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products we offer as discretionary items rather than necessities. As a result, our results of operations are sensitive to changes in macro-economic |
conditions that impact consumer spending, including discretionary spending. Some of the factors adversely affecting consumer spending |
include levels of unemployment; consumer debt levels; changes in net worth based on market changes and uncertainty; home foreclosures |
and changes in home values or the overall housing, residential construction or home improvement markets; fluctuating interest rates; credit |
availability, including mortgages, home equity loans and consumer credit; government actions; fluctuating fuel and other energy costs; |
fluctuating commodity prices and general uncertainty regarding the overall future economic environment. Adverse economic changes in any |
of the regions in which we sell our products could reduce consumer confidence and could negatively affect net revenue and have a material |
adverse effect on our operating results. Our business relies heavily on email and |
other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications |
could materially adversely affect our net revenue and business. Our business is highly dependent upon email and |
other messaging services for promoting our sites and products. If we are unable to successfully deliver emails or other messages to our |
subscribers, or if subscribers decline to open our emails or other messages, our net revenue and profitability would be materially adversely |
affected. Changes in how webmail applications organize and prioritize email may also reduce the number of subscribers opening our emails. |
For example, in 2013 Google Inc.’s Gmail service began offering a feature that organizes incoming emails into categories (for |
example, primary, social and promotions). Such categorization or similar inbox organizational features may result in our emails being |
delivered in a less prominent location in a subscriber’s inbox or viewed as “spam” by our subscribers and may reduce |
the likelihood of that subscriber opening our emails. Actions by third parties to block, impose restrictions on or charge for the delivery |
of emails or other messages could also adversely impact our business. From time to time, Internet service providers or other third parties |
may block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver |
emails or other messages to third parties. Changes in the laws or regulations that limit our ability to send such communications or impose |
additional requirements upon us in connection with sending such communications would also materially adversely impact our business. Our |
use of email and other messaging services to send communications about our products or other matters may also result in legal claims against |
us, which may cause us increased expenses, and if successful might result in fines and orders with costly reporting and compliance obligations |
or might limit or prohibit our ability to send emails or other messages. We also rely on social networking messaging services to send |
communications and to encourage customers to send communications. Changes to the terms of these social networking services to limit promotional |
communications, any restrictions that would limit our ability or our customers’ ability to send communications through their services, |
disruptions or downtime experienced by these social networking services or decline in the use of or engagement with social networking |
services by customers and potential customers could materially adversely affect our business, financial condition and operating results. 51 We are subject to risks related to online |
payment methods. We accept payments using a variety of methods, |
including credit card, debit card, PayPal, credit accounts and gift cards. As we offer new payment options to consumers, we may be subject |
to additional regulations, compliance requirements and fraud. For certain payment methods, including credit and debit cards, we pay interchange |
and other fees, which may increase over time and raise our operating costs and lower profitability. We are also subject to payment card |
association operating rules and certification requirements, including the Payment Card Industry Data Security Standard and rules governing |
electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. As our business |
changes, we may also be subject to different rules under existing standards, which may require new assessments that involve costs above |
what we currently pay for compliance. If we fail to comply with the rules or requirements of any provider of a payment method we accept, |
if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach |
occurs relating to our payment systems, we may, among other things, be subject to fines or higher transaction fees and may lose, or face |
restrictions placed upon, our ability to accept credit card and debit card payments from consumers or to facilitate other types of online |
payments. If any of these events were to occur, our business, financial condition and operating results could be materially adversely |
affected. We occasionally receive orders placed with fraudulent |
credit card data. We may suffer losses as a result of orders placed with fraudulent credit card data even if the associated financial |
institution approved payment of the orders. Under current credit card practices, we may be liable for fraudulent credit card transactions. |
If we are unable to detect or control credit card fraud, our liability for these transactions could harm our business, financial condition |
and results of operations. Government regulation of the Internet and |
e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business |
and results of operations. We are subject to general business regulations |
and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future regulations and laws |
could impede the growth of the Internet, e- commerce or mobile commerce. These regulations and laws may involve taxes, tariffs, privacy |
and data security, anti-spam, content protection, electronic contracts and communications, consumer protection, Internet neutrality and |
gift cards. It is not clear how existing laws governing issues such as property ownership, sales and other taxes and consumer privacy |
