Incredimail 2012 Annual Report Download - page 10

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 like us, these changes
could negatively impact the use of our products.
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 pages. These changes could negatively impact the
ability of our Smilebox users to post content into Facebook, which would adversely affect the usage of our Smilebox photo-
sharing product and
our revenues from such product.
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.
Our ability to generate advertising and search revenues is, amongst others, a function of the number of users of our products. In
addition, a portion of the registered or active users of our free products end up becoming paying customers of our products and services. In order
to induce 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:
We may be unable to maintain the usability and relevance of our existing products or to develop new products. Furthermore, we may
not develop or introduce new products or product enhancements in time to take advantage of market opportunities or achieve a significant or
substantial level of acceptance in new or existing markets. If we fail to do so, our ability to attract and retain customers could be impaired, our
competitive position may be harmed and we may be unable to generate substantial revenues.
If we are unable to establish and increase market acceptance of our products, we will not expand our business and our revenues could
decline.
Our ability to execute our business strategy depends on market demand for software programs that are simple, safe and useful, and on
our ability to maintain these characteristics in our existing products and those that will be bought or internally developed in the future. For
instance, the fact that many email users have multiple email clients and accounts, many of which are likely provided to them free of charge by
large Internet and software companies, positively affects the potential market demand for our enhanced email software products. The growing
popularity of web based mail and its increased functionality and mobility negatively affect the potential market demand for our primarily PC
based email client. Our photo sharing product has benefited from the social trend of sharing digital photos, while the increasing popularity for
taking and viewing photos on mobile devices pose a challenge for our primarily desktop oriented user experience. The rate of adoption and
acceptance of our products may be affected adversely by changing consumer preferences, product obsolescence, technological change, market
competition and our products’ quality and novelty.
Our results of operations and financial condition may be adversely impacted by worldwide economic conditions.
Our primary user base is composed of individual consumers and for the most part their discretionary purchase habits. The current
overall lack of growth in the U.S. and European economies following a few years of weak performance has resulted in continued negative
pressure on consumer spending in general, and discretionary spending in particular, and has impacted consumers in our market territories in
ways that could negatively affect our business. In the event that the United States or Europe experiences an economic downturn, or the current
economic climate worsens, our current and potential software license subscribers may be unable or unwilling to purchase our products or use our
service. This would also have a negative impact on consumer internet spending and search generated revenues. A reduction in the purchasing of
our products or use our services, consumer internet spending and search generated revenues have had a negative impact in the past, and may
possibly have a greater negative impact in the future, on our sales and revenue generation, margins and operating expenses, and consequently
have a material adverse effect on our business, results of operations and financial condition.
• 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;
•
recruiting and retaining highly qualified personnel;
• marketing new products; and
•
market acceptance of the enhanced and new products.
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