Incredimail 2009 Annual Report Download - page 34

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Since we began operations in 2000, we have recorded over 125 million registered downloads of our free products in more than 100
countries, and in 2009, we recorded an average of approximately 1.8 million registered downloads each month. As of December 31, 2009, we
had approximately 11 million active users, and currently, our email users send over 300 million IncrediMail®
emails each month. We define an
“active” user as any user who has performed any activity using any IncrediMail®
product or service, including opening or sending emails using
IncrediMail®,
sending a message utilizing our HiYo tool, downloading content or updating the product, in the 30 days prior to the measurement
date. Our users use our products for as long as six years, based on current statistics (this estimate has been adjusted upwards over the past three
years). Through December 31, 2009, we have sold approximately 2 million products and content licenses worldwide to our registered users. We
believe our historical track record of our users accepting and utilizing the search properties we offer, as well as converting registered users to
purchasing customers, represents a convincing validation of our business strategy.
Prices and license fees for our products vary based on market, length of license period and whether the products are offered together.
Our prices and fees range from less than $10 to about $60. These prices are subject to market conditions and can vary in currencies, other than
the US dollar. We are not aware of inflation or a fluctuation in foreign currency exchange rates having a material effect on our revenues.
Revenues
We generate our revenues primarily from two major sources: (i) advertising, primarily through search generated revenues and other
services, and (ii) software products and solutions, licensing our IncrediMail® Premium, email software, other add-
on subscriptions and licenses
and our anti-
spam solution. In addition, we generate revenues from advertising in our email client, our content database and on our website, as
well as a collaboration arrangement with a websites operator who uses our Incredi
brand name and to whom we refer users, IncrediGames.com,
an online computer games site. The following table shows our revenues by category (in thousands of US Dollars):
Cost of Revenues
Our cost of revenues consists primarily of salaries and related expenses, license fees and payments for content and server maintenance,
all related to our product revenues. Our revenues relating to advertising, primarily search, do not have direct cost associated with them.
Research and Development Expenses
Our research and development expenses consist primarily of salaries and other personnel-
related expenses for employees primarily
engaged in research and development activities. We expect our research and development expenditures, which had increased as percentage of
sales during the second half of 2009, to remain at a level of a similar percentage of sales, increasing only to enable us to pursue our current
strategy of increasing downloads, reducing churn and continuing to enhance our existing suite of products.
Selling and Marketing Expenses
Our selling and marketing expenses consist of customer acquisition expenses, salaries and other personnel-
related expenses for
employees primarily engaged in marketing activities, credit card commissions and fees to our payment gateway providers that provide secure
Internet payment processes. Credit card commissions vary between 1.9% and 3.0% based on the credit card, currency of payment and location of
clearing agency. Having completed the initial market penetration of HiYo, our instant messaging add-
on, in 2008, we reduced the level of
expenditure at the onset of 2009, and believe it will not return in 2010 to the level of 2008, although it may fluctuate in light of the then current
market conditions and our marketing efforts.
Year Ended December 31,
2007
2008
2009
Advertising, primarily through search, and other services
$
9,597
$
12,748
$
20,478
Products
9,078
9,158
6,717
Total revenues
$
18,675
$
21,906
$
27,195
29