ServiceMagic 2013 Annual Report Download - page 8

Table of Contents
Our B2B operations work closely with partners in the software, media and other industries to design and develop customized browser1
based
search applications to be bundled and distributed with these partners' products and services.
We also market and distribute a number of mobile applications through which we provide search and additional services, including: the
Ask.com iOS and Android applications, which provide general search and natural1language question and answer services, and the
Dictionary.com iOS and Android applications, which provide dictionary, reference, educational and learning services.
Revenue
The Search & Applications segment’s revenue consists principally of advertising revenue, which is generated primarily through the display
of paid listings in response to search queries, as well as from advertisements appearing on its destination search websites and portals and certain
third party websites and the syndication of search results generated by Ask-branded destination search websites. The substantial majority of the
paid listings we display are supplied to us by Google pursuant to our services agreement with Google.
Pursuant to this agreement, we transmit search queries to Google, which in turn transmits a set of relevant and responsive paid listings back
to us for display in search results. This ad-serving process occurs independently of, but concurrently with, the generation of algorithmic search
results for the same search queries. Google paid listings are displayed separately from algorithmic search results and are identified as sponsored
listings on search results pages. When a user submits a search query through our Search & Applications properties and services and clicks on a
Google paid listing displayed in response to the query, Google bills the advertiser that purchased the paid listing directly and shares a portion of
its related paid listing fee with us. In cases where the user’s click is generated by a third party website, we recognize the amount due from
Google as revenue and record a revenue share obligation to the third party website as traffic acquisition costs. To a lesser extent, we also
syndicate Google paid listings through third parties with whom we enter into syndication agreements. See “Item 1A-Risk Factors-We depend
upon arrangements with Google and any adverse change in this relationship could adversely affect our business, financial condition and results
of operations.”
Competition
We compete with a wide variety of parties in connection with our efforts to: (i) attract users to our various Search & Applications properties
and services generally; (ii) develop, market and distribute our Applications; (iii) attract third parties to distribute our Applications and related
technology; and (iv) attract advertisers. In the case of our search services generally, our competitors include Google, Yahoo!, Bing and other
destination search websites and search1centric portals (some of which provide a broad range of content and services and/or link to various
desktop applications), third party toolbar, convenience search and applications providers, other search technology and convenience service
providers (including internet access providers, social media platforms, online advertising networks, traditional media companies and companies
that provide online content). When we market our search and content services, our competitors include destination websites that primarily
acquire traffic through paid and algorithmic search results.
Moreover, some of our current and potential competitors have longer operating histories, greater brand recognition, larger customer bases
and/or significantly greater financial, technical and marketing resources than we do. As a result, they have the ability to devote comparatively
greater resources to the development and promotion of their products and services, which could result in greater market acceptance of their
products and services relative to those offered by us.
In the case of our Websites business, we believe that our ability to compete successfully will depend primarily upon the relevance and
authority of our search results, answers and other content, the functionality of our various websites, the quality of related content and features
and the attractiveness of the services provided by our websites generally to consumers relative to those of our competitors. We believe that we
differentiate Ask.com from its competitors through question and answer services that provide accurate, authoritative and direct answers to
natural1language questions (in the form of algorithmic search results and/or responses from other Ask.com users, as well as indexed question
and answer pairings from various websites and online services). Our ability to continue to differentiate Ask.com from its competitors in this
manner depends primarily upon our ability to deliver authoritative and trustworthy content to users, as well as our ability to attract advertisers to
this initiative.
In the case of our Applications business, we believe that our ability to compete successfully will depend primarily upon our continued
ability to create toolbars and other applications that resonate with consumers (which requires that we continue to bundle attractive features,
content and services, some of which may be owned by third parties, with quality search services), differentiate our toolbars and other
applications from those of our competitors (primarily through providing customized
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