| JUPITERMEDIA CORP ITEM 1A RISK FACTORS YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN INVESTMENT DECISION THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING OUR COMPANY OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE HARMED BY ANY OF THE FOLLOWING RISKS THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE TO ANY OF THE FOLLOWING RISKS, AND YOU MIGHT LOSE ALL OR PART OF YOUR INVESTMENT Risks Related to Our Business We may not successfully develop or acquire new and quality images which may inhibit the growth of our online images business |
| The growth of our online images business depends in part upon our ability to provide our customers ready access to a large database of quality clipart, photos, animations and other images and content |
| Although our strategy is to continue to improve and increase the quality and number of our online images, we may not be able to develop or acquire new and quality content due to intense competition, lack of availability or other factors |
| Furthermore, the growth of our content and its overall quality may not keep pace with that of our competitors or the needs of our customers |
| Even if we are able to develop or acquire new content, we may not be able to successfully integrate that content into our existing inventory and systems |
| We have a limited history operating our combined businesses which could result in business decisions that may harm our operations and cause our stock price to fluctuate or decline |
| We have a limited history operating our combined businesses, which makes it difficult to predict future revenues and operating expenses |
| The JupiterImages business was not initially integrated into our business until June 2003 |
| We continue to integrate recent acquisitions within our JupiterImage business, including the acquisition of Creatas, LLC on March 7, 2005, Goodshoot SAS on May 18, 2005, PictureArts Corporation on July 18, 2005, Bananastock Limited on October 13, 2005 and Animation Factory on December 23, 2005 |
| Accordingly, the past performance of these businesses and our company as a whole on a combined basis may not be indicative of the future performance of these businesses or our company as a whole under current management |
| Furthermore, our management has limited experience operating the JupiterImages business, as well as our combined businesses as a whole |
| This limited operating experience could require additional management resources, and may disadvantage us in relation to competitors with more experienced management in these industry segments |
| Such factors could result in increased expenses, reduced revenues and loss of market share, any of which could cause our stock price to fluctuate or decline |
| We may fail to identify or successfully acquire businesses, content and images that would otherwise enhance our product offerings to our customers and users, and as a result our revenue may decrease or fail to grow |
| We have acquired and intend to continue to acquire, where appropriate opportunities arise, businesses, content and images as a key component of our growth strategy |
| We may not be successful in identifying, appropriate acquisition opportunities and, as a result, our growth strategy could be adversely affected |
| If we identify an appropriate acquisition opportunity, we might not be able to negotiate the terms of the acquisition successfully or finance the transaction |
| In order to finance any strategic acquisitions, one or more of which may be very significant to our company, we may have to incur additional indebtedness, use our existing cash or credit facilities and/or issue securities |
| We may be unable to obtain adequate financing for acquisitions on terms and 11 ______________________________________________________________________ [39]Table of Contents conditions acceptable to us |
| In order to finance acquisitions, we may sell equity securities at a discount to our common stock’s market value |
| Any issuance of equity securities may result in substantial dilution to existing stockholders, which may be increased as a result of any discount to our common stock’s market price |
| Any future acquisition or investment may result in amortization expenses related to intangible assets |
| If the market price for acquisition targets increases, or if we fail to acquire desired targets for this or any other reason, our business may fail to grow at historical rates or at all, and as a result our stock price could fluctuate or decline |
| We may fail to successfully integrate or achieve expected synergies from recent or future acquisitions, which could result in increased expenses, diversion of management’s time and resources and a reduction in expected revenues, any of which could cause our stock price to fluctuate or decline |
| We have recently acquired new businesses, content and images, in particular for our JupiterImages business, and expect to continue to make acquisitions in the future |
| With respect to recent and any future acquisitions, we may fail to successfully integrate our financial and management controls, technology, reporting systems and procedures, or adequately expand, train and manage our work force |
| The process of integration could take a significant period of time and will require the dedication of management and other resources, which may distract management’s attention from our other operations |
| If we make acquisitions outside of our core businesses, assimilating the acquired technology, services or products into our operations could be difficult and costly |
| Our inability to successfully integrate any acquired company, or the failure to achieve any expected synergies, could result in increased expenses and a reduction in expected revenues or revenue growth, and as a result our stock price could fluctuate or decline |
