ServiceMagic 2013 Annual Report Download - page 14

Table of Contents
The amount of revenue we receive from Google depends upon a number of factors outside of our control, including the amount Google
charges for advertisements, the efficiency of Google’s system in attracting advertisers and serving up paid listings in response to search queries
and parameters established by Google regarding the number and placement of paid listings displayed in response to search queries. In addition,
Google makes judgments about the relative attractiveness (to the advertiser) of clicks on paid listings from searches performed on our Search &
Applications properties and these judgments factor into the amount of revenue we receive. Changes to Google’
s paid listings network efficiency,
its judgment about the relative attractiveness of clicks on paid listings from our Search & Applications properties or the parameters applicable to
the display of paid listings could have an adverse effect on our business, financial condition and results of operations. Such changes could come
about for a number of reasons, including general market conditions, competition or policy and operating decisions made by Google.
Our services agreement with Google requires that we comply with certain guidelines promulgated by Google for the use of its brands and
services, including the manner in which Google’s paid listings are displayed within search results, and that we establish guidelines to govern
certain activities of third parties to whom we syndicate paid listings, including the manner in which these parties drive search traffic to their
websites and display paid listings. Subject to certain limitations, Google may unilaterally update its policies and guidelines, which could in turn
require modifications to, or prohibit and/or render obsolete certain of, our products, services and/or business practices, which could be costly to
address or otherwise have an adverse effect on our business, financial condition and results of operations. Noncompliance with Google’s
guidelines by us or the third parties to whom we syndicate paid listings or through which we secure distribution arrangements for our
applications could, if not cured, result in Google’s suspension of some or all of its services to our websites or the websites of our third party
partners, the imposition of additional restrictions on our ability to syndicate paid listings or the termination of the services agreement by Google.
The termination of the services agreement by Google, the curtailment of IAC’s rights under the agreement (whether pursuant to the terms
thereof or otherwise) or the failure of Google to perform its obligations under the agreement would have an adverse effect on our business,
financial condition and results of operations. In addition, our inability to obtain a renewal of our agreement with Google with substantially
comparable economic and other terms upon the expiration of our current agreement could have an adverse effect on our business, financial
condition and results of operations. If any of these events were to occur, we may not be able to find another suitable alternate paid listings
provider (or if an alternate provider were found, the economic and other terms of the agreement and the quality of paid listings may be inferior
relative to our arrangements with, and the paid listings supplied by, Google) or otherwise replace the lost revenues.
General economic events or trends that reduce advertising spending could harm our business, financial condition and results of operations.
A substantial portion of our consolidated revenue is attributable to online advertising. Accordingly, we are particularly sensitive to events
and trends that could result in decreased advertising expenditures. Advertising expenditures have historically been cyclical in nature, reflecting
overall economic conditions and budgeting and buying patterns, as well as levels of consumer confidence and discretionary spending.
Small and local businesses with which we do business are particularly sensitive to these events and trends, given that they are not as well
situated to weather adverse economic conditions as their larger competitors, which are generally better capitalized and have greater access to
credit. In the recent past, adverse economic conditions have caused, and if such conditions were to recur in the future they could cause, decreases
and/or delays in advertising expenditures, which would reduce our revenues and adversely affect our business, financial condition and results of
operations.
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.
We continue to compete with traditional advertising 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 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
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 and/or utilize mobile devices), the continued growth in commercial use
of the internet (particularly abroad), the extent to which web browsers, software programs and/or other applications 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, an industry-wide move to self regulatory
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