| GREENFIELD ONLINE INC Item 1A RISK FACTORS You should carefully consider the risks described below and elsewhere in this Annual Report on Form 10-K, which could materially and adversely affect our business, results of operations or financial condition |
| If any of the following risks actually occurs, the market price of our common stock would likely decline |
| We may not be successful at implementing important new business initiatives and key strategies which may have a material negative impact on our financial condition and results of operations |
| On September 29, 2005 we announced the appointment of Mr |
| Albert Angrisani as our new President and Chief Executive Officer |
| We subsequently undertook, among other things, the implementation of several new and important business initiatives and key strategies designed to improve our results of operations including but not limited to: • rightsizing of the North American business to bring expenses in line with current revenue levels; • shifting to a relationship-based management sales strategy; • targeting new client relationships and increasing our market share in North America; • implementing a new pricing strategy; • reinvigorating our North American sales efforts; • continuing to build our panel to support revenue growth and improving panel management techniques; • improving quality control and client satisfaction; • accelerating the integration of our Ciao subsidiary; and • developing and implementing new internal use software such as our new Unified Panel System for panel and project management, and our new GoQuote system, an online quotation ordering system |
| There can be no assurance that we will be able to successfully implement our new initiatives and strategies and if the measures envisaged by these new strategies are insufficient, it is possible that our initiatives and strategies would fail and that we would not achieve our objectives |
| In this case, our business and financial condition could deteriorate, employee morale could decline and client satisfaction could erode, and new measures would need to be devised |
| In addition, as a consequence of our new initiatives and strategies, our historical results of operations may not give you an accurate indication of our future results of operations or prospects |
| If we are unable to maintain the size or demographic composition of our Internet panels, our clients may stop using our products and services |
| The commercial viability of our marketing research data and our overall business is dependent on our ability to attract and maintain active panelists and ensure optimal panel composition to accommodate a broad variety of marketing research requests |
| There is currently no historical benchmark by which to predict the optimal size of research panels to ensure high response rates and maximum revenue generation per panelist |
| If we are unable to accurately determine or build optimal-sized panels, our current panelists may become overused and unresponsive to our requests to participate in surveys |
| If we fail to regenerate our panel with new and active panelists on a regular basis, the size and demographic diversity of our Internet panels may decrease and our clients may reduce or stop using our products and services, which may lead to a decline in our revenue |
| 16 _________________________________________________________________ [64]Table of Contents If the number of panelists participating in our Internet panels decreases, if we experience panel attrition rates in excess of our historical rates of 20prca per year, or if the cost of acquiring new panelists becomes excessive or the demographic composition of our panel narrows, our ability to provide our clients with accurate and statistically relevant information could suffer |
| This risk is likely to increase as our clients’ needs expand, and as more demographically diverse surveys are requested by our clients |
| If the rate at which our panelists respond to our surveys decreases, we may not be able to meet our clients’ needs |
| Our panelists participate in our surveys on a voluntary basis only, and there can be no assurance that they will continue to do so |
| Our ability to maintain adequate response rates may be harmed if: • our email-based survey invitations are not received by our panelists due to the use of spam-filtering and blocking software by individuals, corporations and Internet service providers; • our panelists become dissatisfied with the forms of participation incentives we offer; or • our panelists respond less frequently to our surveys, or stop responding altogether due to excessive requests for participation from us or other researchers |
| If we fail to maintain adequate response rates, we may be unable to meet current or future demand for our products and services and our revenue may decline |
| If the rate at which our panelists respond to our surveys decreases, we may be required to expend additional funds to retain our panelists or provide additional incentives to encourage panelist participation |
| In the past, the responsiveness of our panelists has been variable and a function of the length of the surveys to be completed and the incentives offered to our panelists in exchange for their participation |