| Given the tenure and experience of our CEO and President, and their guiding roles in developing our business and growth strategy since our inception, our growth may be inhibited or our operations may be impaired if we were to lose the services of either of them |
| Our growth and success depends to a significant extent on our ability to retain Alan M Meckler, our Chairman and Chief Executive Officer, and Christopher S Cardell, our President and Chief Operating Officer |
| These persons have developed, engineered and stewarded the growth and operation of our business since its inception |
| The loss of the services of either of these persons could inhibit our growth or impair our operations and cause our stock price to decline |
| Our CEO, President and other employees with specialized knowledge and expertise in the operation of one or more of our businesses could use that knowledge and expertise to compete against us, which could reduce our market share |
| We do not have a non-competition agreement with Mr |
| Meckler or Mr |
| Cardell, or with any other member of management or any of our sales or technical personnel |
| As a result, we may not have any recourse if one or more of them were to terminate their employment and join a competitor or start up a competing venture |
| Competition from key employees or a defection by one or more of them to a competitor could harm our business and results of operations by strengthening our competitors and, as a result, reducing our market share and revenues |
| Our quarterly operating results are subject to fluctuations, and our stock price may decline if we do not meet the expectations of investors and analysts |
| Our quarterly revenues and operating results are difficult to predict and may fluctuate significantly from quarter to quarter due to a number of factors, many of which are outside of our control |
| We believe that our online media revenues are subject to seasonal fluctuations because advertisers generally place fewer advertisements during the first and third calendar quarters of each year |
| Furthermore, Internet user traffic typically drops during the summer months, which reduces the number of advertisements to sell and deliver |
| Expenditures by advertisers tend to vary in cycles that reflect overall economic conditions as well as budgeting 12 ______________________________________________________________________ [40]Table of Contents and buying patterns |
| Our overall revenues could be materially reduced in any period by a decline in the economic prospects of advertisers, IT professionals, business professionals and creative professionals or the economy in general, which could alter current or prospective customers’ spending priorities or budget cycles or extend our sales cycle for the period |
| Finally, we have engaged in a number of significant acquisitions in recent years which make it difficult to analyze our results and to compare them from period to period, including the acquisitions of Animation Factory on December 23, 2005, Bananastock Limited on October 13, 2005, PictureArts Corporation on July 18, 2005, Goodshoot SAS on May 18, 2005, Creatas, LLC on March 7, 2005, Hemera Technologies, Inc |
| on November 12, 2004, Thinkstock Images and Thinkstock Footgage on July 28, 2004 and Comstock Images on April 1, 2004 |
| Any future acquisitions will also make our results difficult to compare from period to period |
| Due to such risks, you should not rely on quarter-to-quarter comparisons of our results of operations as an indicator of our future results |
| Our online media revenues, which represented 26dtta5prca of our total revenues for the year ended December 31, 2005, have decreased in two of the past four years and could decrease in future periods, and as a result our stock price could fluctuate or decline |
| For the years ended December 31, 2004 and 2005, we derived 48dtta4prca and 26dtta5prca, respectively, of our revenues from our online media business |
| Our online media business represents the second largest segment of our business |
| Revenues from our online media business were dlra37dtta5 million, dlra27dtta2 million, dlra25dtta0 million, dlra30dtta0 million and dlra33dtta1 million for the years ended December 31, 2001, 2002, 2003, 2004 and 2005, respectively, representing a compound annual average decrease of 18dtta3prca per year for 2001, 2002 and 2003 and a compound annual average increase of 15prca per year for 2004 and 2005 |
| Online media revenues decreased in 2001 and 2002 due to the general downturn in the US economy and weakness in corporate spending for technology |
| This resulted in a decrease in technology advertising and marketing, which is the primary source of our online media revenues, and we experienced a significant decrease in the number of advertisers in each of 2002 and 2003 over the prior year |
| A future downturn in online advertising spending, technology spending or the US economy generally could result in a decline in the number of our advertisers and our online media revenues in future periods |
| Revenues from our online media business also decreased in 2002 and 2003 as a result of a significant decrease in barter revenue |
| Barter represents non-cash transactions where we deliver advertisements on our networks in exchange for services of other companies, primarily advertisements on their Web sites or in their publications |
| We do not expect to generate significant revenues from barter in future periods |
| Our online media revenues were dlra30dtta0 million and dlra33dtta1 million, respectively, for the years ended December 31, 2004 and 2005, respectively, representing a 20dtta1prca and 10dtta3prca increase, respectively, from the same periods in the prior year |
