Travelzoo 2014 Annual Report Download - page 45

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We co-locate our production servers with Equinix, Inc. (“Equinix”), a global provider of hosting, network, and
application services. Equinix's facilities include features such as power redundancy, multiple egress and peering to other ISPs,
fire suppression and access to our own separate physical space. We believe our arrangements with Equinix will allow us to
grow without being limited by our own physical and technological capacity, and will also provide us with sufficient bandwidth
for our anticipated needs. Because of the design of our websites, our users are not required to download or upload large files
from or to our websites, which allows us to continue increasing the number of our visitors and page views without adversely
affecting our performance or requiring us to make significant additional capital expenditures.
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. U.S. 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.