| The incentives we offer panelists to participate in surveys generally consist of the opportunity to enter into sweepstakes and win prizes or direct cash incentives, however, the panels acquired as a result of our recent acquisitions of Zing Wireless, Inc |
| (“goZing”) and Ciao AG (“Ciao”) have been managed using a guaranteed, cash-based incentive system |
| In April 2004, we shifted the incentive program for our Internet panels in North America away from cash-based payments to a program emphasizing prize-based incentives |
| If we shift back to a cash-based payment incentive program for our Internet panels in North America, otherwise increase incentives or undertake more costly campaigns to retain our current panelists, our operating expenses may increase and our operating income may decline |
| We derived approximately 40prca of our total net revenue from ten clients in fiscal year 2005 |
| In our reportable segments of North America and Europe, we derived approximately 44prca and 51prca of net revenue from ten clients in fiscal year 2005, respectively |
| If we were to lose, or if there were a material reduction in business from, these clients, our net revenue might decline substantially |
| Our ten largest clients accounted for approximately 40prca of our total net revenue for fiscal year 2005 |
| On a consolidated basis no single client accounted for 10prca or more of our net revenue in 2005 |
| In our reportable segments of North America and Europe we derived approximately 44prca and 51prca of net revenue from ten clients in fiscal year 2005, respectively |
| In North America, one client, GfK-AG and its North American subsidiaries, represented approximately 10prca of net revenue |
| Two clients in Europe, Google, Inc |
| (a comparison shopping client) and Taylor Nelson Sofres, Plc and its 14 European subsidiaries, represented approximately 11prca and 10prca of net revenue, respectively |
| In calculating the revenue received from a particular client, we have aggregated all revenue from 17 _________________________________________________________________ [65]Table of Contents companies we know to be under common control |
| If we lose business from any of our top ten clients, our revenue may decline substantially |
| We may not be able to successfully compete with other Internet survey solutions providers, marketing research firms and other potential competitors which may cause us to lose sales or experience lower margins on sales |
| The market for our products and services is highly competitive |
| In North America we compete for clients with numerous Internet survey solution providers, such as Survey Sampling, Inc, Global Market Insite, Inc, e-Rewards, Inc, Lightspeed Online Research, Inc, Harris Interactive Service Bureau, SPSS Service Bureau, OpenVenue, Decision Analyst, Luth Research, Inc, MyPoints, and Common Knowledge, as well as large marketing research companies, such as Taylor Nelson Sofres, Plc, The Kantar Group and Harris Interactive, Inc, which maintain their own panels of online respondents |
| In Europe we compete against Internet survey solutions providers such as Survey Sampling/ Bloomerce, Novatris, Lightspeed Online Research, Inc, and we have recently experienced new competitive pressures from ToLuna Plc and Research Now Plc, which have both recently had their shares quoted on the AIM market of the London Stock Exchange |
| We expect to face intense competition in the future from other marketing research data collection firms that develop Internet-based products and services |
| We also expect to face competition from other companies with access to large databases of individuals with whom they can communicate through the Internet, such as email service providers and Internet-based direct marketers, as well as companies that develop and maintain a large volume of Internet traffic on their websites, such as large Internet portals, networks and search engines |
| These companies may, either alone or in alliance with other firms, enter the Internet-based marketing research data collection market |
| Particularly, such firms face low entry barriers to the sample-only segment of the Internet-based marketing research data collection market |
| Many of our current and potential competitors have longer operating histories, greater brand recognition and significantly greater financial and other resources than we do |
| These competitors may be able to undertake more extensive sales and marketing campaigns offering their services, adopt more aggressive pricing policies, and make more attractive offers to potential employees, strategic partners, panelists and customers than we can |
| In addition, these competitors and potential competitors may develop technologies that are superior to ours, or that achieve greater market acceptance than our own |
| If we do not successfully compete with these companies, we might experience a loss of market share and reduced revenue and profitability |
| Consolidation in the marketing research industry may result in fewer potential clients for us and a smaller market in general if companies with existing Internet-based panels combine with companies without such panels |
| Consolidations within the marketing research industry in general and among our clients in particular, such as the acquisition of NFO Worldgroup, Inc |
| by Taylor Nelson Sofres, Plc, the acquisition of ARBOR, Inc |
| by GfK-AG, and Gfk-AG’s recent acquisition of NOP World, could cause us to lose business from clients that acquire companies with Internet-based panels of their own |
