Tucows 2012 Annual Report Download - page 8

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3
Portfolio
We derive revenue from our portfolio of domain names by displaying advertising on the domains and by
making them available for sale or lease. When a user types one of these domain names into a web browser, they are
presented with dynamically generated links that are pay-per-click advertising. Every time a user clicks on one of these
links, it generates revenue for us through our partnership with third-parties who provide syndicated pay-per-click
advertising (“parked page vendors”).
Our parked page vendor relationships may not continue to generate levels of revenue commensurate with what
we have achieved during past periods. Our ability to generate online advertising revenue from parked page vendors
depends on their advertising networks' assessment of the quality and performance characteristics of Internet traffic
resulting from online advertisements rendered on their websites. We have no control over any of these quality
assessments. Parked page vendors may from time to time change their existing, or establish new, methodologies and
metrics for valuing the quality of Internet traffic and delivering pay-per-click advertisements. Any changes in these
methodologies, metrics and advertising technology platforms could decrease the amount of revenue that we generate
from online advertisements. In addition, parked page vendors may at any time change or suspend the nature of the
service that they provide to online advertisers. These types of changes or suspensions would adversely impact our ability
to generate revenue from pay-per-click advertising.
Portfolio names are sold through our premium domain name service, auctions or in negotiated sales. The size of
our domain name portfolio varies over time, as we acquire and sell domains on a regular basis to maximize the overall
value and revenue generation potential of our portfolio. In evaluating names for sale, we consider the potential foregone
revenue from pay-per-click advertising, as well as other factors. The name will be offered for sale if, based on our
evaluation, the name is deemed non-essential to our business and management believes that deriving proceeds from the
sale is strategically more beneficial to our company.
Portfolio names that have been acquired from third-parties or through acquisition are included as intangible
assets with indefinite lives on our consolidated balance sheet.
We also generate advertising and other revenue through two ad-supported content sites, butterscotch.com and
tucows.com. These sites primarily derive revenue from banner and text advertising. In addition, their revenue is derived
from software developers who rely on us as a primary source of distribution. Software developers use our Author
Resource Center to submit their products for inclusion on our site and to purchase promotional placements of their
software.
Intellectual Property
We believe that we are well positioned in the wholesale domain registration and email markets due in part to
our highly-recognized “Tucows” and “OpenSRS” brands and the respect they confer on us as a defender of end-user
rights and reseller friendly approaches to doing business. We were among the first group of 34 registrars to be accredited
by ICANN in 1999, and we remain active in Internet governance issues.
Our success and ability to compete depend on our ability to develop and maintain the proprietary aspects of our
brand name and technology. We rely on a combination of trademark, trade secret and copyright laws, as well as
contractual restrictions to protect our intellectual property rights.
We have registered the Tucows trademark in the United States, Canada and the European Union and we register
additional service marks and trademarks as appropriate and where such protection is available.
We seek to limit disclosure of our intellectual property by requiring all employees and consultants with access
to our proprietary information to commit to confidentiality, non-disclosure and work-for-hire agreements. All of our
employees are required to sign confidentiality and non-use agreements, which provide that any rights they may have in
copyrightable works or patentable technologies accrue to us. Before entering into discussions with potential vendors and
partners about our business and technologies, we require them to enter into a non-disclosure agreement. If these
discussions result in a license or other business relationship, we also generally require that the agreement containing the
parties’ rights and obligations include provisions for the protection of its intellectual property rights.