ServiceMagic 2012 Annual Report Download - page 15

Table of Contents
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 distribute our products and services.
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 Search & Applications search boxes,
toolbars and other applications to users through third parties. Most of these agreements are either non1exclusive and short1term in nature or, in
the case of long1term or exclusive agreements, are terminable by either party in certain specified circumstances. In addition, a few of these
agreements collectively represent a significant percentage of the revenue generated by our B2B applications. Our inability to enter into new (or
renew existing) agreements to distribute our search boxes, toolbars and other applications through third parties for any reason would result in
decreases in traffic, queries and advertising revenue, 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 or
through e-mail campaigns and we either pay a fixed fee when visitors to these websites click through to or register with 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 short1term in nature and are generally 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 existing and/or new third parties in response to industry trends, our business, financial condition and results of operations
could be adversely affected.
In the case of our HomeAdvisor business, our ability to drive traffic depends, in part, on the nature and number of home services
professionals who are members of our network. While these home services professionals are required to agree that they will operate in
accordance with our terms and conditions, we do not enter into long1term agreements with them. In addition, a significant number of our home
services 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 home services professionals experiences turnover from
time to time. This turnover, if significant or recurring over a prolonged period, could result in a decrease in traffic to HomeAdvisor.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 properties, we may not be able to convert this traffic or otherwise retain users and customers
unless we continue to provide quality products and services. We may not be able to adapt quickly and/or in cost-effective manner to frequent
changes in user and customer preferences, which can be difficult to predict, or appropriately time the introduction of enhancements and/or new
products or services to the market. Our inability to provide quality products and services would adversely affect user and customer experiences,
which would result in decreases in users, customers and revenues, which would adversely affect our business, financial condition and results of
operations.
As discussed below, our traffic building and conversion initiatives also involve the expenditure of considerable sums for marketing, as well
as for the development and introduction of new products, services and enhancements, infrastructure and other related efforts.
Marketing efforts designed to drive traffic to our various websites may not be successful or cost
-effective.
Traffic building and conversion initiatives involve considerable expenditures for online and offline advertising and marketing. We have
made, and expect to continue to make, significant expenditures for search engine marketing (primarily in the form of the purchase of keywords),
online display advertising and traditional offline advertising in connection with these initiatives, which may not be successful or cost-effective.
In the case of our search engine marketing efforts, our failure to respond successfully to rapid and frequent changes in the pricing and operating
dynamics of search engines could adversely affect the placement of paid listings that appear in response to keywords we purchase, as well as
adversely affect the pricing of online advertising we purchase generally, which would increase our costs. In the case of paid advertising
generally, the policies
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