America Online 2010 Annual Report Download - page 20

Table of Contents
ITEM 1A. RISK FACTORS
The risks and uncertainties described below are those which we consider material and of which we are currently aware. In addition, this Annual Report
contains forward-looking statements that involve risks and uncertainties. You should carefully read the section "Cautionary Statement Concerning Forward-
Looking Statements".
If any of the following events occur, our business, financial condition or results of operations could be materially and adversely affected and the
trading price of our common stock could materially decline.
Risks Relating to Our Business
Our strategic shift to an online advertising-supported business model involves significant risks.
Following our strategic shift in 2006 from focusing primarily on generating subscription revenues to focusing primarily on attracting and engaging
Internet consumers and generating advertising revenues, we have become increasingly dependent on advertising revenues as our subscription revenues
continue to decline. We have not been able to generate sufficient growth in our advertising revenues to offset the loss of subscription revenues we have
experienced in recent years. In order for us to increase advertising revenues in the future, we believe it will be important to increase our overall volume of
advertising sold, including sales of advertising through our higher-priced channels, and to maintain or increase pricing for advertising. Our cash flows over the
next several years will be adversely affected by the continued decline of access subscribers. Additionally, advertising revenues are more unpredictable and
variable than our subscription revenues, and are more likely to be adversely affected during economic downturns, as spending by advertisers tends to be
cyclical in line with general economic conditions. Further, because subscription revenues have relatively low direct costs, the expected decline in subscription
revenues will likely result in declines in operating income and cash flows for the foreseeable future, even if we achieve significant growth in advertising
revenues. If we are unable to successfully implement our strategic plan and grow the earnings generated by our online advertising services, we may not be
able to support our business in the future.
Accordingly, we have recently implemented several restructuring plans to better align our organizational structure and costs with our strategy. We
expect to continue to actively manage our costs. However, if we do not fully realize or maintain the anticipated benefits of our restructuring plans and cost
reduction initiatives, our business could be adversely affected.
If we do not continue to develop and offer compelling content, products and services, our ability to attract new consumers or maintain the engagement of
our existing consumers could be adversely affected.
In order to attract consumers and generate increased engagement on AOL Properties, we believe we must offer compelling content, products and
services. However, acquiring, developing and offering new content, products and services, as well as new functionality, features and enhanced performance of
our existing content, products and services, may require significant costs and time to develop. In addition, consumer tastes are difficult to predict and subject
to rapid change. If we are unable to provide content, products and services that are sufficiently attractive and relevant to consumers (including subscribers to
our subscription access service), we may not be able to attract new consumers or maintain or increase our existing consumers' engagement. Even if we
successfully develop and offer compelling content, products and services, we may not be able to attract new consumers and maintain or increase our existing
consumers' engagement. We may acquire businesses in order to produce and offer new content, products and services, and the costs related to such
acquisitions may be more expensive than developing new content, products and services internally.
In general, subscribers to our subscription access service are among the most engaged consumers on AOL Properties, primarily related to search. As our
subscriber base declines, we need to maintain the engagement of
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