SEC Info - Constant Contact/Inc - S-1

Constant Contact/Inc · S-1 · On 7/6/07

Constant Contact/Inc · S-1 · On 7/6/07

Filed On 7/6/07 2:31pm ET · SEC File 333-144381 · Accession Number 950135-7-4211

Registration Statement (General Form) · Form S-1
Filing Table of Contents

S-1 · Constant Contact, Inc. Form S-1
Document Table of Contents

This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]

Filed On 7/6/07 2:31pm ET · SEC File 333-144381 · Accession Number 950135-7-4211

Registration Statement (General Form) · Form S-1Filing Table of Contents

S-1 · Constant Contact, Inc. Form S-1Document Table of Contents

This is an EDGAR HTML document rendered as filed. [ Alternative Formats ]

Registration Statement (General Form) · Form S-1
Filing Table of Contents

S-1 · Constant Contact, Inc. Form S-1
Document Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
		Alternative Formats (RTF, XML, et al.) Balance Sheets Business Capitalization Certain Transactions Description of Capital Stock Dilution Dividend Policy Experts Forward-Looking Statements Index to Financial Statements Legal Matters Management Management s Discussion and Analysis of Financial Condition and Results of Operations Notes to Financial Statements Principal and Selling Stockholders Prospectus Summary Reports of Independent Registered Public Accounting Firms Risk Factors Selected Financial Data Shares Eligible for Future Sale Statements of Cash Flows Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders Equity (Deficit) Statements of Operations Table of Contents Underwriting Use of Proceeds Where You Can Find More Information
1	1st Page
"	Table of Contents
"	Prospectus Summary
"	Risk Factors
"	Forward-Looking Statements
"	Use of Proceeds
"	Dividend Policy
"	Capitalization
"	Dilution
"	Selected Financial Data
"	Management s Discussion and Analysis of Financial Condition and Results of Operations
"	Business
"	Management
"	Principal and Selling Stockholders
"	Certain Transactions
"	Description of Capital Stock
"	Shares Eligible for Future Sale
"	Underwriting
"	Legal Matters
"	Experts
"	Where You Can Find More Information
"	Index to Financial Statements
"	Reports of Independent Registered Public Accounting Firms
"	Balance Sheets
"	Statements of Operations
"	Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders Equity (Deficit)
"	Statements of Cash Flows
"	Notes to Financial Statements

As filed with the Securities and Exchange Commission on July 6, 2007.

Registration No. 333-

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

CONSTANT CONTACT, INC.

(Exact Name of Registrant as Specified in Its Charter)


Delaware	7372	04-3285398
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code No.)	(I.R.S. Employer Identification No.)

Reservoir Place

1601 Trapelo Road, Suite 329

Waltham, Massachusetts 02451

(781) 472-8100

(Address, including zip code, and telephone number,

Including area code, of registrant’s principal executive offices)

Constant Contact, Inc.

Reservoir Place

1601 Trapelo Road, Suite 329

Waltham, Massachusetts 02451

(781) 472-8100

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies to:


Mark G. Borden, Esq. Philip P. Rossetti, Esq. Wilmer Cutler Pickering Hale and Dorr LLP 60 State Street Boston, Massachusetts 02109 (617) 526-6000		Robert P. Nault, Esq. Constant Contact, Inc. Reservoir Place 1601 Trapelo Road, Suite 329 Waltham, Massachusetts 02451 (781) 472-8100		John R. Utzschneider, Esq. Bingham McCutchen LLP 150 Federal Street Boston, Massachusetts 02110 (617) 951-8000

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this form are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

CALCULATION OF REGISTRATION FEE


(1)	Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
(2)	Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

The information contained in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, Dated July 6, 2007

Shares

Common Stock

$ per share

This is an initial public offering of our common stock. We are offering shares and the selling stockholders identified in this prospectus are offering shares.

We expect that the price to the public in the offering will be between $ and $ per share. The market price of the shares after the offering may be higher or lower than the offering price.

We have applied to include our common stock on the Nasdaq Global Market under the symbol “CTCT.”

Investing in our common stock involves risks. See “Risk Factors” beginning on page 7.