| However, due to the risks described above as well as other risk factors highlighted in this prospectus, our online media revenues may decrease in future periods or may not experience growth |
| Any decrease in our online media revenues or any failure to meet our total revenue objectives could result in a decrease or fluctuations in our stock price |
| Because a limited number of advertisers constitute a significant portion of our revenues, our revenues could decline significantly if one or more of these advertisers were to cease advertising with us |
| For the year ended December 31, 2005, our top 20 advertisers accounted for 54prca of our online media revenues |
| We expect that a limited number of advertisers will continue to account for a significant portion of our revenues |
| Moreover, we typically sell advertisements under purchase order agreements |
| Generally, these agreements are subject to cancellation by our advertisers with no minimum notice requirement |
| From time to time, our content may focus on areas that some of our advertisers find contrary to their commercial interests |
| In the event that this occurs, an advertiser may choose to reduce or terminate their commercial relationship with us |
| If we lose one or more of the advertisers that represent a material portion of the revenues we have generated to date, our business, results of operations and financial condition would suffer |
| In addition, if a significant advertiser fails to pay amounts it owes us, or does not pay those amounts on time, our revenues and our stock price could decline |
| 13 ______________________________________________________________________ [41]Table of Contents Our business may suffer if we are unable to maintain or enhance awareness of our brands or if we incur excessive expenses attempting to promote our brands |
| Promoting and strengthening the JupiterImages, JupiterWeb, internet |
| com, DevXcom and JupiterResearch brands is critical to our efforts to attract and retain users of our online media networks, advertisers, customers and clients for our content and research products, and to increase attendance at our events |
| We believe that the importance of brand recognition will likely increase due to the increasing number of competitors entering our markets |
| In order to promote these brands, in response to competitive pressures or otherwise, we may find it necessary to increase our marketing budget, hire additional marketing and public relations personnel or otherwise increase our financial commitment to creating and maintaining brand loyalty among our clients |
| If we fail to effectively promote and maintain our brands, or incur excessive expenses attempting to promote and maintain our brands, our business and financial results may suffer |
| We have generated significant losses since inception and may not report positive net income in the future |
| We had net losses of dlra511cmam000 for the year ended December 31, 2002, net income of dlra1dtta4 million for the year ended December 31, 2003, net income of dlra15dtta7 million for the year ended December 31, 2004 and net income of dlra78dtta4 million for the year ended December 31, 2005 |
| As of December 31, 2005, we had an accumulated deficit of dlra45dtta3 million |
| 2003 was the first year in which we achieved profitability on an annual basis to date |
| Any failure to achieve profitability could deplete our current capital resources and reduce our ability to raise additional capital in the future |
| Our advertising, promotion and selling and general and administrative expenses are based on expectations of future revenues and are relatively fixed in the short term |
| These expenses totaled dlra23dtta5 million for the year ended December 31, 2004 and dlra44dtta2 million for the year ended December 31, 2005 |
| If our revenues are lower than expected, we might not be able to quickly reduce spending |
| Any shortfall in revenues would have a direct impact on operating results for a particular quarter and these fluctuations could affect the market price of our common stock |
| The impairment of a significant amount of goodwill and intangible assets on our balance sheet could result in a decrease in earnings and, as a result, our stock price could decline |
| In the course of our operating history, we have acquired numerous assets and businesses |
| Some of our acquisitions have resulted in the recording of a significant amount of goodwill and/or intangible assets on our financial statements |
| We had dlra239dtta4 million of goodwill and net intangible assets as of December 31, 2005 |
| The goodwill and/or intangible assets were recorded because the fair value of the net tangible assets acquired was less than the purchase price |
| We may not realize the full value of the goodwill and/or intangible assets |
| As such, we evaluate goodwill and other intangible assets with indefinite useful lives for impairment on an annual basis or more frequently if events or circumstances suggest that the asset may be impaired |
| We evaluate other intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable |
| If goodwill or other intangible assets are deemed to be impaired, we would write off the unrecoverable portion as a charge to our earnings |
| If we acquire new assets and businesses in the future, as we intend to do, we may record additional goodwill and/or intangible assets |
| The possible write-off of the goodwill and/or intangible assets could negatively impact our future earnings and, as a result, the market price of our common stock could decline |
| Our business, which is dependent on centrally located communications and computer hardware systems, is vulnerable to natural disasters, telecommunication failures, terrorism and similar problems, and we are not fully insured for losses caused by all of these incidents |
