UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

For the fiscal year ended December 31, 20132014

OR

For the transition period from                      to                     

Commission file number 001-33707

CONSTANT CONTACT, INC.

(Exact name of registrant as specified in its charter)

(781) 472-8100

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨    No  þ

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of June 28, 2013,30, 2014, the last business day of the registrant’s most recently completed second fiscal quarter, was $481,095,143$993,927,578 based upon the closing price reported for such date on the NASDAQ Global Select Market (assuming, for this purpose, that only the registrant’s directors and executive officers are deemed affiliates).

As of February 28, 2014,20, 2015, the registrant had 31,291,38132,131,876 shares of Common Stock, $0.01 par value per share, outstanding.

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission for the registrant’s 20142015 annual meeting of stockholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K.

CONSTANT CONTACT, INC.

INDEX

Forward-Looking Statements

Matters discussed in this Annual Report on Form 10-K relating to future events or our future performance, including any discussion, express or implied, of our anticipated growth, operating results, liabilities and obligations, litigation, future earnings per share, product plans, market opportunity, and other plans and objectives, are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements are often, but not always, identified by the words “believe”, “positioned”, “estimate”, “project”, “target”, “continue”, “intend”, “expect”, “future”, “anticipates”, “objectives”, and similar expressions that are not statements of historical fact. These statements are not guarantees of future events or future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Our actual results and timing of events could differ materially from those anticipated in these forward-looking statements as a result of certain important factors, including, but not limited to, those set forth under Item 1A — “Risk1A—“Risk Factors” and those included elsewhere in this Annual Report on Form 10-K and in our other public filings with the Securities and Exchange Commission. It is routine for internal projections and expectations to change as the year or each quarter in the year progresses, and therefore it should be clearly understood that all forward-looking statements and the internal projections, judgments and beliefs upon which we base our expectations included in this Annual Report on Form 10-K, other periodic reports or otherwise are made only as of the date made and may change. While we may elect to update forward-looking statements at some point in the future, we do not undertake any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.

References in this Annual Report on Form 10-K to “Constant Contact”, the “Company”, “we” or “us” mean Constant Contact, Inc. and our wholly-owned subsidiaries.

PART I

Overview

Constant Contact is a leading provider of online marketing tools that are designed for small organizations, including small businesses, associations and non-profits. We seek to help our customers succeed by creating and growing their customer and member relationships through our easy-to-use products combined with education, support, KnowHow^® and coaching. By enabling sharing, endorsement and engagement across all channels, we believe small organizations will generate new and repeat business. Our suite of online marketing tools which include Email Marketing, EventSpot^®, Social Campaigns^™, SaveLocal^™, SinglePlatform and Survey, enableSurvey. In April 2014, we formally launched Constant Contact Toolkit™, an integrated online marketing platform that simplifies small business marketing by bringing together the tools needed to drive repeat customers and reach new ones. Toolkit combines new and existing elements of our customersproduct set to launchmake it easy for small organizations to find and monitor marketing campaignsengage with current and new customers across multiple marketing channels including email, social, media, events, local deals, online listingsmobile and surveys.web. Toolkit is available to customers in three different packages: Email, Email Plus and Personal Marketer.

We believe our primary growth levers include (i) acquiring new customers, (ii) increasing our revenue per customer and (iii) improving our customer retention rates. We market our products and acquire our customers through a variety of sources, including online advertising, partner relationships, television and radio advertising, regional (i.e., local) initiatives, referrals and brand awareness. Our online advertising includesmarketing, such as search engine marketingengines and advertising onwith online networks and other websites, including banner advertising.offline marketing through television and radio advertising, local seminars, relationships with our partners, outbound sales efforts, referrals from our growing customer base, general brand awareness and a link to our website in the footer of substantially all of the emails sent by our customers. We have partner relationships with over 10,000 local and national small business service providers. These partners refer customers to us through links on their websites and outbound promotions to their customers or allow us to market to their customers directly. Our television and radio advertising is designed to educate potential customers about our marketing solutions and raise awareness of our brand. Our regional initiatives include local seminars and local online advertising.marketing. We employ 2221 regional development directors across the U.S.United States and Canada and we have a marketing office in the United Kingdom. Additionally, we enhance our local reach through approximately 275 specially trained independent local experts that collaborate with our regional development directors and who are trained in both online marketing best practices and our products. Together,In 2014, approximately 185,000 attendees participated in our local classes and workshops run by our regional development directors and independent authorized local experts presented to over 180,000 small businessesaround the United States, Canada and organizations in 2013.the United Kingdom. A significant number of our new customers come to us from word-of-mouth referrals from our existing customers and from the inclusion of a link to our website in the footer of substantially all of the emails sent by our customers. In 2013,2014, our customers sent over 6068 billion emails.

