Incredimail 2012 Annual Report Download - page 49

For more information on uncertainties, demands, commitments or events that are reasonably likely to have a material effect on revenue,
please see Item 3, “Key Information—Risk Factors.”
For additional trend information see the discussion in Item 5.A “Operating and Financial Review and Prospects – Operating Results.”
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.
There has been a growing usage of portable platforms, including smartphones and tablets, enabling users to enjoy a more graphic and
creative experience without a PC. This trend is most prominently represented by the popularity of the iPhone and its Android mobile
platforms, as well as with the popular iPad tablet. In addition, and partially as a result of these successes, the Apple-
Mac platform
popularity has increased as well. Although this trend is attracting an increasing portion of the market, we believe that particularly with
regard to our demographic segment, the PC environment will remain the predominant platform for managing emails in the near future.
To address this trend, we have been developing mobile versions of our desktop applications. We have already introduced Smilebox for
the iPhone and this application has recorded over 1.2 million downloads to date. In addition, in the first quarter of 2013, we introduced
IncrediMail for the iPad. In 2013, we intend to increase our investments in this direction offering better and more products on various
mobile platforms.
6.
As roughly 63% of our revenues are search generated, and this percentage is expected to increase in 2013, 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, or RPM,
rate. In an economic downturn, the amount advertisers are willing to pay naturally declines, reducing their cost per click, or 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. This fluctuation is a function of economic conditions in each country and more importantly
by the different economic conditions in each country and which countries are the focus for growth in this market. Moreover, this market
is becoming more susceptible to alternative methods of advertising and commerce trends. Advertising through generic search sites is
facing growing competition from alternative commerce sites as the latter become more popular and more visible, and also have the
ability to leverage the increasing user data available through these sites. We have begun to invest in systems and products that could
possibly leverage this trend in 2014 and beyond.
7.
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 this
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, enabling 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. In 2012, the amount of competitors and the intensity of the competition have made it more difficult to
maximize the lifetime 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 those of the competition.
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