| Our operations are dependent on our communications systems and computer hardware, most of which is located in a data center operated by Qwest Communications, Inc |
| These systems could be damaged by fire, floods, earthquakes, power loss, telecommunication failures and similar events |
| Our insurance policies have limited coverage levels for loss or damages in these events and may not adequately compensate us for any losses 14 ______________________________________________________________________ [42]Table of Contents that may occur |
| In addition, terrorist acts or acts of war may cause harm to our employees or damage our facilities, our clients, our clients’ customers and vendors, or cause us to postpone or cancel, or result in dramatically reduced attendance at, our events, which could adversely impact our revenues, costs and expenses and financial position |
| The potential for future terrorist attacks, the national and international responses to terrorist attacks or perceived threats to national security, and other acts of war or hostility have created many economic and political uncertainties that could adversely affect our business and results of operations in ways that cannot be presently predicted, and could cause our stock price to fluctuate or decline |
| We are predominantly uninsured for losses and interruptions to our systems or cancellations of events caused by terrorist acts and acts of war |
| System failures and other events may prohibit users from accessing our networks or Web sites, which could reduce traffic on our networks or Web sites and result in decreased capacity for advertising space |
| Our networks and Web sites must accommodate a high volume of traffic and deliver frequently updated information |
| They have in the past experienced, and may in the future experience, slower response times or decreased traffic for a variety of reasons |
| Since we became a public company in 1999, there have been instances where our online networks as a whole, or our Web sites individually, have been inaccessible |
| Also, slower response times, which have occurred more frequently, can result from general Internet problems, routing and equipment problems involving third party Internet access providers, problems with third party advertising servers, increased traffic to our servers, viruses and other security breaches |
| We also depend on information providers to provide information and data feeds on a timely basis |
| Some of the services in our networks or Web sites could experience temporary interruptions in service due to the failure or delay in the transmission or receipt of this information |
| In addition, our users depend on Internet service providers and online service providers for access to our online networks or Web sites |
| Moreover, our Internet infrastructure might not be able to support continued growth of our online networks or Web sites |
| Any of these problems could result in less traffic to our networks or Web sites or harm the perception of our networks or Web sites as reliable sources of information |
| Less traffic on our networks and Web sites or periodic interruptions in service could have the effect of reducing demand for advertising on our networks or Web sites, thereby reducing our advertising revenues |
| Our network operations may be vulnerable to hacking, viruses and other disruptions, which may make our products and services less attractive and reliable |
| Internet usage could decline if any well-publicized compromise of security occurs |
| “Hacking” involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment |
| Hackers, if successful, could misappropriate proprietary information or cause disruptions in our service |
| We may be required to expend capital and other resources to protect our Web sites against hackers |
| Our online networks could also be affected by computer viruses or other similar disruptive problems, and we could inadvertently transmit viruses across our networks to our users or other third parties |
| Any of these occurrences could harm our business or give rise to a cause of action against us |
| Providing unimpeded access to our online networks is critical to servicing our clients and providing superior customer service |
| Our inability to provide continuous access to our online networks could cause some of our clients to discontinue purchasing our products and services and/or prevent or deter our users from accessing our networks |
| Our intellectual property is important to our business, and our failure to protect that intellectual property could result in increased expenses and adversely affect our future growth and success |
| Trademarks, copyrights, domain names and other proprietary rights are important to our success and competitive position |
| Our failure to protect our existing intellectual property rights may result in the loss of exclusivity or the right to use our content and technologies |
| If we do not adequately ensure our freedom to use certain content and technology, we may have to pay others for rights to use their intellectual property, pay damages for infringement or misappropriation, and/or be enjoined from using this intellectual property |
| 15 ______________________________________________________________________ [43]Table of Contents We seek protection of our digital images, editorial content, logos, brands, domain names and software relating to our businesses, including the registration of our trademarks, service marks and copyrights both in the United States and in foreign countries |
| However, our actions may be inadequate to protect our trademarks, copyrights, domain names and other proprietary rights or to prevent others from claiming violations of their trademarks and other proprietary rights |