We sell our products through subscription arrangements priced and sold as separate products. ManyAs of ourDecember 31, 2014, we had approximately 635,000 unique paying customers purchase multiple products from us and our average monthly revenue for 20132014 was $41.36$44.94 per customer. We continue to test pricing and product bundling. Bundled product offerings provide access to multiple products for one set monthly fee. We expect to offer a variety of packages that will contain different product combinations and pricing tiers. We believe, when used in combination, our integrated products provide customers with a unified online marketing platform and that by offering bundles, we will be able to drive increased product usage, increased revenue per customer and higher retention rates.

As of December 31, 2013, we had approximately 595,000 unique paying customers. Our customers include various types of small organizations, including retailers, restaurants, law and accounting firms, consultants, non-profits, religious organizations and alumni associations. We sell our products primarily through subscription arrangements.

We were incorporated in Massachusetts in 1995 under the name Roving Software Incorporated. We reincorporated in Delaware in 2000 and changed our name to Constant Contact, Inc. in 2006. Our on-demand email marketing product was first offered in 2000.

Our principal executive offices are located at 1601 Trapelo Road, Waltham, Massachusetts 02451. Our telephone number is (781) 472-8100. Our website address iswww.constantcontact.com.We are not including the information contained on our website or any information that may be accessed by links on our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K. Through a link on the Investor Relations section of our website, we make available our filings with the Securities and Exchange Commission, or SEC, after they are electronically filed with or furnished to the SEC. All such filings are available free of charge. These filings are also available, free of charge, atwww.sec.govor at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.

Market Opportunity

We believe our integrated suite of online marketing tools, including email marketing, social media marketing, event marketing, local deals, online listings and online survey products, provide significant benefits for small organizations. We believe online marketing is an effective way for smaller organizations to create new relationships and maintain and grow existing relationships.

Small organizations represent a large market opportunity both in the U.SUnited States and abroad. According to the most recently available estimates from the Small Business Administration and the National Center for Charitable Statistics,United States Census Bureau, there are over 2931.5 million registered small businesses and non-profits in the United States. We believe our products address the needs of many of these small organizations. We also believe opportunities exist to more aggressively market our products outside the U.S.United States. Finally, small organizations face unique challenges when adopting online marketing, including unfamiliarity with online marketing tools, uncertainty with respect to the benefits of online marketing, lack of technical and marketing expertise, limited budgets and time constraints. These constraints are highlighted during times of economic uncertainty. We have designed our online marketing platform and our approach to education, support and coaching to address these challenges.

Competitive Advantage

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

•

Solutions Tailored to Meet the Needs of Small Organizations.    With millions of customer interactions each year by way of personal coaching and support, seminars, online tutorials, ongoing market research and customer surveys, we believe we have unique insights into the motivations and challenges facing small organizations. Our easy-to-use and affordable integrated suite of online marketing products, education, support, KnowHow and coaching are designed to help our customers succeed.

Our Growth Strategy

We believe our primary growth levers include (i) acquiring new customers, (ii) increasing our revenue per customer and (iii) improving our customer retention rates. Our growth strategy is driven bycomprised of the following:

Our Products and Services

We offer our products on a stand-alone basis and through our bundled offering, Toolkit. Toolkit is currently available in three different packages: Email, Email Plus and Personal Marketer. Our Email offering is for those customers who want only our email marketing product. Email Plus includes our email marketing product as well as unlimited access to our other marketing offerings, including running promotions and offers, managing events online, conducting surveys and getting feedback. Our Personal Marketer package includes all of the Toolkit offerings in Email Plus as well as a dedicated Personal Marketing Manager who is a single point of contact to advise on marketing best practices, list management and campaign selection and design. Our individual products and services are described below.

