Incredimail 2010 Annual Report Download - page 11

We are increasingly relying on the ability to offer our search properties to users of our software products and subsequently retain them.
Should this offering be blocked, constrained or made redundant, by the providers of the underlying platform, our ability to generate
revenues from search could be significantly reduced.
Over 77% of our revenues for the year ended December 31, 2010 were generated from the acceptance and subsequent retention of our
search properties by the users of our software products. The market for offering and retaining these search properties is very competitive. In
addition, some companies offer a browser without a homepage, which is one of our main search properties. The guidelines imposed pursuant to
our agreement with Google, with respect to homepage resets and default search resets to Google services when providing downloadable
applications have changed as compared to the previous agreement, with potentially negative revenue implications. However, the potentially
negative revenue implications caused by these changes are expected to be substantially offset by other changes made in this agreement. Should
Google, or the other companies providing the internet browsers, effectively further restrict, discourage, or otherwise hamper other companies
from offering or changing the search properties, or those providing browsers without a homepage increase their market share, there would be a
material adverse affect on our search generating revenue model and our financial results.
The generation of revenues from searches has become subject to fierce competition. We obtain a significant portion of our revenues
from searches made through our homepage and other search properties. If we cannot compete effectively in this market, our revenues
are likely to decline.
We obtain a significant and growing portion of our revenues from searches made through the Company's home page ( MyStart
), as well
as offering other search properties. We therefore are constantly looking for ways to convince our users to make MyStart
their homepage and
accept the other search properties offered. There are a growing number of companies that generate an increasing amount of their revenues from
searches, some of them with a more significant presence than ours and with greater capability to offer substantially more content. In addition,
with competition growing, even the larger and in the past more conservative companies, (such as Google, Microsoft and others), have become
increasingly aggressive in their search service offering. Therefore, our ability to attract new users to install IncrediMail’
s home page, and
retaining existing users, could suffer, preventing or delaying us in increasing our revenues, or even cause them to decrease.
If we are unable to continually enhance our existing products and develop new products that achieve widespread market acceptance,
our ability to attract and retain customers could be impaired, our competitive position may be harmed and we may be unable to
generate additional revenues.
We believe that the number of downloads of our free products
indicates that many consumers are interested in having a customized
and entertaining email or instant messaging experience. Our future revenue and profit growth will depend, in part, on the percentage of
registered or active users of our free product who become actual purchasers of our products and services, and increasing the number of
downloads and acceptance of the search properties offered with them, as well as making our products and services attractive to new users. In
order to induce those consumers to use our products, accept the search properties offered, and purchase or license our products, we must
continually enhance our existing products by offering additional features and content that appeal to our unique user base. Maintaining the
usability and relevance of existing products and the development and commercialization of new products can be very complex. Software product
development and commercialization depends upon a number of factors, including:
•
accurate prediction of market requirements, market preferences and trends and evolving standards;
• development of advanced technologies and capabilities;
•
timely completion and introduction of new product designs and features that incorporate market requirements and preferences;
•
our ability to recruit and retain highly qualified personnel;
• our ability to market our new products; and
•
market acceptance of the enhanced and new products.
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