apply to the Internet as the vast majority of these laws were adopted prior to the advent of the Internet and do not contemplate or address |
the unique issues raised by the Internet or e-commerce. It is possible that general business regulations and laws, or those specifically |
governing the Internet or e-commerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another |
and may conflict with other rules or our practices. We cannot be sure that our practices have complied, comply or will comply fully with |
all such laws and regulations. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in |
damage to our reputation, a loss in business and proceedings or actions against us by governmental entities or others. Any such proceeding |
or action could hurt our reputation, force us to spend significant amounts in defense of these proceedings, distract our management, increase |
our costs of doing business, decrease the use of our sites by consumers and suppliers and may result in the imposition of monetary liability. |
We may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with |
any such laws or regulations. Adverse legal or regulatory developments could substantially harm our business. Further, if we enter into |
new market segments or geographical areas and expand the products and services we offer, we may be subject to additional laws and regulatory |
requirements or prohibited from conducting our business, or certain aspects of it, in certain jurisdictions. We will incur additional |
costs complying with these additional obligations and any failure or perceived failure to comply would adversely affect our business and |
reputation. Failure to comply with applicable laws and |
regulations relating to privacy, data protection and consumer protection, or the expansion of current or the enactment of new laws or |
regulations relating to privacy, data protection and consumer protection, could adversely affect our business and our financial condition. A variety of laws and regulations govern the collection, |
use, retention, sharing, export and security of personal information. Laws and regulations relating to privacy, data protection and consumer |
protection are evolving and subject to potentially differing interpretations. These requirements may be interpreted and applied in a manner |
that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices may |
not comply, or may not comply in the future with all such laws, regulations, requirements and obligations. Any failure, or perceived failure, |
by us to comply with our posted privacy policies or with any applicable privacy or consumer protection- related laws, regulations, industry |
self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other legal |
obligations relating to privacy or consumer protection could adversely affect our reputation, brand and business, and may result in claims, |
proceedings or actions against us by governmental entities or others or other liabilities or require us to change our operations and/or |
cease using certain data sets. Any such claim, proceeding or action could hurt our reputation, brand and business, force us to incur significant |
expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers |
and suppliers and may result in the imposition of monetary penalties. We may also be contractually required to indemnify and hold harmless |
third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy |
or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business. 52 Federal, state and international governmental |
authorities continue to evaluate the privacy implications inherent in the use of proprietary or third-party “cookies” and |
other methods of online tracking for behavioral advertising and other purposes. U.S. and foreign governments have enacted, have considered |
or are considering legislation or regulations that could significantly restrict the ability of companies and individuals to engage in |
these activities, such as by regulating the level of consumer notice and consent required before a company can employ cookies or other |
electronic tracking tools or the use of data gathered with such tools. Additionally, some providers of consumer devices and web browsers |
have implemented, or announced plans to implement, means to make it easier for Internet users to prevent the placement of cookies or to |
block other tracking technologies, which could if widely adopted significantly reduce the effectiveness of such practices and technologies. |
The regulation of the use of cookies and other current online tracking and advertising practices or a loss in our ability to make effective |
use of services that employ such technologies could increase our costs of operations and limit our ability to acquire new customers on |
cost-effective terms and consequently, materially adversely affect our business, financial condition and operating results. In addition, various federal, state and foreign |
legislative and regulatory bodies, or self-regulatory organizations, may expand current laws or regulations, enact new laws or regulations |
or issue revised rules or guidance regarding privacy, data protection and consumer protection. Any such changes may force us to incur |
substantial costs or require us to change our business practices. This could compromise our ability to pursue our growth strategy effectively |
and may adversely affect our ability to acquire customers or otherwise harm our business, financial condition and operating results. We rely on the performance of members of |
management and highly skilled personnel, and if we are unable to attract, develop, motivate and retain well-qualified employees, our business |
could be harmed. We believe our success has depended, and continues |
to depend, on the members of our senior management teams. The loss of any of our senior management or other key employees could materially |
harm our business. Our future success also depends on our continuing ability to attract, develop, motivate and retain highly qualified |
and skilled employees, particularly mid-level managers and merchandising and technology personnel. The market for such positions is competitive. |
Qualified individuals are in high demand, and we may incur significant costs to attract them. Our inability to recruit and develop mid-level |
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