| In addition, consolidated clients may possess superior bargaining power in the marketplace, allowing them to demand and receive lower prices for our products |
| Similarly, our smaller clients could be acquired by larger marketing research companies that have their own Internet-based panels, such as the recent acquisition of Wirthlin Worldwide by Harris Interactive, Inc, and their need for our products and services could be reduced or eliminated as a result |
| In any of these cases, our net revenue would be reduced |
| 18 _________________________________________________________________ [66]Table of Contents If our clients develop their own Internet-based panels, we may lose some or all of their business |
| Some of our large clients have the financial resources and sufficient need for Internet survey solutions that they may decide to build their own Internet-based panels |
| Should some or all of these clients decide to build their own Internet-based panels and succeed in doing so, their need for our products and services could be reduced or eliminated |
| Additionally, should our smaller clients consolidate and achieve sufficient scale, it may become economically feasible for them to build their own Internet-based panels |
| If they do so, their need for our products and services could be reduced or eliminated |
| In either case, our revenue would decline |
| If the marketplace significantly slows its migration from traditional data collection methods to Internet-based marketing research data collection, our growth may slow or cease altogether |
| The marketplace must continue to accept the Internet as a medium for collecting marketing research survey data and convert to Internet data collection methodologies in order for our business to grow at the rate that we anticipate |
| In addition, the success of our business depends on our ability to develop and market Internet survey solutions that achieve broad market acceptance and facilitate the transition from traditional data collection methods |
| If the marketplace slows its migration to Internet-based data collection products and services, we may have difficulty obtaining new clients and our revenue could decline |
| If we do not keep pace with technological change, we may be unable to implement our business strategy successfully |
| The marketing research data collection industry, particularly the Internet-based marketing research data collection industry, is characterized by intense competition, rapid new product and service developments and evolving methodologies |
| To succeed, we will need to effectively develop and integrate various software programs, technologies and methodologies required to enhance and improve our Internet survey solutions |
| Any enhancements of new products or services must meet the needs of our current and potential clients and achieve significant market acceptance |
| Our success will also depend on our ability to adapt to changing technologies by continually improving the performance features and reliability of our products and services |
| We may experience difficulties that could delay or prevent the successful development, introduction or marketing of new products and services |
| We could also incur substantial costs if we need to modify our products and services or infrastructure to adapt to these changes |
| If we are unable to manage and support our growth effectively, we may not be able to execute our business strategy successfully |
| We have rapidly expanded our international operations, but have limited experience expanding sales and operations facilities in foreign countries |
| If we fail to successfully integrate our acquisition of Ciao in Europe and expand our sales and marketing efforts there, and throughout the world, we will be unable to adequately address a sizeable portion of the worldwide market for Internet-based survey data collection and may not be able to grow our business at the rate we anticipate |
| Our employee base has grown from 54 in February 2002 to 584 as of December 31, 2005, including employees of our subsidiaries in Canada and India, and Ciao and its subsidiaries |
| We are integrating new personnel to support our growth, which makes it difficult to maintain our standards, controls and procedures |
| Members of our senior management team will be required to devote considerable amounts of their time and attention to this expansion and integration, which may reduce the time and attention they will have available to manage our operations and pursue strategic opportunities |
| If we are unable to successfully develop, implement, maintain and enhance our financial and 19 _________________________________________________________________ [67]Table of Contents accounting systems and controls, integrate new personnel and manage expanded operations, we may not be able to effectively manage our growth |
| We are concentrating a significant portion of our operational capacity in our facilities located in India, Canada, Germany, and Romania and may open additional facilities elsewhere in the world |
| If we fail to successfully build or maintain our operations in these countries or elsewhere, we may suffer interruptions in the delivery of our products and services to our clients |
