Travelzoo 2005 Annual Report Download - page 33

Our business may be sensitive to recessions.
The demand for online advertising may be linked to the level of economic activity and employment in the
U.S. and abroad. SpeciÑcally, our business is dependent on the demand for online advertising from travel
companies. The last recession decreased consumer travel and caused travel companies to reduce or postpone
their marketing spending generally, and their online marketing spending in particular. In case of another
recession, our business and Ñnancial condition could be materially adversely aÅected.
Our operations could be signiÑcantly hindered by the occurrence of a natural disaster or other
catastrophic event.
Our operations are susceptible to outages due to Ñre, Öoods, power loss, telecommunications failures,
break-ins and similar events. In addition, a signiÑcant portion of our network infrastructure is located in
Northern California, an area susceptible to earthquakes. We do not have multiple site capacity in the event of
any such occurrence. Outages could cause signiÑcant interruptions of our service. In addition, despite our
implementation of network security measures, our servers are vulnerable to computer viruses, physical and
electronic break-ins, and similar disruptions from unauthorized tampering with our computer systems. We do
not carry business interruption insurance to compensate us for losses that may occur as a result of any of these
events.
Technological or other assaults on our service could harm our business.
We are vulnerable to coordinated attempts to overload our systems with data, which could result in denial
or reduction of service to some or all of our users for a period of time. We have experienced denial of service
attacks in the past, and may experience such attempts in the future. Any such event could reduce our revenue
and harm our operating results and Ñnancial condition. We do not carry business interruption insurance to
compensate us for losses that may occur as a result of any of these events.
Risks Related to Our Markets and Strategy
We may not be able to develop awareness of our brand name.
We believe that continuing to build awareness of the Travelzoo brand name is critical to achieving
widespread acceptance of our business. Brand recognition is a key diÅerentiating factor among providers of
online advertising opportunities, and we believe it could become more important as competition in our industry
increases. In order to maintain and build brand awareness, we must succeed in our marketing eÅorts. If we fail
to successfully promote and maintain our brand, incur signiÑcant expenses in promoting our brand and fail to
generate a corresponding increase in revenue as a result of our branding eÅorts, or encounter legal obstacles
which prevent our continued use of our brand name, our business could be materially adversely aÅected.
Our business may be sensitive to events aÅecting the travel industry in general.
Events like the war with Iraq or the terrorist attacks on the U.S. in 2001 have a negative impact on the
travel industry. We are not in a position to evaluate the net eÅect of these circumstances on our business. In
the longer term, our business might be negatively aÅected by Ñnancial pressures on the travel industry.
However, our business may also beneÑt if travel companies increase their eÅorts to promote special oÅers or
other marketing programs. If such events result in a long-term negative impact on the travel industry, such
impact could have a material adverse eÅect on our business.
We will not be able to attract travel companies or Internet users if we do not continually enhance and
develop the content and features of our products and services.
To remain competitive, we must continually improve the responsiveness, functionality and features of our
products and services. We may not succeed in developing features, functions, products or services that travel
companies and Internet users Ñnd attractive. This could reduce the number of travel companies and Internet
users using our products and materially adversely aÅect our business.
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