Juno 2014 Annual Report Download - page 27

Table of Contents
networking services and loyalty marketing service. More intense competition could also require us to increase our marketing or other expenditures. As a
result of competition, our business, financial condition, results of operations, and cash flows have been, and may continue to be, adversely affected.
Continued declines in the number of pay accounts for our social networking services could cause our business, financial condition, results of operations,
and cash flows to suffer.
Pay accounts are critical to our business model. Only a small percentage of users visiting our websites or initially registering for our social networking
services sign up for a paid subscription at the time of registration. As a result, our ability to generate subscription revenues is highly dependent on our ability
to attract visitors to our websites, register them as free members, encourage them to return to our websites, and convince them to become pay accounts in
order to access the pay features of our websites. In addition, changes to our registration or renewal processes, such as the changes required for our
international social networking services to implement the Single Euro Payments Area (or SEPA) initiative, could adversely affect our churn rate.
A number of our pay account subscriptions each month are not renewed or are canceled, which, for the Content & Media segment, we refer to as "churn."
The level of churn we experience fluctuates from quarter to quarter due to a variety of factors, including our mix of subscription terms, which affects the
timing of subscription expirations, as well as the degree of credit card failures. To maintain or reduce the level of churn, we must continually add new pay
accounts both to replace pay accounts who churn and to grow our business beyond our current pay account base. We expect that our churn rate will continue
to fluctuate from period to period. A significant majority of our pay accounts are on plans that automatically renew at the end of their subscription period and
we have received complaints with respect to our renewal policies and practices. As discussed in the risk factors related to changes in laws and regulations and
to legal actions and investigations, the laws being considered and those that have been enacted by certain states regarding automatic-renewal practices will,
and enforcement action or changes in enforcement policies and procedures could, impact certain of our business practices. We provide automatic-renewal
notices to members in only those states that legally require such notices. If we provide such notices in additional states, or additional states start to require
such notices, our churn rate may increase. We also experience an increase in the percentage of credit card failures from time to time. For example, a large-scale
security breach at a retailer may result in the cancelation and re-issuance of the affected credit cards by the issuing banks, which would impact our ability to
charge our members on their old credit cards and if our members do not update their credit card information with us, their accounts will terminate. Any
change in our renewal policies or practices, or in the degree of credit card failures, could have a material impact on our churn rate. If we experience a higher
than expected level of churn, it will make it more difficult for us to increase or maintain the number of pay accounts, which could reduce our revenues and
adversely affect our business, financial condition, results of operations, and cash flows.
Our pay accounts and free active accounts have been decreasing, and we anticipate that Content & Media pay accounts and revenues will continue to
decline year over year, at least in the near term. If we are not able to attract visitors to our websites and convert a significant portion to pay accounts, the
number of pay accounts for our social networking services and related advertising revenues will continue to decline and the business, financial condition,
results of operations, and cash flows of our Content & Media segment will be adversely affected.
Failure to increase or maintain the number of visitors to our websites and members for our social networking and loyalty marketing services or the activity
level of these visitors and members could cause our business and financial results to suffer.
The success of our social networking and loyalty marketing services depends upon our ability to increase or maintain the number of visitors to our
websites, our base of free members, and the level of
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