| In addition, if we fail in this regard, we may be required to relocate these international operations to the United States or elsewhere and thereby incur higher labor costs and relocation costs |
| If we are unable to achieve international growth of our Internet panels or to overcome other risks of international operations, we may be unable to conduct business on a global level |
| Expanding our business and our Internet panels to operate on a global level could pose the following risks to us: • more restrictive privacy and data protection laws; • difficulty in recruiting and managing employees in foreign countries; • aversion to US companies or non-domestic companies in the regions where we plan to expand; • unexpected changes in regulatory requirements; • export controls relating to encryption technology; • currency exchange rate fluctuations; • problems collecting accounts receivable and longer collection periods; • potentially adverse tax consequences; • political instability; and • Internet access restrictions |
| Additionally, in the process of expanding our global operations, we may encounter more restrictive regulations and laws in Europe or elsewhere that could inhibit our ability to expand our Internet panels |
| Currency exchange rate fluctuations could lower our revenue and net income |
| In 2005 we derived and expect to continue to derive, a significant portion of our revenue in markets outside of the United States, primarily Europe and the United Kingdom |
| Our contracts in Europe including the United Kingdom are denominated primarily in Euros and the British Pound |
| In preparing our Consolidated Financial Statements, we translate revenue and expenses in foreign countries from their local currencies into US dollars using weighted average exchange rates during the period reported and spot rates at the balance sheet date |
| If the US dollar strengthens relative to local currencies, particularly the Euro and the British Pound, our reported revenue, gross profit and net income will likely be reduced |
| Given the global, complex political and economic dynamics that affect exchange rate fluctuations, we cannot accurately estimate the effect these fluctuations may have upon future reported results or our overall financial condition |
| We have significant operations in India that could be limited or prohibited by changes in the political or economic stability of India or government policies in India or the United States |
| We have a team of 211 professionals in India as of December 31, 2005, who provide us with data processing and other services |
| The development of our operations center in India has been facilitated partly by the liberalization 20 _________________________________________________________________ [68]Table of Contents policies pursued by the Indian government over the past decade |
| A significant change in India’s economic liberalization and deregulation policies could increase our labor costs or create new regulatory expenses for us |
| Also, numerous states have introduced legislation aimed at restricting overseas outsourcing and encouraging US businesses to keep their operations within the United States |
| The US Senate has recently approved an amendment that would prohibit companies from using money from federal contracts to outsource jobs overseas, and would prohibit state contract work from being performed overseas with money received from federal grants |
| If these or similar laws or regulations are enacted, our ability to continue overseas operations could be harmed and our competitive position would be damaged |
| Acquisitions or investments in other companies may have a negative impact on our business and our stock price |
| As part of our strategy to expand our Internet panels, our technology infrastructure and products and services, we may consider acquiring or making investments in complementary businesses, services, products or technologies as appropriate opportunities arise, such as our acquisition and integration of OpinionSurveys |
| The risks we may face in acquiring or investing in complementary businesses include: • difficulties with the integration and assimilation of the acquired business, including maintaining the frequency of survey participation of panelists who join our panel through acquisitions, and operational inefficiencies resulting from operating with multiple and potentially incompatible systems until integration is complete; • diversion of our management team’s attention from other business concerns; • availability of favorable acquisition or investment financing; • potential undisclosed liabilities associated with acquisitions; • loss of clients resulting from their desire to diversify their online sample data sources as we increase our market share by acquiring or investing in complementary businesses; • loss of key employees of any acquired business; and • our ability to successfully operate and grow business units within the acquired companies that provide products and services other than Internet survey solutions |
| Acquisitions or investments may require us to expend significant amounts of cash |
| This would result in our inability to use these funds for other business purposes |
| Additionally, if we fund acquisitions through further issuances of our common stock, our stockholders will be diluted, which may cause the market price of our common stock to decline |
