Travelzoo 2015 Annual Report Download - page 58

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An increase in our refund rates related to our Local Deals and Getaway could reduce our liquidity and profitability.
We provide refunds related to our Local Deals and Getaway voucher sales. As we increase our revenue, our refund rates
may exceed our historical levels. A downturn in general economic conditions may also increase our refund rates. An increase in
our refund rates could significantly reduce our liquidity and profitability.
As we do not have control over our merchants and the quality of products or services they deliver, we rely on a
combination of our historical experience with our merchants over time and the type of refunds provided for development of our
estimate for refund claims. Our actual level of refund claims could prove to be greater than the level of refund claims we
estimate. If our refund reserves are not adequate to cover future refund claims, this inadequacy could have a material adverse
effect on our liquidity and profitability.
Our standard agreements with our merchants generally limit the time period during which we may seek reimbursement
for member refunds or claims. Our members may make claims for refunds with respect to which we are unable to seek
reimbursement from our merchants. Our members could also make false or fraudulent refund claims. Our inability to seek
reimbursement from our merchants for refund claims could have an adverse effect on our liquidity and profitability.
If our advertisers do not meet the needs and expectations of our members, our business could suffer.
Our business depends on our reputation for providing high-quality deals, and our brand and reputation may be harmed by
actions taken by advertisers or merchants that are outside our control. For our Local Deals and Getaway merchants, we are
selling vouchers on behalf of the merchants directly to our members and we face exposures should merchants not fully honor
the deals. As for our travel business, we are only collecting an advertising fee from the advertiser and the members are booking
the deal directly with the advertiser. Although the advertiser is responsible to the consumer to provide the consumer the deal it
advertised, our business can be adversely affected should an advertiser fail to comply with the terms of the advertised deal. Any
shortcomings of one or more of our merchants, particularly with respect to an issue affecting the quality of the deal offered or
the products or services sold, may be attributed by our members to us, thus damaging our reputation, brand value and
potentially affecting our results of operations. In addition, negative publicity and member sentiment generated as a result of
fraudulent or deceptive conduct by our merchants or advertisers could damage our reputation, reduce our ability to attract new
members or retain our current members, and diminish the value of our brand.
Our business relies heavily on e-mail and other messaging services, and any restrictions on the sending of e-mails or
messages or a decrease in member willingness to receive messages could adversely affect our revenue and business.
Our business is highly dependent upon e-mail and other messaging services. Deals offered through e-mails and other
messages sent by us, or on our behalf by our affiliates, generate a substantial portion of our revenue. Because of the importance
of e-mail and other messaging services to our businesses, if we are unable to successfully deliver e-mails or messages to our
members or potential members, or if members decline to open our e-mails or messages, our revenue and profitability would be
adversely affected. New laws and regulations regulating the sending of commercial e-mails, including those enacted in foreign
jurisdictions (such as Canada), may affect our ability to deliver of e-mails or messages to our members or potential members
and may also result in increased compliance costs. Further, actions by third parties to block, impose restrictions on, or charge
for the delivery of, e-mails or other messages could also materially and adversely impact our business. From time to time,
Internet service providers block bulk e-mail transmissions or otherwise experience technical difficulties that result in our
inability to successfully deliver e-mails or other messages to third parties. In addition, our use of e-mail and other messaging
services to send communications about our website or other matters may result in legal claims against us, which if successful
might limit or prohibit our ability to send e-mails or other messages. Any disruption or restriction on the distribution of e-mails
or other messages or any increase in the associated costs would materially and adversely affect our revenue and profitability. In
addition, the shift in our website traffic originating from mobile devices accessing our services may decrease our members'
willingness to use our services if they are not satisfied with our mobile user experience and could decrease their willingness to
be an e-mail member, which could adversely affect our revenue and profitability.