ServiceMagic 2014 Annual Report Download - page 22

Table of Contents
We depend upon arrangements with Google and any adverse change in this relationship could adversely affect our business, financial condition
and results of operations.
A substantial portion of our consolidated revenue is attributable to a services agreement with Google that expires on March 31, 2016. Pursuant
to this agreement, we display and syndicate paid listings provided by Google in response to search queries generated by users of our Search &
Applications properties. In exchange for making our search traffic available to Google, we receive a share of the revenue generated by the paid
listings supplied to us, as well as certain other search1related services.
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 advertisers) of clicks on paid listings from searches performed on our Search & Applications
properties and these judgments factor into the amount of revenue we receive. Google also makes judgments about the relative attractiveness (to
users) of paid listings from searches and these judgments factor into the amount of advertisements we can purchase. Changes to Google’s paid
listings network efficiency, its judgment about the relative attractiveness to advertisers of clicks on paid listings from our Search & Applications
properties, its judgment about the relative attractiveness to users of paid listings from searches 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 without advance notice, 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. In addition, Google's ability to limit our ability to market our products and services through its advertising services, whether due to
policy or competitive reasons or otherwise, 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.
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