Travelzoo 2006 Annual Report Download - page 38

• payments which we may make to previous stockholders of Travelzoo.com Corporation who failed to submit
requests for shares in Travelzoo Inc. within the required time period.
We may significantly increase our operating expenses related to advertising campaigns for Travelzoo for a
certain period if we see a unique opportunity for a brand marketing campaign, if we find it necessary to respond to
increased brand marketing by a competitor, or if we decide to accelerate our acquisition of new subscribers.
If revenues fall below our expectations in any quarter and we are unable to quickly reduce our operating
expenses in response, our operating results would be lower than expected and our stock price may fall.
We depend on two clients for a substantial part of our revenues.
In the fiscal year ended December 31, 2006, two clients accounted for 16% and 14% of our revenues. The
agreements with these clients are in the form of multiple insertion orders from groups of entities under common
control, in either the Company’s standard form or in the client’s form. The loss of either client may result in a
significant decrease in our revenues, which could have a material adverse effect on our business.
Our business model may not be adaptable to a changing market.
Our current revenue model depends on advertising fees paid by travel companies. If current clients decide not
to continue advertising their offers with us and we are unable to replace them with new clients, our business may be
adversely affected. To be successful, we must provide online marketing solutions that achieve broad market
acceptance by travel companies. In addition, we must attract sufficient Internet users with attractive demographic
characteristics to our products. It is possible that we will be required to further adapt our business model in response
to changes in the online advertising market or if our current business model is not successful. If we are not able to
anticipate changes in the online advertising market or if our business model is not successful, our business could be
materially adversely affected.
We may not be able to obtain sufficient funds to grow our business and any additional financing may be
on terms adverse to your interests.
We intend to continue to grow our business, and intend to fund our current operations and anticipated growth
from the cash flow generated from our operations and our retained earnings. However, these sources may not be
sufficient to meet our needs. We may not be able to obtain financing on commercially reasonable terms, or at all.
If additional financing is not available when required or is not available on acceptable terms, we may be unable
to fund our expansion, successfully promote our brand name, develop or enhance our products and services, take
advantage of business opportunities, or respond to competitive pressures, any of which could have a material
adverse effect on our business.
If we choose to raise additional funds through the issuance of equity securities, you may experience significant
dilution of your ownership interest, and holders of the additional equity securities may have rights senior to those of
the holders of our common stock. If we obtain additional financing by issuing debt securities, the terms of these
securities could restrict or prevent us from paying dividends and could limit our flexibility in making business
decisions.
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. Specifically, 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
financial condition could be materially adversely affected.
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