	Per Share	Total

Price to the public	$	$
Underwriting discount
Proceeds, before expenses, to Constant Contact
Proceeds, before expenses, to the selling stockholders

The selling stockholders have granted an over-allotment option to the underwriters. Under this option, the underwriters may elect to purchase a maximum of additional shares from the selling stockholders within 30 days following the date of this prospectus to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


CIBC World Markets	Thomas Weisel Partners LLC


William Blair & Company	Cowen and Company	Needham & Company, LLC

The date of this prospectus is , 2007

Prospectus Summary

This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including our financial statements and related notes, and the risk factors beginning on page 7, before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, we use the terms “Constant Contact,” “our company,” “we,” “us” and “our” in this prospectus to refer to Constant Contact, Inc.

Constant Contact

Overview

Constant Contact is the leading provider of on-demand email marketing solutions for small organizations, including small businesses, associations and non-profits. As of June 30, 2007, we had over 120,000 customers. Our customers use our email marketing solution to more effectively and efficiently create, send and track professional and affordable permission-based email marketing campaigns. With these campaigns, our customers can build stronger relationships with their customers, clients and members, increase sales and expand membership. Our email marketing solution incorporates a wide range of customizable templates to assist in campaign creation, user-friendly tools to import and manage contact lists and intuitive reporting to track campaign effectiveness. In June 2007, we introduced an online survey solution that complements our email marketing solution and enables small organizations to easily create and send surveys and effectively analyze responses. We are committed to providing our customers with a high level of support, which we deliver via phone, chat, email and our website.

Our email marketing customer base has grown steadily from approximately 25,000 at the end of 2004 to over 120,000 as of June 30, 2007. We estimate that approximately two-thirds of our customers have fewer than ten employees and in the first quarter of 2007 our top 50 email marketing customers accounted for approximately 1% of our gross email marketing revenue. Our email marketing customers pay a monthly subscription fee that generally ranges between $15 per month and $150 per month based on the size of their contact lists and, in some cases, volume of mailings. For the first quarter of 2007, our average monthly revenue per email marketing customer exceeded $32. We believe that the simplicity of on-demand deployment combined with our affordable subscription fees and functionality facilitate adoption of our solution by our target customers while generating significant recurring revenue. From January 2005 through June 2007, at least 97.4% of our customers in a given month have continued to utilize our email marketing solution in the following month. Since the first quarter of 2002, we have achieved 21 consecutive quarters of growth in customers and revenue. Based on the current size of our customer base, we believe that we are the largest provider of email marketing services to small organizations.

We acquire our customers through a variety of paid and unpaid sources. Our paid sources include online marketing through search engines, advertising networks and other sites; offline marketing through radio advertising, local seminars and other marketing efforts; and relationships with over 1,700 active channel partners, which include national small business service providers such as Network Solutions, LLC, American Express Company and VistaPrint Limited as well as local small business service providers. Our unpaid sources of customer acquisition include referrals from our growing customer base, general brand awareness and the inclusion of a link to our website in the footer of more than 500 million emails currently sent by our customers each month. We believe that during the first quarter of 2007 at least 45% of our new email marketing customers were generated through unpaid sources.

We were founded in 1995 and our on-demand email marketing solution was first offered commercially in 2000. In 2006, our revenue was $27.6 million and our net loss was $7.8 million, and in the quarter ended March 31, 2007 our revenue was $9.7 million and our net loss was $2.7 million.

Industry Background

We believe that small organizations represent a large market for email marketing. Based on statistics compiled by the U.S. Small Business Administration and others, we believe that our email marketing solutions could potentially address the needs of more than 27.3 million small organizations in the United States.

To date, however, small organizations have been slower than large organizations to adopt email marketing. Many small organizations lack familiarity with the benefits of email marketing and an understanding of how to prepare, execute and measure a campaign. Similarly, they often do not have the technical expertise necessary to implement email marketing software or the financial resources to hire in-house staff or retain an outside agency to support the effort. We believe that existing alternatives, primarily the use of general email applications, are poorly suited to meeting the email marketing needs of small organizations. General email applications and services, such as Microsoft Outlook^®, America Online^® or Hotmail^®, are designed for one-on-one emails and do not have the formatting, graphics or links needed to produce effective email marketing campaigns. The other major alternative is enterprise email marketing providers that offer sophisticated services for large organizations with sizeable marketing budgets and deliver services at a price and scale far beyond the scope of most small organizations. As a result, we believe there is a significant opportunity for an email marketing solution tailored to the needs of small organizations.