| We might not be able to obtain effective trademark, copyright, domain name and trade secret protection in every country in which we distribute our services or make them available through the Internet |
| For instance, it may be difficult for us to enforce certain of our intellectual property rights against third parties who may have inappropriately acquired interests in our intellectual property rights by filing unauthorized trademark applications in foreign countries to register our marks |
| It is also difficult and costly for us to police unauthorized use of our proprietary rights and information, particularly in foreign countries |
| We may not have, in all cases, conducted formal evaluations to confirm that our technology and products do not or will not infringe upon the intellectual property rights of third parties |
| As a result, we cannot be certain that our technology and products and services do not or will not infringe upon the intellectual property rights of third parties |
| If we were found to have infringed on a third party’s intellectual property rights, the value of our brands and our business reputation could be impaired, and sales of our products and services could suffer |
| Although we generally obtain our content, including images for our JupiterImages business, from our employees or through work-for-hire arrangements, we also license content from third parties |
| In these license arrangements, we generally obtain representations as to origin and ownership of this content and the licensors have generally agreed to defend, indemnify and hold us harmless from any third party claims that this content violates the rights of another |
| However, we cannot be sure that these protections will be effective or sufficient or that we will be able to maintain our content on commercially reasonable terms |
| In seeking to protect our trademarks, copyrights and other proprietary rights, or defending ourselves against claims of infringement brought by others, with or without merit, we could face costly litigation and the diversion of our management’s attention and resources, which could result in increased expenses and operating losses, any of which could cause our stock price to fluctuate or decline |
| Our research business revenues and growth could suffer if we prove unable to anticipate market trends or if we fail to provide information that is useful to our clients |
| The success of our JupiterResearch business, which accounted for 23dtta5prca of our consolidated revenues for the year ended December 31, 2003, 15dtta0prca of our consolidated revenues for the year ended December 31, 2004 and 8dtta7prca of consolidated revenues for the year ended December 31, 2005, depends in large part on our ability to anticipate, research and analyze rapidly changing technologies and industries and on our ability to provide this information in a timely and cost-effective manner |
| If we are unable to continue to provide credible and reliable information that is useful to companies, our business and financial results may suffer |
| Our research products and services focus on information technology and the Internet |
| The Internet is undergoing frequent and dramatic changes, including the introduction of new products and the obsolescence of others, shifting business strategies and revenue models, changing legal and regulatory environments, the formation of numerous new companies and high rates of growth |
| Because of these rapid and continuous changes in the Internet markets, we face significant challenges in providing timely analysis and advice |
| Many of the industries and areas on which we focus are relatively new, and it is very difficult to provide predictions and projections as to the future marketplace, revenue models and competitive factors |
| In addition, many companies have not embraced the use of the Internet as a medium and are unclear as to how to allocate corporate resources effectively |
| As a result, some companies may conclude that our research products are not useful to their businesses |
| Further, the need to continually update our research requires the commitment of substantial financial and personnel resources |
| If our predictions or projections prove to be wrong, if we are unable to continually update our information, or if companies do not agree with our analysis of market trends and the areas on which we choose to focus, our reputation may suffer and demand for our research products and services may decline |
| 16 ______________________________________________________________________ [44]Table of Contents If we fail to maintain an effective direct sales force, our revenues could decline significantly |
| We depend primarily on our direct sales force to sell advertising on our online networks as well as for the sales of our research products |
| We also depend on our sales force to license images and to enter into e-commerce agreements |
| This dependence involves a number of risks, including: • the need to increase the size of our direct sales force; • the need to hire, retain, integrate and motivate additional sales and sales support personnel; • lack of experience of our new sales personnel; and • competition from other companies in hiring and retaining sales personnel |
| Our revenues could decline if we fail to maintain an effective direct sales force, and as a result our stock price could decline |
| Intense competition in each of our businesses could reduce our market share, which could result in a decrease in revenue |
| The market for visual content and related products and services is highly competitive |
