Travelzoo 2008 Annual Report Download - page 36

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 financial 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
Our international expansion is expected to result in substantial operating losses, and is subject to other
material risks.
In May 2005, we began operations in the U.K. In 2006 we began operations in Canada, Germany and Spain. In
2007, we began operations in Australia, China, France, Hong Kong, Japan, and Taiwan. We expect our operations in
Asia Pacific and Europe will incur significant losses in the next two to three years primarily as a result of significant
expenses related to subscriber acquisition and other marketing activities. These losses may not have any recog-
nizable tax benefit. We expect this will have a material negative impact on our operating margins, net income and
cash flows. Any of these developments could result in a significant decrease in the trading price of our common
stock. In addition to uncertainty about our ability to generate net income from our foreign operations and expand our
international market position, there are certain risks inherent in doing business internationally, including:
• trade barriers and changes in trade regulations;
• difficulties in developing, staffing and simultaneously managing foreign operations as a result of distance,
language and cultural differences;
• stringent local labor laws and regulations;
• currency exchange rate fluctuations;
• risks related to government regulation; and
• potentially adverse tax consequences.
We may not be able to continue developing 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 differentiating 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 efforts. If we fail to successfully promote
and maintain our brand, incur significant expenses in promoting our brand and fail to generate a corresponding
increase in revenue as a result of our branding efforts, or encounter legal obstacles which prevent our continued use
of our brand name, our business could be materially adversely affected.
Our business may be sensitive to events affecting 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 effect of these circumstances on our business. In the longer
term, our business might be negatively affected by financial pressures on the travel industry. However, our business
may also benefit if travel companies increase their efforts to promote special offers 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
effect on our business.
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