Our Products and Services

We provide small organizations with a convenient, effective and affordable way to communicate with their constituents. Our email marketing solution provides customers with the following features:


	•	Campaign Creation Wizard. A comprehensive, easy-to-use interface that enables our customers to create and edit email campaigns.

	•	Professionally Developed Templates. Pre-designed email message forms that help our customers to quickly create attractive and professional campaigns.

	•	Contact List Management. These tools help our customers build and manage their email contact lists.

	•	Email Tracking and Reporting. These features enable our customers to review and analyze the overall effectiveness of a campaign by tracking and reporting aggregate and individualized information.

	•	Email Delivery Management. These tools are incorporated throughout our email marketing solution and are designed to maintain our high deliverability rates.

	•	Image Hosting. This feature enables customers to store up to five images for free, view and edit these images and resize them as necessary.

	•	Security and Privacy. We protect our customers’ data and require that our customers adopt a privacy policy to assist them in complying with government regulations and email marketing best practices.

In addition, we recently launched an online survey solution to enable our customers to survey their customers, clients or members and analyze the responses. Our survey solution provides customers with a survey creation wizard, over 40 different preformatted and customizable survey templates, list management capabilities and live customer support.

Business Strengths

We believe that the following business strengths differentiate us from our competitors and are key to our success:


	•	Focus on Small Organizations

	•	Efficient Customer Acquisition Model

	•	High Degree of Recurring Revenue

	•	Consistent Commitment to Customer Service

	•	Software-as-a-Service Delivery

Growth Strategy

Our objective is to grow our market leadership through the following strategies:


	•	Acquire New Customers. We have increased the number of email marketing customers acquired in each of the past 11 quarters and aggressively seek to continue to attract new customers by promoting the Constant Contact brand and encouraging small organizations to try our solutions.

	•	Increase Revenue Per Customer. As of June 30, 2007, we had an email marketing customer base in excess of 120,000. We seek to increase revenue from each customer through add-on services that enhance our solutions such as image hosting.

	•	Provide Additional Products. We plan to continue to invest in research and development to maintain our leadership position in email marketing and to develop and provide our customers with complementary solutions that are easy-to-use, effective and affordable such as our recently launched survey product.

	•	Expand Internationally. Customers in over 110 countries and territories currently use our email marketing solution, despite limited marketing efforts outside the United States, and we believe that opportunities exist to more aggressively market our solutions in English-speaking countries.

	•	Pursue Complementary Acquisitions. We follow industry developments and technology advancements and intend to evaluate and acquire technologies or businesses to cost-effectively enhance our solutions, access new customers or markets or both.

Corporate Information

We were incorporated in Massachusetts in August 1995 under the name Roving Software Incorporated. We reincorporated in Delaware in July 2000 and changed our name to Constant Contact, Inc. in December 2006. Our principal executive offices are located at Reservoir Place, 1601 Trapelo Road, Suite 329, Waltham, Massachusetts 02451, and our telephone number is (781) 472-8100. Our website address is www.constantcontact.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.

Constant Contact^®, Do-It-Yourself Email Marketing^®, SafeUnsubscribe^®, Email Marketing 101^®, Email Marketing Hints & Tips^® and other trademarks or service marks of Constant Contact appearing in this prospectus are the property of Constant Contact. This prospectus contains additional trade names, trademarks and service marks of other companies.

The Offering


Common stock offered by us		shares

Common stock offered by the selling stockholders		shares

Common stock to be outstanding after the offering		shares

Use of proceeds		We intend to use our net proceeds from this offering for general corporate purposes, including the development of new products, the acquisition of new customers and capital expenditures. We also intend to use a portion of our net proceeds to repay outstanding debt. We may use a portion of our proceeds for the acquisition of, or investment in, businesses, technologies, products or assets that complement our business. We have no present understandings, commitments or agreements to enter into any acquisitions or make any investments. We will not receive any proceeds from the shares sold by the selling stockholders. See “Use of Proceeds” for more information.

