Overstock.com 2014 Annual Report Download - page 15

Table of Contents
We depend on email to promote our site and offerings. We provide daily emails to potential customers about our offerings, and email promotions are
an important part of our marketing and help generate a substantial portion of our net revenue. If we are unable to effectively deliver email to our potential
customers, our business, financial condition and operating results would be harmed. Changes in webmail applications’ organization or prioritization of email
could reduce the number of potential customers opening our email. For example, Google Inc.’s Gmail service introduced a feature that organizes incoming
emails into categories (for example, primary, social and promotions). Such categorization or similar inbox organizational features may result in our emails
being delivered in a less prominent location in a subscriber’s inbox or viewed as “spam” by our subscribers and may reduce the likelihood of that subscriber
opening our emails. Anything, including legal or regulatory restrictions, that blocks, imposes restrictions on or imposes charges for the delivery of email
could also harm our business. We also rely on social networking messaging services to send communications and to encourage customers to send
communications. Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit our ability
or our customers’ ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline
in the use of or engagement with social networking services by customers and potential customers could materially adversely affect our business, financial
condition and operating results.
We intend to increase the amount we spend on Club O Rewards to Club O members and decrease the amount we spend on coupon marketing to non-Club O
members, which may adversely affect our revenues.
We engage in significant promotional activities involving coupons, and we depend heavily on coupon marketing to generate sales. We intend to
attempt to increase the amounts we spend on Club O Rewards to members of Club O, and to decrease the amounts we spend on coupon marketing to non-
Club O members. If we are unable to generate sales to Club O members at rates equal to or better than the rates we have been generating through our coupon
marketing to non-Club O members, our business, financial condition and operating results could be materially adversely affected.
We depend upon third parties for all or substantially all of the services we offer.
In addition to the many third parties we rely on in connection with our sale and the delivery of products to our customers, we depend upon third
parties for all or substantially all of the services we offer, including our insurance offerings, our consumer financing offerings, our new and used car listings,
our car-related services and our pet adoption services. Service offerings are inherently different from product offerings, and we may encounter difficulties with
our services offerings that may be different from the types of issues we face with our product offerings.
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,
and to resulting claims and litigation. A number of large Internet companies have suffered security breaches, many of which have involved intentional
attacks. From time to time we and many other Internet businesses also experience denial of service attacks in which 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 rapidly evolving types of cyber-attacks.
Cyber-attacks may target us, our customers, our suppliers, banks, credit card processors, delivery services, e-commerce in general or the communication
infrastructure on which we depend. If an actual or perceived attack or breach of our security occurs, customer and/or supplier perception of the effectiveness
of our security measures could be harmed and we could lose customers, suppliers or both. Actual or anticipated attacks and risks may cause us to incur
increasing costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third party experts and
consultants.
A person who is able to circumvent our security measures might be able to misappropriate our or our users’ proprietary information, cause
interruption in our operations, damage our computers or those of our users, or otherwise damage our reputation and business. Any compromise of our security
could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence
in our security measures, which could harm our business.
Most of our customers use credit cards to pay for their purchases. We rely on encryption and authentication technology licensed from third parties to
provide the security and authentication to effectively secure transmission of confidential
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