Incredimail 2011 Annual Report Download - page 9

We rely heavily 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.
Approximately 72% of our revenues for the year ended December 31, 2011 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, while others may cause difficulties in resetting the 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, this had negative revenue implications, offset by some positive changes made in the 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 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 Perion’
s
home page, and retaining existing users, could suffer, preventing or delaying us in increasing our revenues, or even cause them to decrease.
Social related software and Facebook in particular, is becoming an increasingly dominant method of communication over the internet. If Facebook increases
its dominance over other forms of communication, or changes the way people share content and we are not able to adapt our products to this new
environment, the users of our products could decrease and negatively affect our revenues.
A significant portion of our revenues stems from the usage of our IncrediMail email client. If the usage of Facebook or other social related software as a
method of communication replaces email, this would decrease the usage of our email client and subsequently have a negative effect on our revenues.
In addition, our IncrediMail email client and other products, interface with Facebook, which we believe contributes to the usage by our users of our products.
If Facebook were to change the guidelines and policies governing their cooperation with companies, these changes could negatively impact the use of our products.
Finally, a significant portion of the users of our Smilebox photo-
sharing product uses Facebook to share their creations. We could be impacted by changes
that Facebook makes in how our users are able to post content into Facebook. These changes could negatively impact the use of Smilebox to post to Facebook which
would adversely affect our service usage and revenues.
6