Incredimail 2011 Annual Report Download - page 46

E. OFF-BALANCE SHEET ARRANGEMENTS
We do not have off-
balance sheet arrangements (as such term is defined by applicable SEC regulations) that have or are reasonably likely to have a current or
future effect on our financial condition, changes in financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to investors.
5.
Safety and security are also growing trends for all platforms including Mac, PC, tablets and Smartphones (iPAd and iPhone as well). The more successful a
platform the higher degree of probability that professional criminals and hackers will invade your privacy and security. According to the Data Breach
Investigations Report published by Verizon in April 2011, individuals affiliated with organized crime perpetrated more than half of the data breaches
involving external agents. An underground economy has emerged to support this new industry which makes it a very attractive profit center for many hackers
and criminals. The total market is expected to grow to roughly $16 billion in 2015 according to an IDC report form November 2011. This presents us with a
significant opportunity through partnership and/or acquisition to enter this space with a customized solution for our users. Given the established need and
competition in this space we feel a partnership or acquisition, is the best entry point and expect to make a significant investment in this space in the future.
6.
Rapid adoption of mobile devices as well as a shift to online from traditional retail has opened up the industry to new opportunities and growth possibilities.
Users no longer have their information in one place and the persistent connectivity and cloud provide even more ways for criminals to access your data. There
would seem to be significant demand for these types of products well into the future.
7.
As roughly 72% of our revenues are search generated, we are affected by the general trends and metrics of the search revenue market. One of the most
significant metrics is the revenue per thousand impressions ("RPM") rate. In an economic downturn, the amount advertisers are willing to pay naturally
declines, reducing their cost per click (“CPC”)
rate and subsequently our revenues. The RPM rate has fluctuated dramatically over the past months and it is
difficult to predict a specific trend in this important metric going forward.
8.
The downloadable software market and the way it interacts with search providers have been changing. With its market leading position, Google has been the
forerunner of these changes, which have also impacted our agreement with Google. It is difficult to know how process will end, although we are convinced
that the process is ongoing and has not reached equilibrium. We will continue to work with Google as well with the other search companies to improve the
consumer experience and address the market needs. As more and more products become cloud based services this may also impact the way in which
companies like ours generate search revenue. The clear trend is to provide users with a solution that is at least partly cloud driven which enables portability for
consumers and easier maintenance for companies. More and more companies however are finding new ways to generate revenues including, advertising and
premium sales as well as search from the web based service. Another trend in the market as it relates to downloadable software with search monetization is the
intensity of the competition. This past year the amount of competitors and the intensity of the competition have made it more difficult to maximize life time
value of a consumer. We continue to focus on providing real value to the consumer from our products and services with a belief that in the long run companies
with a real relationship with consumers based on a product that gives them real value is sustainable. This will be especially true in the future as the next
generation of browsers may block the installation of toolbars in their current format. As mentioned earlier our solution is one of value. Our focus is on creating
products and services that serve the needs of our users and provide them with real value so that they continue to use our products and brand instead of the
competition.
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