| We believe that the principal competitive factors are: name recognition; company reputation; the quality, relevance and diversity of the images in a company’s collections; the quality of contributing photographers, filmmakers and other imagery providers under contract with a company; maintenance of existing, and establishment of new, relationships with image distributors; effective use of current and emerging technology; customer service; pricing policies and practices; accessibility of imagery; and speed and ease of search and fulfillment |
| Some of our existing and potential competitors may have or may develop products, services or technology superior to ours, or other competitive advantages |
| If we are not able to compete effectively, or if a significant image provider or distributor were to terminate or fail to renew an agreement with us, we could lose market share, which could have an adverse effect on our revenues and operating results |
| Our current and potential competitors include: other general visual content providers such as Getty Images, Inc |
| and Corbis Corporation; specialized visual content companies that are well established in their local, content or product-specific market segments; stock film footage businesses such as Corbis Motion; and commissioned photographers |
| There are also many of small stock photography and film footage agencies and image content aggregators and distributors throughout the world |
| The market for Internet-based services is intensely competitive and rapidly changing |
| Since the advent of commercial services on the Internet, the number of online services competing for users’ attention and spending has proliferated |
| We expect that competition will continue to intensify |
| We compete with other companies, which direct a portion of their overall Web content at the IT and Internet professional community, such as CNET, Inc, CMP Media Inc, International Data Group, Open Source Development Network, Inc |
| and Ziff-Davis, Inc |
| We also compete for circulation and advertising impressions with general interest portal and destination Web sites as well as traditional media |
| In the market for research products and services, our principal competitors are Forrester Research, Inc, Gartner Inc |
| and IDC, a subsidiary of International Data Group |
| Numerous other companies, however, compete with us both domestically and internationally in providing research and analysis related to a specific industry or geographic area |
| In addition, we face increased direct and indirect competition from IT research firms, business consulting firms, electronic and print publishing companies and equity analysts employed by financial services companies |
| Many of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we have |
| These competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements and to devote greater resources to the development, promotion and sale of their products and services than we can |
| As a result, we could lose market share to our competitors in one or more of our business and our revenues could decline |
| 17 ______________________________________________________________________ [45]Table of Contents We may not be able to attract and retain qualified personnel, which could impact the quality of our content and services and the effectiveness and efficiency of our management, resulting in increased costs and losses in revenue |
| Our success also depends on our ability to attract and retain qualified technical, sales and marketing, customer support, financial and accounting, legal and other managerial personnel |
| The competition for personnel in the industries in which we operate is intense |
| Our personnel may terminate their employment at any time for any reason |
| Loss of personnel may also result in increased costs for replacement hiring and training |
| If we fail to attract new personnel or retain and motivate our current personnel, we may not be able to operate our businesses effectively or efficiently, serve our customers properly or maintain the quality of our content and services |
| We face potential liability for information and images that we publish or distribute, provide at events or disseminate through our research analysts |
| Due to the nature of content published on our online networks, including content placed on our online networks by others, and as a publisher and distributor of both images and of original research, market projections and trend analyses, we face potential liability based on a variety of theories, including defamation, negligence, copyright or trademark infringement, personal injury or other legal theories based on the nature, publication or distribution of this information |
| Such claims may also include, among others, claims that by providing hypertext links to Web sites operated by third parties, we are liable for wrongful actions by those third parties through these Web sites |
| Similar claims have been brought, and sometimes successfully asserted, against online services |
| It is also possible that users could make claims against us for losses incurred in reliance on information provided on our networks |
| Such claims, whether brought in the United States or abroad, could divert management time and attention and result in significant cost to investigate and defend, regardless of the merit of these claims |
| Our insurance may not adequately protect us against these claims |
| The filing of these claims may also damage our reputation as a high-quality provider of unbiased, timely analysis and result in client cancellations or overall decreased demand for our products and services |
| Our stock price could continue to be extremely volatile, making an investment in our common stock less predictable and more risky, and could spur costly litigation against us |
| The market price of our common stock has fluctuated in the past and is likely to continue to be highly volatile |
