Travelzoo 2012 Annual Report Download - page 67

Our software is written using widely used standards, such as Visual Basic Script, and HTML, and interfaces with products from
Microsoft and ITA software. We have generally standardized our hardware platform on HP servers and Cisco switches.
Competition
We compete for advertising dollars with large Internet portal sites such as MSN and Yahoo! that offer listings or other advertising
opportunities to travel, entertainment and local businesses. We compete with search engines like Google and Bing that offer pay-per-click
listings. We compete with travel meta-search engines like Kayak and online travel and entertainment deal publishers. We compete with large
online travel agencies like Expedia and Priceline that also offer advertising placements and capture consumer interest. We compete with
companies like Groupon and LivingSocial that sell vouchers for deals from local businesses such as spas, hotels, restaurants and activity
companies. We expect to face increased competition from other Internet and technology-
based businesses such as Google and Microsoft, each of
which has launched initiatives which are directly competitive to our Local Deals and Getaway products. In addition, we compete with
newspapers, magazines and other traditional media companies that operate websites which provide advertising opportunities. We expect to face
additional competition as other established and emerging companies, including print media companies, enter our market. We believe that the
primary competitive factors are price, performance and audience quality.
Many of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and
other resources and larger advertiser bases than we do. In addition, current and potential competitors may make strategic acquisitions or establish
cooperative relationships to expand their businesses or to offer more comprehensive solutions.
New technologies could increase the competitive pressures that we face. The development of competing technologies by market
participants or the emergence of new industry standards may adversely affect our competitive position. Competition could result in reduced
margins on our services, loss of market share or less use of our products by our advertisers and consumers. If we are not able to compete
effectively with current or future competitors as a result of these and other factors, our business could be materially adversely affected.
Government Regulation and Legal Uncertainties
There are increasing numbers of laws and regulations pertaining to the Internet, including laws and regulations relating to user privacy,
liability for information retrieved from or transmitted over the Internet, online content regulation, and domain name registration. Moreover, the
applicability to the Internet of existing laws governing issues such as intellectual property ownership and infringement, copyright, patent,
trademark, trade secret, obscenity, libel and personal privacy is uncertain and developing.
Privacy Concerns. Government agencies are considering adopting regulations regarding the collection and use of personal identifying
information obtained from individuals when using Internet sites or e-mail services. While we have implemented and intend to implement
additional programs designed to enhance the protection of the privacy of our users, these programs may not conform to any regulations which
may be adopted by these agencies. In addition, these regulatory and enforcement efforts may adversely affect our ability to collect demographic
and personal information from users, which could have an adverse effect on our ability to provide advertisers with demographic information.
The European Union (the “EU”) has adopted a directive that imposes restrictions on the collection and use of personal data. The directive could
impose restrictions that are more stringent than current Internet privacy standards in the U.S. The directive may adversely affect our operations
in Europe.
Anti-Spam Legislation. The CAN-SPAM Act, a federal anti-spam law, pre-empts various state anti-spam laws and establishes a single
standard for e-mail marketing and customer communications. We believe that this law, on an overall basis, benefits our business as we do not
use spam techniques or practices and may benefit now that others are prohibited from doing so.
Domain Names . Domain names are the user's Internet “addresses.” The current system for registering, allocating and managing domain
names has been the subject of litigation and of proposed regulatory reform. We have registered travelzoo.com, travelzoo.ca, travelzoo.co.jp,
travelzoo.com.au, travelzoo.com.tw, travelzoo.co.uk, travelzoo.de, travelzoo.fr, travelzoo.org, travelzoo.net, weekend.com, and weekends.com,
among other domain names, and have registered “Travelzoo” as a trademark in the United States, Canada, the EU, and in various countries in
Asia Pacific. In January 2009, we purchased the domain name Fly.com . Because of these protections, it is unlikely, yet possible, that third
parties may bring claims for infringement against us for the use of our domain name and trademark. In the event such claims are successful, we
could lose the ability to use our domain names. There can be no assurance that our domain names will not lose their value, or that we will not
have to obtain entirely new domain names in addition to or in lieu of our current domain names if changes in overall Internet domain name rules
result in a restructuring in the current system of using domain names which include “.com,” “.net,” “.gov,” “.edu” and other extensions.
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