| If we fund acquisitions by incurring indebtedness, it may require us to dedicate a portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital and capital expenditures, and for other general corporate purposes |
| The potential impairment or complete write-off of goodwill and other intangible assets related to any such acquisition may reduce our overall earnings, which in turn could negatively affect the price of our common stock |
| A substantial portion of our comparison shopping portal traffic is derived through optimization of search engine results and changes in these algorithms may cause our comparison shopping revenue to decline |
| A substantial portion of our comparison shopping portal traffic results from our optimization of search engine results, which directs search engine users to our Ciao comparison shopping portals |
| This search engine optimization is based on our understanding of the search algorithms used by major search engines to catagorize the content of the 21 _________________________________________________________________ [69]Table of Contents Internet |
| Periodically, major search engines revise, update or improve their algorithms, and in such cases we may experience a substantial reduction in search engine generated comparison shopping Internet traffic, which we may not be able to rapidly replace, if at all |
| As our revenue from our comparison shopping busines is largely derived as a result of Internet traffic to our comparison shopping portals, a decline in such Internet traffic will adversely affect our revenue from our comparison shopping business |
| Our success depends on our ability to retain the current members of our senior management team and other key personnel |
| Our success depends to a significant extent on the continued services of our core senior management team of Albert Angrisani, our CEO; Robert E Bies, our Executive Vice President and CFO; and Jonathan A Flatow, our Vice President and General Counsel |
| If one or more of these individuals were unable or unwilling to continue in his present position, our business would be disrupted and we might not be able to find replacements on a timely basis or with the same level of skill and experience |
| Finding and hiring any such replacements could be costly, disruptive to our business, and might require us to grant significant equity awards or other incentive compensation, which could adversely impact our financial results |
| We do not maintain key-person life insurance for any of our management personnel or other key employees |
| If we fail to continue to attract and retain project management professionals and other highly-skilled personnel, we may be unable to successfully execute our business strategy |
| Our business model is based, and our success depends upon, our ability to attract, retain and motivate highly-skilled project management professionals and other technical, managerial, marketing, sales and client support personnel throughout the world |
| Because competition to attract trained technical and project management personnel is intense in the marketing research data collection industry, we may experience difficulty attracting, integrating or retaining the number of qualified personnel needed to successfully implement our business strategy |
| If we are delayed in recruiting key employees, we may be forced to incur significant additional recruitment, compensation and relocation expenses |
| If we are unable to hire and retain such personnel in the future, we may not be able to operate our business as we do today or meet the needs of our clients |
| In the event of a departure of one of our key personnel, we could incur severance obligations and other expenses that could be significant |
| We do not have adequate plans or procedures in place to allow us to rapidly rebuild our operational and technical infrastructure in case of a catastrophic event |
| Our ability to provide our Internet survey solutions and comparison shopping services depends on the efficient and uninterrupted operation of our computer and communications systems |
| Our service has experienced system interruptions from time to time and could experience periodic system interruptions in the future |
| Our systems and operations also are vulnerable to damage or interruption from human error, natural disasters, power loss, telecommunication failures, break-ins, sabotage, computer viruses, design defects, vandalism, denial-of-service attacks, fire, flood, hurricane, terrorism and similar events |
| We do not have full second-site redundancy, a formal disaster recovery plan or alternative providers of hosting services, and outages at our data centers could mean the loss of some or all of our website functionality |
| Our business interruption insurance, if any, may not adequately compensate us for losses that may occur |
| Any system failure that causes an interruption in service or decreases the responsiveness of our service could impair our reputation and cause our revenues to decline |
| 22 _________________________________________________________________ [70]Table of Contents We may be at a competitive disadvantage if we are unable to protect our proprietary rights or if we infringe on the proprietary rights of others, and related litigation could be time consuming and costly |