| For example, the market price of our common stock has ranged from dlra0dtta96 per share to dlra72dtta25 per share since our initial public offering in June 1999 |
| The stock market has experienced extreme price and volume fluctuations and the market prices of securities of technology companies, particularly Internet-related companies, have been highly volatile |
| In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against such a company |
| Such litigation could result in substantial costs and a diversion of our management’s attention and resources |
| Because our stock ownership is heavily concentrated in Alan M Meckler, our Chairman and CEO, Mr |
| Meckler will be able to influence matters requiring stockholder approval |
| As of February 23, 2005, Alan M Meckler beneficially owned approximately 34dtta68prca of our outstanding common stock |
| As a result of his beneficial ownership, Mr |
| Meckler, acting alone or with others, is able to influence matters requiring stockholder approval, including the election of directors and approval of significant transactions |
| This concentration of ownership may have the effect of delaying or preventing a change in control of our company, which some investors might deem to be in the best interests of the stockholders |
| Our charter documents and the Delaware General Corporation Law may inhibit a takeover, even if such takeover would be beneficial to our stockholders |
| Our Amended and Restated Certificate of Incorporation, bylaws and the Delaware General Corporation Law could make it more difficult for a third party to acquire us, even if a change in control would be beneficial to our 18 ______________________________________________________________________ [46]Table of Contents stockholders |
| Our Amended and Restated Certificate of Incorporation allows our board of directors to issue preferred stock that may have rights and preferences that are superior to those of our common stock, which could deter a potential acquiror |
| Our bylaws provide that a special meeting of stockholders may only be called by our Board, Chairman of the Board, Chief Executive Officer or President or at the request of the holders of a majority of the outstanding shares of our common stock, which could deter a potential acquiror or delay a vote on a potentially beneficial change in control transaction until the annual meeting of stockholders |
| Risks Related to the Information Technology and Internet Industries A lack of continued growth in the use of information technology and the Internet could inhibit the growth of our business |
| Our market is relatively new and rapidly evolving |
| If information technology or Internet usage does not continue to grow or declines, the use of our networks could decrease or fail to increase and the growth of our business could decline |
| Information technology and Internet usage may be inhibited for a number of reasons, including: • inadequate network infrastructure; • security concerns; • inconsistent quality of service; • lack of availability of cost-effective and high-speed service; and • changes in government regulation and other law |
| If information technology and Internet usage grows, the Internet infrastructure might not be able to support the demands placed on it by this growth or its performance and reliability may decline |
| In addition, future outages and other interruptions occurring throughout the Internet could lead to decreased use of our networks and would therefore harm our business |
| If we are unable to adapt to the relatively new and rapidly changing Internet advertising environment, we may be unable to attract advertisers to our networks and our revenues could suffer |
| The Internet is a relatively new advertising medium and advertisers that have historically relied upon traditional advertising media may be reluctant to advertise on the Internet |
| In addition, advertisers that have already invested substantial resources in other advertising methods may be reluctant to adopt a new strategy |
| Moreover, filtering software programs that limit or prevent advertising from being delivered to an Internet user’s computer are now more effective and widely available |
| Widespread adoption of this filtering software by Internet users could impair the commercial viability of Internet advertising |
| Our business would suffer a decrease in revenues if the market for Internet advertising fails to recover from its recent downturn or develops more slowly than expected |
| In addition, several pricing models have emerged for selling advertising on the Internet |
| A substantial majority of our advertising is sold on a cost-per-impression basis |
| We also offer advertising based on certain cost-per-action models |
| Pricing models continue to emerge and our advertising revenue could suffer if we are unable to adapt to this evolving environment |
| Legal uncertainties could add additional costs and risks to doing business on the Internet, which would cause an increase in the costs and risks associated with operating our business |
| Legal standards relating to the validity, enforceability and scope of protection of proprietary rights in Internet-related businesses and digital rights are still evolving |
| As a result, we cannot assure the future viability or value of our proprietary rights |
| We might not have taken adequate steps to prevent the misappropriation or infringement of our intellectual property |
| Any such infringement or misappropriation, should it occur, might 19 ______________________________________________________________________ [47]Table of Contents decrease the value of our intellectual property and undermine our competitive advantage with respect to such property, resulting in impairment of our business, results of operations and financial condition |
