Juno 2014 Annual Report Download - page 10

Table of Contents
from the sale of gift cards. Loyalty marketing advertising revenues and operating results tend to be higher in the quarter ending December 31 when compared
to other quarters, though there can be no assurance that these seasonal trends will continue in the future.
—U.S. online retail sales are expected to grow from $263 billion in 2013 to $414 billion in 2018, a compound annual growth rate
of 9.5%, according to an online retail sales forecast from Forrester Research Inc. In addition, U.S. advertisers' spending on digital advertising is expected to
grow from $57 billion in 2014 to $103 billion in 2019 representing 36% of all ad spending, according to Forrester's latest estimates based on its
ForecastView model. As advertisers seek methods to target, reach and retain online consumers, loyalty marketing presents an attractive option.
According to the 2013 Colloquy Loyalty Census, total loyalty memberships in the U.S. grew from 973 million in 2000 to over 2.65 billion in 2012. This
confluence of growth in online shopping and advertising, and in loyalty memberships offers significant opportunities for MyPoints as our loyalty marketing
business is poised to realize its potential by exploiting current assets including: strong relationships with a variety of retailers and clients, a large and
engaged member base, a variety of engagement activities to serve member needs and interests, and the ability to provide loyalty incentives to drive consumer
action. Loyalty marketing programs are generally designed to reward consumers with points that accumulate based on their activities and which may be
redeemed for cash, gift cards, or products and services from participating vendors. Some loyalty marketing programs use points as an incentive for members to
opt in to receiving certain email offers or to update their personal interest profiles, which provide useful information that helps advertisers target consumers
interested in purchasing the advertisers' products and services. While these programs have long been popular with airlines, credit card vendors, hotels, and
retailers, in recent years, loyalty marketing programs have expanded into a comprehensive direct marketing and targeted advertising strategy for companies
in a wide range of industries.
Loyalty marketing programs and similar services enable advertisers to target consumers in ways that are generally impractical with traditional offline
direct marketing channels. Loyalty marketing programs can also easily measure click- through rates on display advertising and response rates to email
campaigns, providing rapid feedback for advertisers that can be used to identify potential customers and create new targeted offers. In addition, a loyalty
marketing program that has attracted a large, responsive and loyal member base helps to improve returns on advertisers' marketing investments. Furthermore,
advertisers may prefer to work with loyalty marketing programs that offer performance-based pricing, which helps advertisers achieve specific performance
objectives within budget.
—The market for loyalty marketing services is highly competitive, and we expect competition to significantly increase in the future as
loyalty marketing programs continue to grow in popularity and expand to mobile platforms. Our MyPoints loyalty marketing business faces competition for
members from other online loyalty marketing programs, such as Ebates and Mr. Rebates, as well as offline loyalty marketing programs that have a significant
online presence, such as those operated by credit card, airline and hotel companies. In addition, we also face competition for members from online providers
of discounted offerings and coupons, such as Groupon and LivingSocial. We believe the primary competitive factors in the loyalty marketing industry are the
number, type and popularity of the participating merchants, the attractiveness of the rewards offered, the value awarded for various actions, the ease and
speed of earning rewards, and the ability to offer members a robust, user-friendly shopping experience. We believe that we compete favorably in many of
these areas, although some of our competitors have an advantage over us in some or all of these areas. For additional information, see "Risk Factors", which
appears in Item 1A of this Annual Report on Form 10-K.
For additional information regarding our segments, see Note 2, "Segment Information" of the Notes to the Consolidated Financial Statements, which
appears in Part II, Item 8 of this Annual Report on Form 10-K.
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