Tucows 2012 Annual Report Download - page 15

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misappropriation by third parties of our network of customer domain names and attempts by third parties to operate
websites on these domain names or to extort the customer whose domain name and website were misappropriated.
Furthermore, our risk of incurring liability for a security breach on a customer website would increase if the security
breach were to occur following our sale to a customer of an SSL certificate that proved ineffectual in preventing it.
Finally, we are exposed to potential liability as a result of our private domain name registration service, wherein we
become the domain name registrant, on a proxy basis, on behalf of our customers. While we have a policy of providing
the underlying Whois information and reserve the right to cancel privacy services on domain names giving rise to
domain name disputes including when we receive reasonable evidence of an actionable harm, the safeguards we have in
place may not be sufficient to avoid liability in the future, which could increase our costs of doing business.
The international nature of our business exposes us to certain business risks that could limit the effectiveness of our
growth strategy and cause our results of operations to suffer.
Expansion into international markets is an element of our growth strategy. Introducing and marketing our
services internationally, developing direct and indirect international sales and support channels and managing foreign
personnel and operations will require significant management attention and financial resources. We face a number of
risks associated with expanding our business internationally that could negatively impact our results of operations,
including:
• management, communication and integration problems resulting from cultural differences and geographic
dispersion;
• compliance with foreign laws, including laws regarding liability of online resellers for activities of customers
and more stringent laws in foreign jurisdictions relating to the privacy and protection of third-party data;
• accreditation and other regulatory requirements to provide domain name registration, website hosting and
other services in foreign jurisdictions;
• competition from companies with international operations, including large international competitors and
entrenched local companies;
• to the extent we choose to make acquisitions to enable our international expansion efforts, the identification o
f
suitable acquisition targets in the markets into which we want to expand;
• difficulties in protecting intellectual property rights in international jurisdictions;
• political and economic instability in some international markets;
• sufficiency of qualified labor pools in various international markets;
• currency fluctuations and exchange rates;
• potentially adverse tax consequences or an inability to realize tax benefits; and
• the lower level of adoption of the Internet in many international markets.
We may not succeed in our efforts to expand our international presence as a result of the factors described
above or other factors that may have an adverse impact on our overall financial condition and results of operations.
We currently license many third party technologies and may need to license further technologies which could delay
and increase the cost of product and service developments.
We currently license certain technologies from third parties and incorporate them into certain of our services
including email, anti-spam and anti-virus. The Internet services market is evolving and we may need to license
additional technologies to remain competitive. We may not be able to license these technologies on commercially
reasonable terms or at all. To the extent we cannot license necessary solutions, we may have to devote our resources to
development of such technologies, which could delay and increase the cost of product and service developments overall.