Overstock.com 2004 Annual Report Download - page 28

Difficulties or negative publicity associated with our auctions business could affect our main shopping site business.
Any significant operational or other difficulties we encounter with our auctions business could damage our reputation, our ability to attract new
customers to our main shopping site, and the Overstock.com brand name generally. Negative publicity resulting from actual or alleged fraudulent or deceptive
conduct by users of our auctions site could also damage our reputation, our ability to attract new customers to our main shopping site, and the Overstock.com
brand name generally.
Risks Relating to the Internet Industry
Our success is tied to the continued use of the Internet and the adequacy of the Internet infrastructure.
Our future revenues and profits, if any, substantially depend upon the continued widespread use of the Internet as an effective medium of business and
communication. Factors which could reduce the widespread use of the Internet include:
actual or perceived lack of security of information or privacy protection;
possible disruptions, computer viruses or other damage to the Internet servers or to users' computers; and
excessive governmental regulation.
Customers may be unwilling to use the Internet to purchase goods.
Our long-term future depends heavily upon the general public's willingness to use the Internet as a means to purchase goods. E-commerce remains a
relatively new concept, and large numbers of customers may not begin or continue to use the Internet to purchase goods. The demand for and acceptance of
products sold over the Internet are highly uncertain, and most e-commerce businesses have a short track record. If consumers are unwilling to use the Internet
to conduct business, our business may not develop profitably.
The security risks or perception of risks of e-commerce may discourage customers from purchasing goods from us.
In order for the e-commerce market to develop successfully, we and other market participants must be able to transmit confidential information securely
over public networks. Third parties may have the technology or know-how to breach the security of customer transaction data. Any breach could cause
customers to lose confidence in the security of our Websites and choose not to purchase from our Websites. If someone is able to circumvent our security
measures, he or she could destroy or steal valuable information or disrupt our operations. Concerns about the security and privacy of transactions over the
Internet could inhibit the growth of the Internet and e-commerce. Our security measures may not effectively prohibit others from obtaining improper access to
our information. Third parties may target our customers directly with fraudulent identity theft schemes designed to appear as legitimate communications from
us. Any security breach or fraud perpetrated on our customers could expose us to increased costs and to risks of loss, litigation and liability and could
seriously disrupt our operations.
Credit card fraud could adversely affect our business.
We do not carry insurance against the risk of credit card fraud, so the failure to adequately control fraudulent credit card transactions could reduce our
net revenues and our gross margin. We have implemented technology to help us detect the fraudulent use of credit card information. However, we may in the
future suffer losses as a result of orders placed with fraudulent credit card data even though the associated financial institution approved payment of the
orders. Under current credit card practices,
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