Overstock.com 2013 Annual Report Download - page 14

Table of Contents
during the holiday season, could harm our business. If our relationships with these third parties are terminated or impaired or if these third parties are unable
to deliver products for us, whether as a result of labor shortage, slow down or stoppage, deteriorating financial or business condition, terrorist attacks, cyber-
attacks, Internet or other infrastructure or communications impairment, natural disasters, or for any other reason, we would be required to use alternative
carriers for the shipment of products to our customers. In addition, conditions such as adverse weather or natural disasters can prevent any carrier from
performing its delivery services, which can have an adverse effect on our customers’ satisfaction with us. In any of these circumstances, we may be unable to
engage alternative carriers on a timely basis, upon terms we find acceptable, or at all. Changing carriers, or absence of carrier availability, could have a
material adverse effect on our business.
We depend upon our credit card processors and payment card associations.
Our customers primarily use credit cards to buy from us. We are dependent upon our credit card processors to process the sales transactions and
remit the proceeds to us. The credit card processors have the right to withhold funds otherwise payable to us to establish or increase a reserve based on their
assessment of the inherent risks of credit card processing and their assessment of the risks of processing our customers’ credit cards at any time, and have
done so from time to time in the past. We are also subject to payment card associations’ operating rules, certification requirements and rules governing
electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or
requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from our customers, process
electronic funds transfers, or facilitate other types of online payments. In addition, events affecting our credit card processors, including cyber-
attacks, Internet or other infrastructure or communications impairment or other events that could interrupt the normal operation of the credit card processors,
could have a material adverse effect on our business.
We rely upon paid and natural search engines like Google, Bing, and Yahoo! to rank our product offerings. Our financial results may suffer if
search engines change their ranking algorithms and our product offerings are ranked lower, and we may at times be subject to ranking penalties
if search engines believe we are not in compliance with their guidelines.
We rely on paid and natural search engines to attract consumer interest in our product offerings. Potential and existing customers use search engines
provided by search engine companies, including, but not limited to, Google, Bing, and Yahoo!, which use algorithms and other devices to provide users a
natural ranked listing of relevant Internet sites matching a user’s search criteria and specifications. Generally, Internet sites ranked higher in the paid and
natural search results attract the largest visitor share among similar Internet sites, and often benefit from increased sales. Natural search engine algorithms use
information available throughout the Internet, including information available on our site. If search engine companies change their natural search engine
algorithms, and our ranking in natural searches is adversely affected by those changes, our financial results may suffer from reduced revenues and from
increased marketing expenses from seeking to replace such lost revenues from other sources.
Rules and guidelines of these natural search engine companies govern our participation on their sites and how we share relevant Internet information
that may be considered or incorporated into the algorithms used by these sites. If these rules and guidelines change, or if we fail to present, or improperly
present, our site information for use by natural search engine companies, or if any of these natural search engine companies determine that we have violated
their rules or guidelines, as Google did in February 2011 through April 2011, or if others improperly present our site information to these search engine
companies, we may fail to achieve an optimum ranking in natural search engine listing results, or we may be penalized in a way that could harm our
business.
In addition, large marketplace websites and sites which aggregate marketplace sellers with a large product selection are becoming increasingly popular,
and we may not be able to place our products on these sites to take advantage of their internal search platforms. Our inability to place products on or access
these sites may have a material adverse effect on our business.
We are subject to cyber security risks and risks of data loss or other security breaches, and may incur increasing costs in an effort to minimize
those risks and to respond to cyber incidents.
Our business is entirely dependent on the secure operation of our website and systems as well as the operation of the Internet generally. Our business
involves the storage and transmission of users’ proprietary information, and security breaches could expose us to a risk of loss or misuse of this information,
litigation, and potential liability. A number of large Internet companies have suffered security breaches, some of which have involved intentional attacks. From
time to time we and many other Internet businesses also experience denial of service attacks wherein attackers attempt to block customers’ access to our
Website. If we are unable to avert a denial of service attack for any significant period, we could sustain substantial revenue loss from lost sales and customer
dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent
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