Proposed Nasdaq Global Market symbol		CTCT

The number of shares of our common stock to be outstanding after this offering is based on the number of shares of common stock outstanding as of March 31, 2007, and excludes:


	•	1,383,497 shares of common stock issuable upon the exercise of stock options and warrants outstanding as of March 31, 2007 at a weighted average exercise price of $2.61 per share, of which options and warrants to purchase 406,732 shares of our common stock were exercisable as of March 31, 2007 with a weighted average exercise price of $2.73 per share;

	•	787,823 shares of common stock available for future issuance under our equity compensation plans as of March 31, 2007; and

	•	120,000 shares of common stock issuable upon the exercise of a warrant to purchase redeemable convertible preferred stock with an exercise price of $0.50 per share, which preferred stock is convertible into common stock.

Unless otherwise stated, all information contained in this prospectus gives effect to a 1-for-100 reverse stock split of our common stock that was effected on November 26, 2002, assumes no exercise by the underwriters of their over-allotment option, gives effect to the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into 13,189,778 shares of our common stock upon the closing of this offering and gives effect to the restatement of our certificate of incorporation and amendment and restatement of our bylaws to be effective upon completion of this offering.

Summary Financial Information

The following tables present our summary statements of operations data for the three years ended December 31, 2006 and for the three months ended March 31, 2006 and 2007, and our summary historical, pro forma and pro forma as adjusted balance sheet data as of March 31, 2007. The summary statements of operations data for the three years ended December 31, 2006 are derived from our audited financial statements for the three years ended December 31, 2006 included elsewhere in this prospectus. The summary statements of operations data for the three months ended March 31, 2006 and 2007 and the summary balance sheet data as of March 31, 2007 have been derived from our unaudited financial statements included elsewhere in this prospectus. Our unaudited financial statements have been prepared on the same basis as the audited financial statements and notes thereto and, in the opinion of our management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the information for the unaudited interim periods. Our historical results for prior interim periods are not necessarily indicative of results to be expected for a full year or for any future period. You should read this data together with our financial statements and related notes included elsewhere in this prospectus and the information under “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”


										Three Months Ended
	Year Ended December 31,									March 31,
	2004			2005			2006			2006			2007
	(in thousands, except per share and customer data)
Statements of Operations Data:
Revenue	$	8,071		$	14,658		$	27,552		$	5,429		$	9,713
Cost of revenue(1)		2,211			3,747			7,801			1,543			2,731

Gross profit		5,860			10,911			19,751			3,886			6,982

Operating expenses:(1)
Research and development		2,140			3,355			6,172			1,363			2,169
Sales and marketing		3,385			7,460			18,592			2,837			6,121
General and administrative		856			1,326			2,623			493			1,082

Total operating expenses		6,381			12,141			27,387			4,693			9,372

Loss from operations		(521	)		(1,230	)		(7,636	)		(807	)		(2,390	)
Interest and other income (expense), net		(34	)		(24	)		(203	)		(150	)		(291	)

Net loss		(555	)		(1,254	)		(7,839	)		(957	)		(2,681	)
Accretion of redeemable convertible preferred stock		(3,701	)		(5,743	)		(3,788	)		(2,136	)		(253	)

Net loss attributable to common stockholders	$	(4,256	)	$	(6,997	)	$	(11,627	)	$	(3,093	)	$	(2,934	)

Net loss attributable to common stockholders per share:
Basic and diluted	$	(5.68	)	$	(3.23	)	$	(4.40	)	$	(1.22	)	$	(1.02	)
Weighted average shares outstanding used in computing per share amounts:
Basic and diluted		749			2,164			2,645			2,527			2,869

Other Operating Data:
End of period number of customers(2)		25,229			47,730			89,323			57,195			104,265


(1)		Amounts include stock-based compensation expense, as follows:


Cost of revenue	$	–	$	–	$	25	$	2	$	15
Research and development		–		–		27		1		21
Sales and marketing		6		–		19		1		11
General and administrative		17		17		12		1		36

	$	23	$	17	$	83	$	5	$	83


(2)		We define our end of period number of customers as email marketing customers that we billed directly during the last month of the period.

The following table summarizes our balance sheet data as of March 31, 2007:


	•	on an actual basis;

	•	on a pro forma basis to reflect the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into shares of common stock upon the closing of the offering and the assumed expiration of an outstanding warrant to purchase 120,000 shares of our redeemable convertible preferred stock resulting in a reversal of other expense of $1,048,000 related to previous adjustments to its fair value; and

	•	on a pro forma as adjusted basis to reflect the pro forma adjustment above, as well as the receipt by us of estimated net proceeds of $ million from the sale of shares of common stock offered by us, at an initial public offering price of $ per share, the mid-point of the estimated price range shown on the cover page of this prospectus, after deducting the estimated underwriting discount and offering expenses payable by us and the payment by us of $565,000 to repay our outstanding indebtedness as described under “Use of Proceeds.”


