TeleNav 2015 Annual Report Download - page 28

Table of Contents
We rely on a proprietary provisioning and reporting system to track end user activation, deactivation and usage data and any material
failures in this system could harm our revenue, affect our costs and impair our ability to manage our business effectively.
Our provisioning and reporting system that authenticates end users and tracks the number of end users and their use of our services is a
proprietary and customized system that we developed internally. Although we believe that the flexibility of this service to integrate tightly with
wireless carriers’ reporting and provisioning systems gives us a competitive advantage, we might lose revenue and the ability to manage our
business effectively if the system were to experience material failures or be unable to scale as our business grows. In addition, we may not be
able to report our financial results on a timely basis if our customers question the accuracy of our records or we experience significant
discrepancies between the data generated by our provisioning and reporting systems and data generated by their systems, or if our systems fail or
we are unable to report timely and accurate information to our third party data providers. The inability to timely report our financial results
would impair the quality of our financial reporting and could result in the delisting of our common stock.
If our end users increase their usage of our services, our operating loss may increase, or we may incur larger losses because we offer the
service as a free offering or usage for paid offerings outpaces our expectations.
With limited exceptions, fees for the use of our services do not vary depending on whether or how often an end user uses our services, and
we offer certain of our mobile phone based navigation services for free. Historically, end users using certain mobile phones or under certain
service plans tended to use our services more than other end users. We budget and operate our services by making certain assumptions about
usage patterns. If our end users were to further increase their usage of our services substantially or more end users access our services for free
through a freemium model, we would incur additional expenses to expand our server capacity through our use of third party hosted services and
pay additional third party content fees. These additional costs would harm our operating results and financial condition.
We rely on third party data and content to provide our services and if we were unable to obtain content at reasonable prices, or at all, our
gross margins and our ability to provide our services would be harmed.
We rely on third party data and content to provide our services, including map data, POI, traffic information, gas prices and weather
information. If our suppliers of this data or content were to enter into exclusive relationships with other providers of location services or were to
discontinue providing such information and we were unable to replace them cost effectively, or at all, our ability to provide our services would
be harmed. Our gross margins may also be affected if the cost of third party data and content increases substantially. Although we have recently
announced efforts to use OSM data to reduce the expenses we incur for third party map data, we may not be successful at integrating OSM data
into our products and may experience difficulty with customer acceptance if the quality of the consumer generated data within OSM is lower
than that of paid maps. We have only recently introduced mobile phone-based navigation with OSM and launched our first brought-in
automotive navigation service with OSM in 2015. As a result, we may not have sufficient data for automotive manufacturers and OEMs to feel
comfortable electing to use OSM in the products and services we provide them.
We obtain map data from TomTom and HERE, which are companies owned by our current and potential competitors TomTom and Nokia,
respectively. Accordingly, these third party data and content providers may act in a manner that is not in our best interest. For example, they may
cease to offer their map and POI data to us. We most recently amended our TomTom agreement effective January 30, 2014 to extend the license
period for TomTom map data for voice-guided turn by turn GPS navigation service for mobile phones (except for Sprint’s bundled offering,
automotive navigation products) through December 31, 2015. Our agreement with HERE was automatically renewed under its existing terms
through January 31, 2016, and automatically renews for successive one year periods unless either party provides notice of non-renewal at least
180 days prior to the expiration of the applicable term. Nokia, which owns HERE, has recently agreed to sell HERE to a consortium of German
automobile manufacturers, and the sale of HERE may increase our costs.
We may identify other requisite content and content-related technologies, including certain geocoding data necessary for our OSM
products, that we may be unable to license or develop internally. If we are unsuccessful in licensing these content or technologies from third
parties or developing them internally, we may be unable to successfully launch our OSM-based products globally and across all desired product
offerings.
We may not be able to upgrade our navigation services platform to support certain advanced features and functionality without obtaining
technology licenses from third parties. Obtaining these licenses may be costly and may delay the introduction of such features and functionality,
and these licenses may not be available on commercially favorable terms, or at all. The inability to offer advanced features or functionality, or a
delay in our ability to upgrade our navigation services platform, may adversely affect consumer demand for our navigation services and,
consequently, harm our business.
We also use our proprietary provisioning and reporting system to record and report royalties we owe to third party providers of content
used by end users in connection with our services. Certain of the third party content providers have the right to audit our use of their services
and, if we were found to have under or incorrectly reported usage, we may be required to pay the third party content providers for the actual
usage, as well as interest and the cost of the audit. Any significant error in
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