Enom 2013 Annual Report Download - page 27

Changes in the level of spending on online advertising and/or the way that online networks compensate owners of websites could impact the
demand for domain names.
Many domain name registrants seek to generate revenue through advertising on their websites. Changes in the way these registrants are
compensated (including changes in methodologies and metrics) by advertisers and advertisement placement networks, such as Google, Yahoo!
and Bing, have, and may continue to, adversely affect the market for those domain names favored by such registrants which has resulted in, and
may continue to result in, a decrease in demand and/or the renewal rate for those domain names. Fo r example, Google has in the past (and may
in the future) changed its search algorithm and pay-per-
click advertising policies to provide less compensation for certain types of websites. This
has made such websites less profitable, which has resulted in, and may continue to result in, fewer domain name registrations and renewals. In
addition, as a result of the general economic environment, spending on online advertising and marketing may not increase as projected or may be
reduced, which in turn, may result in a further decline in the demand for those domain names.
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 had a net loss in every year from inception until the year ended
December 31, 2012 , when we generated net income, and we had a net loss of $20.2 million in the year ended December 31, 2013. As of
December 31, 2013 we had an accumulated deficit of approximately $84.8 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. 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 operating losses in the future for a number of
reasons, including those discussed in other risk factors and factors that we cannot foresee, and we may be unable to generate net income or
sufficient positive cash flows.
Our historic revenue growth rate may not be sustainable.
Our revenue, and particularly our Content & Media revenue, increased rapidly between 2008 and 2012. Our revenue growth for the year
ended December 31, 2013 was substantially lower, with our Content & Media revenue flat year over year , and we may not be able to return to
historic growth rates in future periods. 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 continues to decline significantly, our business, financial condition and results of operations would be adversely
affected.
A substantial portion of our assets is reflected as goodwill and intangible assets on our balance sheet, which may be subject to impairment,
especially if our market capitalization remains below the book value of our stockholders’ equity for an extended period and/or our actual or
expected results of operations fall sufficiently below our forecasts. If our intangible assets, including goodwill, become impaired we may be
required to record a significant non-cash charge to earnings which would have a material adverse effect on our results of operations.
We carry a substantial amount of goodwill and intangible assets on our balance sheet from our acquisitions over the past several years and
the creation of long-lived media content. Goodwill is not amortized, but is reviewed for impairment at least annually or more frequently if
impairment indicators are present and long-lived assets, including our media content, are generally only reviewed for impairment if impairment
indicators are present. We assess potential impairments to our goodwill and intangible assets when there is evidence that events or changes in
circumstances indicate that the carrying value of such goodwill or intangible assets may not be recoverable. For example, a significant and
sustained decline in our stock price and market capitalization relative to our book value or our inability to generate sufficient revenue or cash
flows in future periods from our long-lived media content or the businesses that we have acquired may result in us having to take a non-cash
impairment charge against certain of our intangible assets, including goodwill. As of March 7, 2014, our market capitalization was less than the
net book value of our assets. If this condition continues for an extended period, we will consider this and other factors, including our anticipated
cash flows, to determine whether we need to record an impairment charge. Any such impairment charge could have a material adverse effect on
our results of operations and financial condition, particularly in the period such charge is taken.
Our operating results may fluctuate on a quarterly and annual basis due to a number of factors, which may make it difficult to predict our
future performance.
Our revenue and operating results could fluctuate 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. Therefore, comparing our operating
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