| In addition, we may have to file lawsuits in the future to perfect or enforce our intellectual property rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others |
| These lawsuits could result in substantial costs and divert our resources and the attention of our management, which could reduce our earnings and cause our stock price to decline |
| Regulation could reduce the value of our domain names |
| We own the Internet domain names “Jupitermedia |
| com,” “Jupiterresearch |
| com,” “DevXcom,” “Photos |
| com,” “PictureArts |
| com,” as well as numerous other domain names both in the United States and internationally |
| Domain names generally are regulated by Internet regulatory bodies |
| The regulation of domain names in the United States and in foreign countries is subject to change |
| Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names |
| As a result, we might not acquire or maintain the “Jupitermedia |
| com,” “Jupiterresearch |
| com,” “PictureArts |
| com,” “thinkstock |
| com” domain names, or comparable domain names, in all the countries in which we conduct business |
| Because our domain names are important assets which increase our value and contribute to our competitive advantage through name recognition and reputation, a failure to acquire or maintain such domain names in certain countries could inhibit our growth |
| Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is still evolving |
| Therefore, we might be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our trademarks and other proprietary rights |
| Any impairment in the value of these important assets could cause our stock price to decline |
| Changes in laws and standards relating to data collection and use practices and the privacy of Internet users and other individuals could impair our efforts to advertise our products and services and thereby decrease our advertising revenue |
| With our customers’ permission, we may use this information to inform our customers of products and services that may be of interest to them |
| We may also share this information with our advertising clients if our customers have elected to receive additional promotional materials within a specified topic and have granted us permission to do so |
| The US federal and various state governments have recently adopted or proposed limitations on the collection, distribution and use of personal information of Internet users |
| The European Union adopted a directive that may limit our collection and use of information from Internet users in Europe |
| In addition, growing public concern about privacy and the collection, distribution and use of personal information has led to self-regulation of these practices by the Internet advertising and direct marketing industry and to increased federal and state regulation |
| Since many of the proposed laws or regulations are just being developed, we cannot yet determine the impact these regulations may have on our business |
| Although our compliance with all applicable federal and state laws and regulations has not hurt our business, additional, more burdensome federal or state laws or regulations, including consumer privacy laws, could be enacted or applied to us or our customers |
| Such laws or regulations could impair our ability to collect customer information which helps us to provide more targeted advertising for our customers, thereby impairing our ability to maximize advertising revenue from our advertising clients |
| Taxation of online commerce in certain states or jurisdictions could result in a decrease in sales and an increase in compliance costs, either of which could cause our stock price to decline |
| Tax authorities in a number of states, as well as a Congressional advisory commission, are currently reviewing the appropriate tax treatment of companies engaged in online commerce, and new state tax regulations 20 ______________________________________________________________________ [48]Table of Contents may subject us to additional state sales and other taxes |
| If one or more local, state or foreign jurisdictions impose sales tax collection obligations on us, we may suffer decreased sales into such state or jurisdiction as the effective cost of purchasing goods from us increases for those residing in these states or jurisdictions |
| We pay value added taxes on subscription sales in the European Union |
| We may also be subject to value added and other taxes if we sell other merchandise to customers located in the European Union and we may incur significant financial and organizational burdens in order to set up the infrastructure required to comply with applicable tax regulations |
| The information technology and Internet industries are characterized by rapid technological change, which could require frequent and costly technological improvements and, if we fail to continually improve our content offerings and services, we could cease to be competitive in our businesses |
| Rapid technological developments, evolving industry standards and user demands, and frequent new product introductions and enhancements characterize the market for Internet products and services |
| These market characteristics are exacerbated by the emerging nature of the market and the fact that many companies are expected to introduce new Internet products and services in the near future |
| Our future success and competitive edge will depend on our ability to continually improve our content offerings and services |
| In addition, the widespread adoption of developing multimedia-enabling technologies could require fundamental and costly changes in our technology and could fundamentally affect the nature, viability and measurability of Internet-based advertising, which could harm our advertising revenues |