Enom 2013 Annual Report Download - page 23

to expand the number of services we provide to our customers, any decline in renewals of domain name registrations not offset by new domain
name registrations would likely have an adverse effect on our business, financial condition and results of operations.
Our registrar business is dependent on third-party resellers, including a small number of resellers that account for a significant portion of
our domain names under management. Our failure to maintain or strengthen our relationships with resellers, particularly those servicing a
large percentage of our domain names under management, would have a material adverse effect on our business.
As a registrar with a wholesale component, we provide domain name registration services and offer value-added services through a
network of more than 20,000 active resellers, comprised of small businesses, large e-commerce websites, Internet service providers and web-
hosting companies, as well as through companies using our hosted back-end registrar platform. These customers, in turn, contract directly with
domain name registrants to deliver these services. Maintaining and deepening relationships with our r esellers is an important part of our growth
strategy, as strong third-party distribution arrangements enhance our ability to market our products and to increase our domain names under
management, revenue and profitability.
As of December 31, 2013, our three largest resellers accounted for 32% of our total domain names under management, and our largest
reseller, Namecheap, Inc., represented 22% of total domain names under management. The term of our current reseller agreement with
Namecheap expires in December 2014, but will automatically renew for an additional one
-year period unless terminated by either party. There
can be no assurance that the reseller distribution relationships we have established will continue, as our resellers may cease to operate or
otherwise terminate their relationship with us. Any reduction in access to third-party reseller distributors, particularly those servicing a large
percentage of our domain names under management, would have a material adverse effect on our ability to market our products and to generate
revenue.
Governmental and regulatory policies or claims concerning the domain name registration system, and industry reactions to those policies or
claims, may cause instability in the industry and negatively impact our business.
ICANN is a private sector, not-for-profit corporation formed in 1998 by the U.S. Department of Commerce for the express purposes of
overseeing a number of Internet related tasks previously performed directly on behalf of the U.S. government, including managing the domain
name registration system. ICANN has been subject to strict scrutiny by the public and by the U.S. government and other governments around the
world, with many of those governments becoming increasingly interested in Internet governanc e. For example, the U.S. Congress has held
hearings to evaluate ICANN’s selection process for new TLDs. In addition, ICANN faces significant questions regarding efficacy as a private
sector entity. ICANN may continue to evolve both its long term structure and mission to address perceived shortcomings such as a lack of
accountability to the public and a failure to maintain a diverse representation of interests on its board of directors.
We continue to face the risks that:
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the U.S. or any other government may reassess its decision to introduce competition into, or ICANN’s role in overseeing, the domain
name registration market;
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the Internet community, the U.S. government or other governments may (i) refuse to recognize ICANN’s authority or support its
policies, (ii) attempt to exert pressure on ICANN, or (iii) enact laws in conflict with ICANN’s policies, each of which could create
instability in the domain name registration system;
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some of ICANN’s policies and practices, and the policies and practices adopted by registries and registrars, could be found to conflict
with the laws of one or more jurisdictions;
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the terms of the Registrar Accreditation Agreement (the “RAA”), under which we are accredited as a registrar, could change in ways
that are disadvantageous to us or under certain circumstances could be terminated by ICANN preventing us from operating our
registrar service, or ICANN could adopt unilateral changes to the RAA that are unfavorable to us, that are inconsistent with our
current or future plans, or that affect our competitive position;
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international regulatory or governing bodies, such as the International Telecommunications Union or the European Union, may gain
increased influence over the management and regulation of the domain name registration system, leading to increased regulation in
areas such as taxation and privacy;
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ICANN or any third-
party registries may implement policy changes that would impact our ability to run our current business practices
throughout the various stages of the lifecycle of a domain name;
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foreign constituents may succeed in their efforts to have domain name registration removed from a U.S.-
based entity and placed in the
hands of an international cooperative;