Travelzoo 2009 Annual Report Download - page 38

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 France.
Although our revenues in Europe increased 70% in the twelve months ended December 31, 2009 from the
same period last year, we expect our operations in Europe will continue to incur losses in the next 12 months
primarily as a result of significant expenses related to subscriber acquisition and the launch of Fly.com. We intend to
continue adding a significant number of subscribers in selected countries in which we operate as we believe this is
one of the factors that will allow us to increase our advertising rates and increase our revenues in Europe.
The losses from our operations in Europe may not have any recognizable tax benefit. We expect this will have a
material negative impact on our 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 and Fly.com brand names 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 or the current global financial crisis
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.
We will not be able to attract travel and entertainment companies or Internet users if we do not continu-
ally 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 and
entertainment companies and Internet users find attractive. This could reduce the number of travel and
entertainment companies and Internet users using our products and materially adversely affect our business.
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