Enom 2012 Annual Report Download - page 14

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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, 2011 and 2012, we derived
approximately 33% and 38%, 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. We have entered into agreements with Google related to (i) advertising for our developed websites,
such as eHow, and our undeveloped websites, (ii) our use of Google's DoubleClick ad-serving platform to deliver
advertisements to our developed websites, and (iii) a revenue-sharing arrangement with respect to revenue generated by our
content posted on Google's YouTube. Each such agreement expires in the third quarter of 2014. 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 factors determined by Google. We have no control over any
of these 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 advertising rates that we
receive and/or 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
content that meets their specific interests and enables them to share and interact with the content and supporting communities.
We may not be able to create the variety and types of content in a cost-effective manner or content that meets rapidly changing
consumer demand in a timely manner, if at all. Any such failure to do so could adversely affect user and customer experiences
and reduce traffic driven to our owned and operated websites and to our customer websites through which we distribute our
content, which would adversely affect our business, revenue, financial condition and results of operations.