Email Marketing

Our email marketing product allows customers to easily create, send and track professional-looking email campaigns. The product includes a campaign creation wizard that makes it easy to create and edit email campaigns, with access to over 300375 pre-designed email campaign templates that reflect a wide variety of themes and styles and access to over 15 million images through our relationship with Bigstock^®, a subsidiary of Shutterstock,

Inc. Our contact list growth and management tools include file and spreadsheet import functionality as well as software plug-ins to import contact lists from other applications. We also offer market leadingmarket-leading free tools and applications that allow customers to add and update contacts, including adding contacts directly from a computer or point of sale device, an iPhone^® applicationmobile applications with list building features, a “Join My Mailing List” application for a customer’s website, blog and Facebook^® page, and “text to join” and “scan to join” offerings for mobile devices. Delivery management tools are incorporated throughout our product and are designed to maintain our high deliverability rates. To improve the percentage of emails delivered to a subscriber’s inbox, we work closely with Internet service providers, or ISPs, on spam prevention issues, which increases the likelihood that our customers’ emails will reach the inbox.issues. Email tracking and reporting mechanisms enable our customers to review and analyze the overall effectiveness of a campaign by tracking and reporting aggregate and individual information about delivery, open rates and click-rates on links within a communication. Email campaigns can be easily shared across multiple social media networks using Simple Share^™. In addition, our customers may add social media links, such as links to Facebook pages and Twitter^® feeds, as well as “Share” and “Like” buttons, to their emails to encourage recipients to share and connect on social networks. With MyLibrary Plus, we enable customers to store and edit images, download stock images and create a hosted version of current and past email campaigns on our system and make them readily available to their constituents via a link on a customer’s website or on Facebook or Twitter.

For the year ended December 31, 2013, revenue from our email marketing product alone was approximately 84% of our total revenue.

EventSpot

Our event marketing product allows our customers to promote and manage events, communicate with invitees and registrants, capture and track registrations and collect online payments. We make online registration quick and easy by offering convenient, customizable forms to capture names and email addresses and other company or personal information. Our product includes an event creation wizard, over 150 preformatted and customizable event templates and list management capabilities as well as a hosted event homepage that includes event details, special guests and integrated online maps. Links on the homepage bring visitors to the registration page. The homepage can also be used to share post-event photos, materials and presentations. Social media capabilities allow our customers to promote their event on any website, blog or social media network. When setting up an event, customers can select the preferred currency for the event, create promotional codes for discounted pricing and collect payment or make the event free. Event Check-in, available for iPhone^® and Android^® mobile devices, allows event sponsors to access registrant information, identify participants as checked-in and email registrants by tapping an address on their smartphones. Event tickets are now available on Apple^® Passbook^®.

Social Campaigns and Social Media

Our social media products include Social Campaigns^™, which empowers customers to reach and engage users on Facebook to grow their fans and create social word-of-mouth through easy-to-create offers and promotions. For customers looking for more assistance, our SocialConcierge “Do-It-For-Me” offering assists customers in a range of services including setting up social media profiles, publishing posts and responding to comments and managing Social Campaigns and Facebook ads. To enable customers to monitor and manage their social media accounts and relationships, we offer NutshellMail, a free monitoring tool that aggregates social media activity and updates into an easy-to-read email digest that is delivered directly to a customer’ssubscriber’s inbox at specified intervals.

We have incorporated many social media features into our products. Our Simple Share feature makes it easy for customers to promote their campaigns across major social networks, including Facebook, Twitter and LinkedIn^®. Social analytics enable customers to track shares of their campaigns and to identify which social channels are most effective.

We also offer a variety of social media guides, webinars, seminars and bootcamps to educate our customers on how to build and engage a responsive social media audience. Our SocialQuickstarter website offers a self-guided curriculum on social media theory, overviews of social networking platforms such as Facebook, Twitter, LinkedIn and YouTube^®, and covers other topics such as ratings and reviews, location-based services, QR codes and best practices on how to implement email and social media into an integrated multi-channel marketing strategy.

