ServiceMagic 2010 Annual Report Download - page 18

Table of Contents
multitude of websites with high levels of traffic and online advertising networks, for a share of available advertising expenditures and expect to
face continued competition as more emerging media and traditional offline media companies enter the online advertising market. We believe that
the continued growth and continued acceptance of online advertising generally will depend, to a large extent, on its perceived effectiveness and
the acceptance of related advertising models (particularly in the case of models that incorporate user targeting), 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, or any decrease in the effectiveness and value of online advertising (whether due to the passage of laws
requiring additional disclosure and/or opt-in policies for advertising that incorporates user targeting or other developments) would have an
adverse effect on our business, financial condition 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, 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 short term in nature and are terminable by either party upon notice. Our
inability to enter into new (or renew existing) agreements to distribute our toolbars and search boxes through third parties for any reason would
result in decreases in traffic, 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 the businesses within our Match segment, we have entered into a number of arrangements with third parties to
drive traffic to our online personals websites. Pursuant to these arrangements, third parties generally promote our services on their websites and
we either pay a fixed fee when visitors to these websites click through to or register on our online personals websites or pay a percentage of
revenue we receive from such visitors who pay us subscription fees. These arrangements are generally not exclusive, are short term in nature 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 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 adverse economic conditions, such as 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 period, 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.
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