Travelzoo 2008 Annual Report Download - page 35

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 one client for a substantial part of our revenues.
In the fiscal year ended December 31, 2008, Orbitz Worldwide accounted for 13% of our revenues. The
agreements with Orbitz Worldwide are in the form of multiple insertion orders, in either the Company’s standard
form or in the client’s form. The loss of this 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 primarily 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.
For the year ended December 31, 2008 our cash and cash equivalents decreased by $8.5 million to
$14.2 million. We intend to continue to grow our business, and intend to fund our current operations and
anticipated growth from the cash on hand. However, this 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. Recessions could have a
material adverse effect on our business and financial condition.
Our operations could be significantly hindered by the occurrence of a natural disaster or other
catastrophic event.
Our operations are susceptible to outages due to fire, floods, power loss, telecommunications failures, break-
ins and similar events. In addition, a significant 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 significant 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
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