ServiceMagic 2009 Annual Report Download - page 17

Table of Contents
Our success depends upon the continued growth and acceptance of online advertising, particularly paid listings, as an effective alternative to
traditional, offline advertising and the continued commercial use of the internet.
Many advertisers still have limited experience with online advertising and may continue to devote significant portions of their advertising
budgets to traditional offline advertising media. Accordingly, we continue to compete with traditional media, including television, radio and
print, in addition to a multitude of websites with high levels of traffic and online advertising networks, for a share of available advertising
expenditures. We believe that the continued growth and acceptance of online advertising generally will depend, to a large extent, on its perceived
effectiveness and the acceptance of related advertising models, the continued growth in commercial use of the internet (particularly abroad), the
extent to which software programs that limit or prevent advertising from being displayed become commonplace and the extent to which the
industry is able to effectively manage click fraud. Any lack of growth in the market for online advertising, particularly for paid listings, would
have an adverse effect on our business, financial conditions and results of operations.
We depend, in part, upon arrangements with third parties to drive traffic to our various websites and convert visitors into users and
customers.
We engage in a variety of activities designed to attract traffic to our various websites and convert visitors into repeat users and customers.
How successful we are in these efforts depends, in part, upon our continued ability to enter into arrangements with third parties to drive traffic to
our various websites, as well as the continued introduction of new and enhanced products and services that resonate with users and customers
generally.
For example, in an effort to increase traffic to our destination search websites, we have entered into, and expect to continue to enter into,
agreements to distribute our toolbars and search boxes to users through third parties. These agreements are generally not exclusive, are for a
short term and are terminable by either party given notice. Our inability to enter into new (or renew existing) agreements to distribute our
toolbars and search boxes through third parties would result in a decrease in traffic to our destination search websites, and in turn related
decreases in queries and advertising revenues, which could have an adverse effect on our business, financial condition and results of operations.
In addition, in the case of our Match business, we have entered into a number of arrangements with third parties to drive traffic to our
personals websites. Pursuant to these arrangements, third parties generally promote our services on their websites and we pay a fixed fee when
visitors to these websites click though to our personals websites. These arrangements are generally not exclusive, are for a short term and are
terminable by either party given notice. If existing arrangements with third parties are terminated or are not renewed upon their expiration and
we fail to replace this traffic and related revenues, or if we are unable to enter into new arrangements with third parties in response to industry
trends, our business, financial condition and results of operations could be adversely affected.
In the case of our ServiceMagic business, our ability to drive traffic depends, in part, on the nature and number of the third party service
professionals who are members of our service provider network. While these professionals are required to agree that they will operate in
accordance with our terms and conditions, we do not enter into long term contracts with them. In addition, a significant number of our service
professionals are sole proprietorships and small businesses, which are particularly sensitive to economic downturns, constrained liquidity and
decreases in consumer spending. As a result, our network of service professionals may experience turnover from time to time, which if
significant or recurring over a prolonged basis, could result in a decrease in traffic to ServiceMagic.com and increased costs, all of which could
adversely affect our business, financial condition and results of operations.
Even if we succeed in driving traffic to our destination search and other websites, we may not be able to convert this traffic or otherwise
retain users unless we continue to provide quality products and services that resonate with consumers. We may not be able to adapt quickly
and/or in cost-effective
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