Travelzoo 2015 Annual Report Download - page 61

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in foreign exchange rates, which may differ across regions, makes it more difficult to forecast industry and consumer trends and
the timing and degree of their impact on our markets and business, which in turn could adversely affect our ability to
effectively manage our business and adversely affect our results of operations.
In addition, we face risks related to the growth rate and expansion of our international business, including our recent
expansion in Asia Pacific. A decline in the growth rates of our international businesses could have a negative impact on our
gross profit and earnings per share growth rates and, as a consequence, our stock price. Many of these regions have different
customs, currencies, levels of consumer acceptance and use of the Internet for commerce, legislation, regulatory environments,
tax laws and levels of political stability. International markets may have strong local competitors with an established brand that
may make expansion in that market difficult and costly and take more time than anticipated. In addition, compliance with legal,
regulatory or tax requirements in multiple jurisdictions places demands on our time and resources, and we may nonetheless
experience unforeseen and potentially adverse legal, regulatory or tax consequences.
Investment in new business strategies and acquisitions could disrupt our ongoing business and present risks not originally
contemplated.
We have invested, and in the future may invest, in new business strategies and acquisitions. For example, we recently
acquired businesses in Asia Pacific, including Australia, China, Hong Kong, Japan, Taiwan, and Southeast Asia. If the
businesses we have acquired do not perform as expected or we are unable to effectively integrate acquired businesses, our
operating results and prospects could be harmed. Expansions into foreign markets involve risks and uncertainties, including,
among other things, potential distraction of management from operations in North America and Europe, greater than expected
liabilities and expenses, inadequate return on capital, and unidentified issues not discovered in our investigations and
evaluations of those strategies and acquisitions. It may take us longer than expected to fully realize the anticipated benefits of
the Asia Pacific transaction, and those benefits may ultimately be smaller than anticipated, which could adversely affect our
business. If we are unsuccessful in expanding in new and existing international markets and effectively managing the increased
costs of the expansion, our business, results of operations and financial condition will be adversely affected. We are also subject
to risks typical of international businesses, including differing economic conditions, differing customs, languages and consumer
expectations, changes in political climate, differing tax structures and other regulations and restrictions, including labor laws,
and foreign exchange rate volatility
We may not be able to continue developing awareness of our brand names.
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 brands, incur
significant expenses in promoting our brands 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 names, our business could be
materially adversely affected.
If we fail to retain our existing members or acquire new members, our revenue and business will be harmed.
We spent $9.5 million, $7.9 million and $5.6 million on online marketing initiatives relating to member acquisition for
years ended December 31, 2015, 2014 and 2013 and expect to continue to spend significant amounts to acquire additional
members. We must continue to retain and acquire members in order to maintain or increase revenue. We cannot assure you that
the revenue from members we acquire will ultimately exceed the cost of acquiring new members. If members do not perceive
our offers to be of high value and quality or if we fail to introduce new and more relevant deals, we may not be able to acquire
or retain members. If we reduce our member acquisition costs, we cannot assure you that this will not adversely impact our
ability to acquire new members. If we are unable to acquire new members who purchase our deals directly or indirectly in
numbers sufficient to grow our business, or if members cease to purchase our deals directly or indirectly through our
advertisers, the revenue we generate may decrease and our operating results will be adversely affected. If the level of usage by
our member base declines or does not grow as expected, we may suffer a decline in member growth or revenue. A significant
decrease in the level of usage or member growth would have an adverse effect on our business, financial condition and results
of operations. In addition, a shift of our audience to mobile devices and social media channels without corresponding updates
of our offerings or marketing activities to address this audience could result in lower revenues.
Our business may be sensitive to events affecting the travel industry in general.
Events like the Middle East conflicts, the global financial crisis that began in 2008 or the recent terrorist attacks in France
have a negative impact on the travel industry. We are not in a position to evaluate the net effect of these circumstances on our