SaveLocal

SaveLocal makes it quick and easy for our customers to retain existing customers and attract new customers by creating, running and managing local deals, and provides them with end-to-end control over their deals at an affordable price. We also offer Digital Coupons, which are trackable and customizable digital coupons that when coupled with deals from SaveLocal give small businesses the ability to offer discount types mapped to their particular goals and objectives from one integrated resource.

Survey

Our online survey product enables our customers to survey their customers or members and analyze responses. By selecting one of our customizable templates and editing our template questions or entering their own questions, our customers can easily create a professionally formatted survey. Our survey product includes a survey creation wizard, over 90 different preformatted and customizable survey templates and list management capabilities. Our SocialSimple Share feature makes it easy for our customers to post surveys to Facebook, Twitter, LinkedIn and other social networking sites. Real-time reporting enables customers to analyze overall survey results and specific answers submitted by individual respondents and analytic features enable our customers to segment results based on survey responses, easily edit filters for “slice and dice” analysis and view the results in intuitive, easy-to-understand graphical and data formats.

SinglePlatform

Our SinglePlatform product provides our customerslocal businesses the power to manage all of their key online listings from one place by helping themability to create a content richand manage digital storefront listings through one interface. The digital storefront, which canmay include menus, photos, services, offers and featured products. Contentproducts, is distributed online across sitesover 100 online publishers, including multiple websites and mobile appsapplications such as Yelp^®, Urbanspoon^®, Foursquare^®, YellowPages^®, WhitePages^®, and TripAdvisor^® and NYTimes^®, as well as over 100 additional publishers.. SinglePlatform increases a merchant’s reach and helps small businesses getto be found online and via mobile sites.sites by consumers. In 2014, we launched SingleAPI, which allows consumers to take actions with local businesses through the digital storefront. By enabling actions on a merchant’s online listing, consumers can go from discovery to ordering, reserving, booking or buying with the merchant without leaving the website or the mobile application. Our SingleAPI offering is a transaction-based product and, therefore, we consider SingleAPI merchants as customers if they had a transaction within the prior 12-month period.

CardStar

CardStar consolidates loyalty, rewards and membership cards on smartphones, letting consumers use a single application rather than a series of physical cards. New featuresFeatures include location-based services, better management of loyalty cards, shopping lists and local offers. CardStar’s free mobile loyalty application currently has over four million registered users and is available on major mobile platforms, including iPhone, Android, and Blackberry^®.

Customer Support

We provide free customer support to all customers and trialers of our products via phone, chat, email and social media. In 2013,2014, our customer support employees engaged with our customers and trialers through over 1.51.6 million interactions. Our support teams are located at our headquarters in Waltham, Massachusetts and at our sales and support call center in Loveland, Colorado. We complement our customer support with free daily product tours offered via our website, a knowledge base of frequently asked questions and webinars that explain the benefits of online marketing.

Our compliance group is responsible for enforcing our permission and prohibited content policies. We work closely with customers who have higher than average spam complaint rates or bounced emails, and with customers whose emails are flagged by our system as possibly including prohibited content or spam, to assist them in complying with our policies. If we cannot resolve outstanding concerns, we terminate our agreement with the customer.

As of December 31, 2013,2014, we had 424477 employees working in our customer support organization. Our customer support organization includes customer support, customer operations, training and compliance.

Other Services

We also offer our customers the following services:

Custom Services.    Although the majority of our customers select the “do-it-yourself” approach, we also offer custom services to customers who would like their email campaigns, event promotions or surveys prepared for them. Our custom serviceservices offerings range from a basic getting started service to custom campaign creation.

Training Programs.    Our regional development directors and independent authorized local experts deliver free marketing best practices seminars with the goal of providing small organizations the confidence they need to use our products. We also offer workshops and webinars that provide attendees with comprehensive product training.

Customers

We have maintained a consistent focus on small organizations. As of December 31, 2013,2014, we served a large and diverse group of approximately 595,000635,000 unique paying customers. ThisUnique customers are rounded to the nearest 5,000 and we define unique customers as customers of all of our products and services, inclusive of both subscription and transaction-based products. Transactional customers are included in the customer count for the period if they transacted within the prior 12-month period. A customer of multiple products and services is counted as one unique customer.

