Incredimail 2014 Annual Report Download - page 34

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Our Opportunity
. Our experience and success as developers allow us to best understand the needs of publishers and to enable other
developers to succeed. Honed through our own products, our technology-
based solutions platform provides us with the opportunity to allow
developers to focus on what they do best, creating great digital content and applications. Our team brings decades of experience, operating and
investing in diversified digitally-enabled businesses, and we continue to innovate and create value for developers.
Strategy
In the turbulent industry we are in, we have a twin-pronged approach for growing Perion.
Search-generated revenues
We generate the majority of our revenues from services agreements with our search partners. Search-
generated revenues accounted for
96%, 85% and 85% of our revenues in 2012, 2013, and 2014, respectively. Through our search technology, including syndication, we offer end
users the ability to search the Internet via easily embedded search boxes powered by premium search companies, including Microsoft, Google,
APN, LLC ("Ask") and Yahoo, and depending on the search partner powering the search or location in which the search was initiated, we
receive either a fixed price, pay-per-search fee or portion of the revenues generated by these companies through the search process.
We are currently the second largest redistributor of search monetization in the United States. We have agreements with all the major
search engine companies. Our agreement with Microsoft, our largest search engine partner, expired on December 31, 2014, and on August 1,
2014 we announced that we entered into a new agreement with them, with a three-
year term, from January 1, 2015 through December 31, 2017,
and upon mutual agreement, the agreement may be renewed for an additional 12-month period, until the end of 2018.
In the past, the fees payable by Microsoft under the Microsoft Agreement were payable based on either a fixed price, pay-per-
search
basis that is tied to the number of searches conducted by end users, or in certain instances on a share of the revenue generated as a result of
searches conducted by end users who utilize the search engine that appears on toolbars created by publishers through our platform or through
other search related products. The fees payable by Microsoft varied annually over the term of the agreement, decreasing significantly during the
last two years (2013 and 2014) of the term of the agreement compared to the first two years (2011 and 2012). We also syndicate Microsoft-
provided searches through publishers' websites with which the business enters into syndication agreements.
While most of our search-
generated revenues are based on our Microsoft relationship, nonetheless, in line with our strategy for
diversification, we were successful in engaging and maintaining positive relationships with other search providers as well. On April 29, 2013, we
signed a three-year agreement with Ask (which was amended on several occasions during 2014, and is in effect until March 31, 2016, with auto-
renewal for additional one year periods). We also have an agreement with Yahoo which is in effect until July 18, 2017, and as revenues from
Google are no longer material to us, we decided to exercise our right to opt out of our agreement with Google as of August 31, 2014, although
remaining with the Perion legacy agreement expiring in April 30, 2015.
In the turbulent market place we currently act in, we intend to differentiate ourselves by providing our software developing partners with three
major advantages:
We make these advantages available to the software developer by assisting them in three areas; distribution, monetization and
optimization.
•
Steady search revenue generating business on the desktop, providing high profitability and healthy cash flow; and
•
Develop and market a robust advertising platform for mobile app developers.
•
Provide a user friendly monetization solution, that enables them to engage users, by providing quality software, while creating
monetization through, user friendly, non
-
intrusive and transparent means;
•
deliver superior analytics and optimization tools enabling the software developer to extend its reach and increase monetization
with a positive return on investment; and
•
offer creative and flexible monetization models with scalable risk and reward, suited to the software developer’s business.
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