	As of March 31, 2007
						Pro Forma
	Actual			Pro Forma		as Adjusted
	(in thousands)

Balance Sheet Data:
Cash, cash equivalents and short-term marketable securities	$	9,802		$	9,802	$
Total assets		16,326			16,326
Deferred revenue		6,833			6,833
Redeemable convertible preferred stock warrant		1,048			–
Notes payable		565			565
Redeemable convertible preferred stock		35,575			–
Total stockholders’ equity (deficit)		(31,469	)		5,154

Risk Factors

An investment in our common stock involves a high degree of risk. In deciding whether to invest, you should carefully consider the following risk factors. Any of the following risks could have a material adverse effect on our business, financial condition, results of operations or prospects and cause the value of our common stock to decline, which could cause you to lose all or part of your investment. When determining whether to invest, you should also refer to the other information in this prospectus, including the financial statements and related notes.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

If we are unable to attract new customers and retain existing customers on a cost-effective basis, our business and results of operations will be affected adversely.

To succeed, we must continue to attract and retain a large number of customers on a cost-effective basis, many of whom have not previously used an email marketing service. We rely on a variety of methods to attract new customers, such as paying providers of online services, search engines, directories and other websites to provide content, advertising banners and other links that direct customers to our website and including a link to our website in substantially all of our customers’ emails. In addition, many of our new customers are referred to us by existing customers. If we are unable to use any of our current marketing initiatives or the cost of such initiatives were to significantly increase or our efforts to satisfy our existing customers are not successful, we may not be able to attract new customers or retain existing customers on a cost-effective basis and, as a result, our revenue and results of operations would be affected adversely.

Our business is substantially dependent on the market for email marketing services for small organizations.

We derive, and expect to continue to derive, substantially all of our revenue from our email marketing solution for small organizations, including small businesses, associations and non-profits. As a result, widespread acceptance of email marketing among small organizations is critical to our future growth and success. The overall market for email marketing and related services is relatively new and still evolving, and small organizations have generally been slower than large organizations to adopt email marketing as part of their marketing mix. There is no certainty regarding how or whether this market will develop, or whether it will experience any significant contractions. Our ability to attract and retain customers will depend in part on our ability to make email marketing convenient, effective and affordable. If small organizations determine that email marketing does not sufficiently benefit them, existing customers may cancel their accounts and new customers may decide not to adopt email marketing. In addition, many small organizations lack the technical expertise to effectively send email marketing campaigns. As technology advances, however, small organizations may establish the capability to manage their own email marketing and therefore have no need for our email marketing solution. If the market for email marketing services fails to grow or grows more slowly than we currently anticipate, demand for our services may decline and our revenue would suffer.

U.S. federal legislation entitled Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 imposes certain obligations on the senders of commercial emails, which could minimize the effectiveness of our email marketing solution, and establishes financial penalties for non-compliance, which could increase the costs of our business.

In December 2003, Congress enacted Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the CAN-SPAM Act, which establishes certain requirements for commercial email messages and specifies penalties for the transmission of commercial email messages that are intended to deceive the recipient as to source or content. The CAN-SPAM Act, among other things, obligates the sender of commercial emails to provide recipients with the ability to opt out of receiving future emails from the sender. In addition, some states have passed laws regulating commercial email practices that are significantly more

punitive and difficult to comply with than the CAN-SPAM Act, particularly Utah and Michigan, which have enacted do-not-email registries listing minors who do not wish to receive unsolicited commercial email that markets certain covered content, such as adult or other harmful products. Some portions of these state laws may not be preempted by the CAN-SPAM Act. The ability of our customers’ constituents to opt out of receiving commercial emails may minimize the effectiveness of our email marketing solution. Moreover, non-compliance with the CAN-SPAM Act carries significant financial penalties. If we were found to be in violation of the CAN-SPAM Act, applicable state laws not preempted by the CAN-SPAM Act, or foreign laws regulating the distribution of commercial email, whether as a result of violations by our customers or if we were deemed to be directly subject to and in violation of these requirements, we could be required to pay penalties, which would adversely affect our financial performance and significantly harm our business. We also may be required to change one or more aspects of the way we operate our business, which could impair our ability to attract and retain customers or increase our operating costs.

