Shutterfly 2015 Annual Report Download - page 28

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We may not succeed in promoting and strengthening our brands, which would prevent us from acquiring new
customers and increasing net revenues.
A component of our business strategy is the continued promotion and strengthening of the Shutterfly, Tiny
Prints, Wedding Paper Divas, BorrowLenses, MyPublisher, Groovebook, and ThisLife brands. Due to the
competitive nature of the digital photography products and services markets, if we are unable to successfully
promote our brands, we may fail to attract new customers, increase the engagement of existing customers with
our brands or substantially increase our net revenues. Customer awareness and the perceived value of our brands
will depend largely on the success of our marketing efforts and our ability to provide a consistent, high-quality
customer experience. To promote our brands, we have incurred, and will continue to incur, substantial expense
related to advertising and other marketing efforts. The failure of our brand promotion activities could adversely
affect our ability to attract new customers and maintain customer relationships, which would substantially harm
our business and results of operations.
If we are unable to develop, market and sell new products and services that address additional market
opportunities, our results of operations may suffer. In addition, we may need to expand beyond our current
customer demographic to grow our business.
Although earlier in our history we have focused our business on consumer markets for silver halide prints,
we have consistently evolved and broadened our offering to include other photo-based products, such as photo
books, stationary cards, calendars, and photo merchandise such as mugs and magnets. We continually evaluate
the demand for new products and services and the need to address trends in consumer demand and opportunities
in the marketplace. For example, we have expanded in recent years into home decor, including wall art,
ornaments and pillows. In 2014, we began to offer online photography and video equipment rentals through the
BorrowLenses brand. In the future, we may need to address additional markets and expand our customer
demographic to grow our business. Our efforts to expand our existing services, create new products and services,
address new market segments or develop a significantly broader customer base may not be successful. Any
failure to address additional market opportunities could result in loss of market share, which would harm our
business, financial condition and results of operations.
We may undertake acquisitions to expand our business, which may pose risks to our business and dilute the
ownership of our existing stockholders.
A key component of our business strategy includes strengthening our competitive position and refining the
customer experience on our websites and mobile applications through internal development. However, from time
to time, we may selectively pursue acquisitions of complementary businesses, such as our 2014 acquisition of
selected assets of Dot Copy, Inc. (“Groovebook”), our 2013 acquisitions of BorrowLenses LLC, R&R Images,
Inc. and MyPublisher, Inc. The identification of suitable acquisition candidates can be time-consuming and
expensive, and we may not be able to successfully complete identified acquisitions. Furthermore, even if we
successfully complete an acquisition, we may not achieve the anticipated benefits and synergies we expect due to
a number of factors including the loss of management focus on and the diversion of resources from existing
businesses; difficulty retaining key personnel of the acquired company; cultural challenges associated with
integrating employees from an acquired company into our organization; difficulty integrating acquired
technologies into our existing systems; entry into a business or market with which we have historically had little
experience; difficulty integrating data systems; the need to implement or remediate the controls, procedures or
policies of the acquired company; and increased risk of litigation. Failure to achieve the anticipated benefits of
such acquisitions or the incurrence of debt, contingent liabilities, amortization expenses, or write-offs of goodwill
in connection with such acquisitions could harm our operating results.
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