| Because we operate our business through websites and rely heavily on computer hardware and software, proprietary rights, particularly trade secrets and copyrights, are critical to our success and competitive position |
| The actions we take to protect our proprietary rights may be inadequate |
| In addition, effective copyright, trademark and trade secret protection may be unenforceable or limited in certain countries and, due to the global nature of the Internet, we may be unable to control the dissemination of our content and products and the use of our products and services |
| In addition, third parties may claim that we have violated their intellectual property rights |
| For example, companies have recently brought claims against other Internet companies regarding alleged infringement of patent rights relating to methods of doing business over the Internet |
| To the extent that we violate a patent or other intellectual property right of another party, we may be prevented from operating our business as planned or may be required to pay damages, obtain a license, if available, for the use of the patent or other right to use a non-infringing method to accomplish our objectives |
| Our ability to execute our business strategy will suffer if a successful claim of infringement is brought against us and we are unable to introduce new trademarks, develop non-infringing technology or license the infringed or similar technology on a timely basis |
| Moreover, our general liability insurance may not be adequate to cover all or any of the costs incurred defending patent or trademark infringement claims, or to indemnify us for liability that may be imposed |
| Fluctuations in our quarterly operating results may cause our stock price to decline and limit our stockholders’ ability to sell our common stock in the public market |
| In the past, our operating results have fluctuated significantly from quarter to quarter and we expect them to continue to do so in the future due to a variety of factors, many of which are outside of our control |
| Our operating results may in some future quarter fall below our expectations or the expectations of securities analysts and investors |
| In this event, the trading price of our common stock could decline significantly |
| In addition to the risks disclosed elsewhere in this report, factors outside of our control that have caused our quarterly operating results to fluctuate in the past and that may affect us in the future, include: • fluctuations in general economic conditions; • demand for marketing research products and services generally; • fluctuations in the marketing research budgets of the end-users serviced by our marketing research clients; • the failure of our large clients to win Internet-based marketing research projects; • fluctuations in foreign currency exchange rates; • lower than expected project win-rates; • the development of products and services by our competitors; • project cancellations by our clients or changes in project completion dates by our clients, effecting the timing of our recognition of revenue; and • changes in search engine algorithms |
| 23 _________________________________________________________________ [71]Table of Contents In addition, factors within our control, such as the quality of our products and services and our capacity to deliver projects to our clients in a timely fashion, have caused our operating results to fluctuate in the past and may affect us similarly in the future |
| The factors listed above may affect both our quarter-to-quarter operating results as well as our long-term success |
| Given the fluctuations in our operating results, you should not rely on quarter-to-quarter comparisons of our results of operations as an indication of our future performance or to determine any trend in our performance |
| Fluctuations in our quarterly operating results could cause the market price of and demand for our common stock to fluctuate substantially, which may limit our stockholders’ ability to sell our common stock on the public market |
| We might have difficulty obtaining additional capital, which could prevent us from achieving our business objectives |
| If we are successful in raising additional capital, it may have a dilutive effect on our stockholders |
| We may need to raise additional capital in the future to fund the expansion of our Internet panels and the marketing of our products and services, or to acquire or invest in complementary businesses, technologies or services |
| If additional financing is not available, or available only on terms that are not acceptable to us, we may be unable to fund the development and expansion of our business, attract qualified personnel, promote our brand name, take advantage of business opportunities or respond to competitive pressures |
| Also, if we raise funds by issuing additional shares of our common stock or securities convertible into common stock, our stockholders will experience dilution, which may be significant, to their ownership interest in us |
| If we raise funds by issuing shares of a different class of stock other than our common stock or by issuing debt, the holders of such different classes of stock or debt securities may have rights senior to the rights of the holders of our common stock |
| Government regulations could limit our Internet activities or result in additional costs of doing business and conducting marketing research on the Internet |
