Incredimail 2012 Annual Report Download - page 27

In the past, we devloped and marketed PhotoJoy, a photo presentation application, both for the desktop and mobile platforms, as well as
Fixie, our PC optimization tool. The marketing and continued devlopment of these products has been suspended until we can identify
monetization models that justify continued development. Most of our applications are monetized through a "freemium" model. Free versions of
our applications are monetized primarily through our toolbar which generates search revenue and display advertising revenue, generated through
impressions. A more advanced feature-
rich version of many of our products is available for a subscription or fee. We also offer and develop a
range of products for mobile phones and tablets to answer our users’ increasing mobile demands.
In 2012, we sold 414,000 products, content licenses and subscriptions to our registered users worldwide. We believe that our
historical track record of converting registered users to purchasing customers represents a convincing validation of our business strategy.
For a breakdown of total revenues by category of activity, see "Item 5.A Operating Results — Revenues."
In the past we relied primarily on "viral marketing" to increase our user base. Our "viral marketing" has resulted from recipients of our
users’ emails clicking on the link at the bottom of emails sent with IncrediMail Xe,
an instant message enriched by SweetIM content, or
receiving digital photo creations from friends and relatives created by our Smilebox software, and then downloading our products and also from
word of mouth. Since the middle of 2011 while viral marketing still contributes to our growth, we are investing increasing sums in advertising to
accelerate our growth as the effectiveness of our viral marketing declines. Our revenues were $29.5 million in 2010, $35.5 million in 2011 and
$60.2 million in 2012. Our operations have been profitable since 2002, with a gross profit margin of at least 90%.
When we use the term "registered user" in this annual report, we mean a user who has downloaded at least one of our products and
completed the registration process. Registrations are not necessarily indicative of the number of individuals using our products or services, as a
user may register more than one time and a particular product or service may be resident on a computer but not actually be used. In addition, the
term "active user" as used in this annual report means a registered user whose computer we can communicate with in order to verify if any of our
products are resident on such computer, in the 30 days prior to the applicable measurement date.
Our Markets
Our user base . Our products ideally service “second wave adopters”,
characterized by typically being above 40 years old, looking for
computer applications that assist them in effectively utilizing their time and that are simple, safe and useful. Based on our internal statistics and
in-
depth consumer research contracted by us, we have learned that, approximately 95% of our users are 35 years old or older and approximately
80% are 45 years old or older. In addition, our users do tend to adopt technology later in its life cycle, rather than earlier.
Our Opportunity . We believe we are one of the few hi-
tech companies that target this unique demographic segment, rather than
offering the latest technology to younger audiences. Our opportunity is to offer this demographic segment software that is simple safe and useful,
enabling them to better utilize their time, as we have done successfully with our email client and photo sharing software. We believe this is a
substantial and underserved market.
Productivity tools
. We are actively seeking to enrich our product suite to include other consumer products that bear similar
characteristics appealing to our unique demographic segment. We believe our communication client Incredimail, digital photo product Smilebox
and our instant messaging tool SweetIM, have these characteristics and will appeal similarly to our user base. Based on our consumer research,
we will seek to offer our users, in addition to these products, other tools in the areas of safety and security in the PC environment, personal
productivity, and other areas.
Our Strategy
Our objective is to become the market leader and a reliable provider of consumer applications for second wave adopters seeking
products that are simple and safe, helping to make their everyday online tasks more enjoyable. To achieve this goal, we intend to enhance our
existing business and extend it beyond that by way of acquisitions.
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