 31, 2011. We may not be able to sustain our
revenue growth rate in future periods and you should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future
performance. If our future growth fails to meet investor or analyst expectations, it could have a materially negative effect on our stock price. If our growth rate
were to decline significantly or become negative, it would adversely affect our business, financial condition and results of operations.
If we do not effectively manage our growth, our operating performance will suffer and we may lose consumers, advertisers, customers and freelance
creative professionals.
We have experienced rapid growth in our operations since our founding in 2006, and we may experience continued growth in our business, both
through internal growth and potential acquisitions. For example, our employee headcount grew from approximately 475 to over 600 in the three years ended
December 31, 2011. This overall growth has placed, and will continue to place, significant demands on our management and our operational and financial
infrastructure. In particular, continued growth may make it more difficult for us to accomplish the following:
• successfully scale our technology and infrastructure to support a larger business;
• continue to grow our platform at scale and distribute through our new and existing properties while successfully monetizing our content;
• maintain our standing with key advertisers as well as Internet search companies and our network of customer websites;
• maintain our customer service standards;
• develop and improve our operational, financial and management controls and maintain adequate reporting systems and procedures;
• acquire and integrate websites and other businesses;
• successfully expand our footprint in our existing areas of consumer interest and enter new areas of consumer interest; and
• respond effectively to competition and potential negative effects of competition on profit margins.
In addition, our personnel, systems, procedures and controls may be inadequate to support our current and future operations. The improvements
required to manage our growth will require us to make significant expenditures, expand, train and manage our employee base and allocate valuable
management resources. If we fail to effectively manage our growth, our operating performance will suffer and we may lose our advertisers, customers and key
personnel.
If we do not continue to innovate and provide products and services that are useful to our customers, we may not remain competitive, and our revenue
and operating results could suffer.
Our success depends on our ability to innovate and provide products and services useful to our customers in both our Content & Media and
Registrar service offerings. Our competitors are constantly developing innovations in content creation and distribution as well as in domain name registration
and related services, such as web hosting, email and website creation solutions. As a result, we must continue to invest significant resources in product
development in order to maintain and enhance our existing products and services and introduce new products and services that deliver a sufficient return on
investment and
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