Evolving regulations concerning data privacy may restrict our customers’ ability to solicit, collect, process and use data necessary to conduct email marketing campaigns or to send surveys and analyze the results or may increase their costs, which could harm our business.

Federal, state and foreign governments have enacted, and may in the future enact, laws and regulations concerning the solicitation, collection, processing or use of consumers’ personal information. Such laws and regulations may require companies to implement privacy and security policies, permit users to access, correct and delete personal information stored or maintained by such companies, inform individuals of security breaches that affect their personal information, and, in some cases, obtain individuals’ consent to use personal information for certain purposes. Other proposed legislation could, if enacted, prohibit the use of certain technologies that track individuals’ activities on web pages or that record when individuals click through to an Internet address contained in an email message. Such laws and regulations could restrict our customers’ ability to collect and use email addresses, page viewing data, and personal information, which may reduce demand for our solutions.

As Internet commerce develops, federal, state and foreign governments may draft and propose new laws to regulate Internet commerce, which may negatively affect our business.

As Internet commerce continues to evolve, increasing regulation by federal, state or foreign governments becomes more likely. Our business could be negatively impacted by the application of existing laws and regulations or the enactment of new laws applicable to email marketing. The cost to comply with such laws or regulations could be significant and would increase our operating expenses, and we may be unable to pass along those costs to our customers in the form of increased subscription fees. In addition, federal, state and foreign governmental or regulatory agencies may decide to impose taxes on services provided over the Internet or via email. Such taxes could discourage the use of the Internet and email as a means of commercial marketing, which would adversely affect the viability of our solutions.

In the event we are unable to minimize our loss of existing customers or to grow our customer base by adding new customers, our operating results will be adversely affected.

From January 2005 through June 2007, at least 97.4% of our customers in a given month have continued to utilize our email marketing solution in the following month. Such historic performance is not indicative of future performance, and there is no guarantee that new customers will demonstrate the loyalty our existing customers have exhibited in the past or that our existing customers will continue to use our solutions consistently. Our growth strategy requires us to minimize the loss of our existing customers and grow our customer base by adding new customers. Customers cancel their accounts for many reasons, including a perception that they do not use our solution effectively, the service is a poor value and they can manage their email campaigns without our solution. In some cases, we terminate an account because the customer fails to comply with our standard terms and conditions. We must continually add new customers to replace customers whose accounts are cancelled or terminated, which may involve significantly higher marketing expenditures

than we currently anticipate. If too many of our customers cancel our service, or if we are unable to attract new customers in numbers sufficient to grow our business, our operating results would be adversely affected.

As we expand our customer base through our marketing efforts, our new customers may use our solutions differently than our existing customers and, accordingly, our business model may not be as efficient at attracting and retaining new customers.

As we expand our customer base, our new customers may use our solutions differently than our existing customers. For example, a greater percentage of new customers may take advantage of the free trial period we offer but choose to use another form of marketing to reach their constituents. If our new customers are not as loyal as our existing customers, our attrition rate will increase and our customer referrals will decrease, which would have an adverse effect on our results of operations. In addition, as we seek to expand our customer base, we expect to increase our marketing spend in order to attract new customers, which will increase our operating costs. There can be no assurance that these marketing efforts will be successful.

The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.

The market for our solutions is competitive and rapidly changing, and the barriers to entry are relatively low. With the introduction of new technologies and the influx of new entrants to the market, we expect competition to persist and intensify in the future, which could harm our ability to increase sales and maintain our prices.

Our principal competitors include providers of email marketing solutions for small to medium size businesses such as Vertical Response, Inc., CoolerEmail Inc., Broadwick Corporation (iContact, formerly Intellicontact), Emma, Inc., Got Corporation (Campaigner^®), Lyris Technologies, Inc. and Topica Inc., as well as the in-house information technology capabilities of prospective customers. Competition could result in reduced sales, reduced margins or the failure of our email marketing solution to achieve or maintain more widespread market acceptance, any of which could harm our business. In addition, there are a number of other vendors that are focused

Proposed Maximum

Amount of

Each Class of

Aggregate Offering

Registration

Securities to be Registered

Price(1)

Fee(2)

Common Stock, par value $0.01 per share

$86,250,000