Incredimail 2011 Annual Report Download - page 12

If we are deemed to be not in compliance with applicable data protection laws, our operating results could be materially affected.
We collect and maintain certain information about our customers in our database. Such collection and maintenance of customer information is subject to data
protection laws and regulations in Israel and may be subject to laws and regulations in, the United States, the European Union and other countries as well. A failure to
comply with applicable regulations could result in class actions, governmental investigations and orders, and criminal and civil liabilities, which could materially
affect our operating results.
Although we strive to comply with the applicable laws and regulations and use our best efforts to comply with the evolving global standards regarding
privacy, and inform our customers of our business practices prior to any installations of our product and use of our services, it is possible that these laws may be
interpreted and applied in a manner that is inconsistent with our data collection and preservation practices, or that it may be argued that our practices do not comply
with other countries' privacy and data protection laws and regulations. In addition to the possibility of fines, such a situation could result in the issuance of an order
requiring that we change our data collection or retention practices, which in turn could have a material effect on our business. See "Item 4.B Business Overview —
Government Regulation" for additional discussion of applicable regulations.
If users or third parties express privacy or security concerns regarding our collection, use and handling of personal information, we could incur substantial
expenses.
Although we strive to comply with strict privacy data security requirements and take all reasonable steps to ensure the security of personal information,
concerns may be expressed, from time to time, about whether our products compromise the privacy or confidentiality of the information of users and others. Concerns
about our collection, use, sharing or handling of personal information or other privacy related matters, even if unfounded, could damage our reputation and operating
results. See "Item 4.B Business Overview — Government Regulation" for additional discussion of applicable regulations.
We depend on a third party Internet and telecommunication provider to operate our websites. Temporary failure of these services would reduce our
revenues and damage our reputation, and securing alternate sources for these services could significantly increase our expenses.
We depend on Bezeq International Ltd., a third party provider of Internet and related telecommunication services, including hosting and location facilities, to
operate our websites. This company may not continue to provide services to us without disruptions in services at the current cost or at all. Such a disruption in
services, even temporary, would reduce our revenues from product sales, and possibly even from search, depending on the extent of disruption. While we believe that
there are many alternative providers of hosting and other communication services available to us, and the company has a plan for adjusting and adapting in such an
event, the costs associated with any transition to a new service provider could be substantial and require us to reengineer our computer systems and
telecommunications infrastructure to accommodate a new service provider. This process could be both expensive and time consuming and could result in lost business
both during the transition period and after.
Our servers and communications systems could be damaged or interrupted by fire, flood, power loss, telecommunications failure, earthquakes, acts of war or
terrorism, acts of God, computer viruses, physical or electronic break-ins and similar events or disruptions. Although we maintain back-
up systems for our servers, any
of these events could cause system interruption, delays, loss of critical data and lost registered users and revenues.
We currently rely solely on the Internet as a means to sell our products. Accordingly, if we, or our customers, are unable to utilize the Internet due to a failure
of technology or infrastructure, terrorist activity or other reasons, we could lose current or potential customers and revenues. While we have backup systems for most
aspects of our operations, our systems are not fully redundant and our disaster recovery planning may not be sufficient for all eventualities. In addition, we may have
inadequate insurance coverage or insurance limits to compensate us for losses from a major interruption. Furthermore, interruptions in our website could materially
impede our ability to attract new companies to advertise on our website and to maintain relationships with current advertisers. Difficulties of this kind could damage
our reputation, be expensive to remedy and curtail our growth.
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