| The federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”), which took effect on January 1, 2004, imposes a series of new requirements on the use of commercial email messages and directs the FTC to issue new regulations that define relevant criteria and to enforce the Act |
| Among other things, one proposal being examined by the FTC is a federal “Do Not Email” registry |
| The CAN-SPAM Act and the regulations enforcing the Act may significantly impact the manner in which we recruit and communicate with our panelists |
| It may also expose us to potential liability or require us to change or abandon our webmaster affiliate program and other recruitment techniques |
| We may also need to develop technology or systems to comply with the Act’s requirements for honoring “opt-out” requests |
| Additionally, there are many state statutes that purport to regulate the distribution of commercial email |
| If we cannot comply with the requirements of the CAN-SPAM Act or these state statutes, we may need to cease operating portions of our business, which could reduce our revenue |
| The Internet Tax Freedom Act (the “ITFA”) that was originally passed in 1995 prohibited states or political subdivisions from (i) imposing taxes on Internet access and (ii) imposing multiple and discriminatory taxes on e-commerce |
| The ITFA expired on November 1, 2003 and has not been renewed |
| As a result of the expiration of the ITFA, states are no longer prohibited under federal law from imposing taxes that were covered by the ITFA In the absence of a renewal of the ITFA, states may begin to impose taxes on Internet access, related charges and other e-commerce products and services |
| If one or more states impose such taxes in a manner that results in the taxation of Internet access providers, ourselves, our customers or other parties upon whom these parties or our panelists rely for access to the Internet or other products or services, our expenses may increase and it may become difficult to recruit and maintain our panelists or sell our products and services |
| Proposed legislation has been introduced in Congress to 24 _________________________________________________________________ [72]Table of Contents reinstate and broaden the ITFA It is unclear whether or not this legislation will be enacted and, if so, the substance of its provisions |
| A number of states within the United States are participants in the Streamlined Sales Tax Project (the “SSTP”), which seeks to establish a uniform, nationwide state-based taxation system that requires remote sellers to administer and collect their respective sales taxes even though they do not maintain a presence within that state |
| If the SSTP is successful in implementing such a system, and if our products or services are subject to this system, our resulting tax, administrative and compliance burden will increase |
| Separately, countries belonging to the European Union (the “EU”) impose a value added tax (“VAT”) on the sale of goods and services, including digital goods and services |
| An EU Directive that took effect on July 1, 2003 requires businesses that sell digital goods and services from outside the EU to certain customers within the EU to collect, administer and remit the VAT To the extent that our products or services are subject to the EU Directive, our resulting administrative and compliance burden will increase |
| In February 1999, the FCC issued a declaratory ruling interpreting the Telecommunications Act of 1996 to allow local exchange carriers to receive reciprocal compensation for traffic delivered to information service providers, particularly Internet service providers, on the basis that traffic bound for Internet service providers is largely interstate |
| As a result of this ruling, the costs of transmitting data over the Internet may increase |
| If this occurs, our tax liability and operating expenses may increase |
| In addition to those described above, we expect more stringent laws and regulations to be enacted both domestically and globally in the near future due to the increasing popularity and use of the Internet |
| Any new legislation or regulations or the application of existing laws and regulations to the Internet could limit our effectiveness in conducting Internet-based marketing research and increase our operating expenses |
| In addition, the application of existing laws to the Internet could expose us to substantial liability for which we might not be indemnified by content providers or other third-parties |
| Existing laws and regulations currently address, and new laws and regulations and industry self-regulatory initiatives are likely to address, a variety of issues that could have a direct impact on our business, including: • user privacy and expression; • the rights and safety of children; • intellectual property; • information security; • anti-competitive practices; • the convergence of offline channels with Internet commerce; and • taxation and pricing |
| Current laws that explicitly apply to the Internet have not yet been interpreted by the US courts and their applicability and scope are not yet defined |
| Any new laws or regulations relating to the Internet could have an impact on the growth of the Internet and, as a result, might limit our ability to administer our surveys and provide our products and services |