Enom 2012 Annual Report Download - page 31

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We have made and may make additional acquisitions that could entail significant execution, integration and operational
risks.
We have made numerous acquisitions in the past, including one in 2012 and four in 2011, and our future growth may
depend, in part, on acquisitions of complementary websites, businesses, solutions or technologies rather than internal
development. We may continue to make acquisitions in the future to increase the scope of our business domestically and
internationally. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may
not be able to successfully complete identified acquisitions. If we are unable to identify suitable future acquisition
opportunities, reach agreement with such parties or obtain the financing necessary to make such acquisitions, we could lose
market share to competitors who are able to make such acquisitions. This loss of market share could negatively impact our
business, revenue and future growth.
Furthermore, even if we successfully complete an acquisition, we may not be able to successfully assimilate and integrate
the websites, business, technologies, solutions, personnel or operations of the company that we acquired, particularly if key
personnel of an acquired company decide not to work for us. In addition, we may incur indebtedness to complete an
acquisition, which would increase our costs and impose operational limitations, or issue equity securities, which would dilute
our stockholders' ownership and could adversely affect the price of our common stock. We may also unknowingly inherit
liabilities from previous or future acquisitions that arise after the acquisition and are not adequately covered by indemnities.
We may have difficulty scaling and adapting our existing technology and network infrastructure to accommodate increased
traffic and technology advances or changing business requirements, which could lead to the loss of consumers, advertisers,
customers and freelance creative professionals, and cause us to incur expenses to make architectural changes.
To be successful, our network infrastructure has to perform well and be reliable. The greater the user traffic and the greater
the complexity of our products and services, the more computing power we will need. In the future, we may spend substantial
amounts to purchase or lease data centers and equipment, upgrade our technology and network infrastructure to handle
increased traffic on our owned and operated websites and roll out new products and services. This expansion could be
expensive and complex and could result in inefficiencies or operational failures. If we do not implement this expansion
successfully, or if we experience inefficiencies and operational failures during its implementation, the quality of our products
and services and our users' experience could decline. This could damage our reputation and lead us to lose current and potential
consumers, advertisers, customers and freelance creative professionals. The costs associated with these adjustments to our
architecture could harm our operating results. Cost increases, loss of traffic or failure to accommodate new technologies or
changing business requirements could harm our business, revenue and financial condition.
If the security measures for our systems are breached, or if our products or services are subject to attacks that degrade or
deny the ability of administrators, developers, users and customers to maintain or access them, our systems, products and
services may be perceived as not being secure. If any such events occur, users, customers, advertisers and publishers may
curtail or stop using our products and services, and we may incur significant legal and financial exposure, all of which
could have a negative impact on our business, financial condition and results of operations.
Some of our systems, products and services involve the storage and transmission of information regarding our users,
customers, and our advertising and publishing partners, and security breaches could expose us to a risk of loss of this
information, litigation, and potential liability. Our security measures may be breached due to the actions of outside parties,
employee error, malfeasance, or otherwise, and, as a result, an unauthorized party may obtain access to this information.
Additionally, outside parties may attempt to fraudulently induce employees, users, or customers to disclose sensitive
information in order to gain access to our systems and the stored data therein. Any such breach or unauthorized access could
result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security of our
systems, products and services that could potentially have an adverse effect on our business, financial condition and results of
operations. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change
frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to
implement adequate preventative measures. If an actual or perceived breach of our security occurs, the market perception of the
effectiveness of our security measures could be harmed and we could lose users, customers, advertisers or publishers.
If we do not adequately protect our intellectual property rights, our competitive position and business may suffer.
Our intellectual property, consisting of trade secrets, trademarks, copyrights and patents, is, in the aggregate, important to
our business. We rely on a combination of trade secret, trademark, copyright and patent laws in the United States and other
jurisdictions together with confidentiality agreements and technical measures to protect our proprietary rights. We rely more