Our customer base is comprised of business-to-business users, business-to-consumer users and non-profits and associations. We serve a wide range of business-to-business customers, including law firms, accountants, marketing and public relations firms, recruiters, industrial products suppliers and independent consultants. TheyThese business-to-business customers typically use our products to showcase their subject matter knowledge and educate their audiences by sending informational newsletters and announcements about their company or industry. We also serve a diverse base of business-to-consumer customers, including on-andon- and off-line retailers, restaurants, realtors, travel and tourism businesses, yoga studios and day spas. These customers typically use our products to find new customers and promote their offerings with the intent of generating regular, repeat business from their customers and prospects. Finally, we serve a variety of non-profits and associations, including religious organizations, charities, trade associations, alumni associations and other non-profits. They typically use our products to maintain regular communications with their members and inform them about news and events pertaining to their groups, as well as to drive event attendance, volunteer participation and fundraising efforts. We serve a wide spectrum of small organizations and estimate that approximately eighty percent80% of our customers employ 25 or fewer employees. ForWe have low customer concentration and, for the year ended December 31, 2013,2014, our average monthly revenue per unique customer was $41.36. We have low customer concentration as our top 100 customers in 2013 accounted for less than 1% of our total revenue.$44.94. Customers in more than 180 countries and territories currently use our products. During 2013,2014, we generated approximately 10% of our revenue from countries outside of the U.S.;United States; however significantly all of our long-lived assets were held in the U.S.United States.

We measure customer satisfaction on a monthly basis by surveying our customers. Based on these surveys and our low customer attrition rate, we believe that our overall customer satisfaction remains strong.

Sales and Marketing

Our sales and marketing efforts are designed to attract potential customers to our website, enroll them in a free trial, encourage them to engage with our products, convert them to paying customers, introduce and cross-sell our multiple integrated products and add-ons, encourage them to use our products effectively and retain them as ongoing customers. We employ sophisticated strategies to acquire our customers by using a variety of sources, including but not limited to, online advertising, partner relationships, television and radio advertising, regional

initiatives, referrals and general brand awareness. We also invest in public relations and thought leadership to build our overall brand and visibility.

In the years ended December 31, 2014, 2013 and 2012, we spent approximately $125.8 million, $111.4 million and $104.5 million, respectively, on sales and marketing. Our sales and marketing expense as a percentage of revenue for the years ended December 31, 2014, 2013 and 2012 was 38%, 39% and 42%, respectively. As of December 31, 2014, we had 391 employees working in our sales and marketing organization.

Customer Acquisition Sources

Television and Radio Advertising.    Our television and radio advertising campaigns are designed to build awareness and distinguish the value of the Constant Contact brand and drive market awareness of our products.

Online Advertising.    We advertise online through pay-per-click advertising with search engines, including Google, Yahoo! and Bing^®, and banner advertising with online advertising networks and other websites likely to be frequented by small organizations.

Partners.    We have relationships with over 10,000 active partners who refer customers to us through links on their websites and outbound promotions to their customers. Our partners include solution providers, franchisors and other distribution partners, AppConnect^®technology partners, strategic partners and affiliate partners. Solution providers, which include web developers, small business consultants, marketing consultants and social media consultants, are typically small business influencers who sell our products, provide implementation services and refer us to their customers. Franchisors and other distribution partners are typically larger organizations that want their affiliates (franchisees in the case of franchises) to use our products. AppConnectTechnology partners, which include companies offering software applications, point of sale solutions, web applications and small business accounting solutions, have software or technical solutions that are integrated with our products. We typically market our products to their base of customers. Strategic partners are major companies with a focus on smaller businesses and non-profits who want to provide their customers with access to our products. Affiliate partners provide links to our website from their website. Most of our partners either share a percentage of theour revenue, receive a discount on their customer accounts or receive a one-time referral fee. We promote many of our solution providers and AppConnecttechnology partners in our Constant Contact MarketPlace.

Word-of-Mouth Referrals.    New customers frequently indicate that they learn about us from a current customer. We also offer our paying customers a referral incentive consisting of a $30 credit for them and for any customer they refer.

Footer Click-Throughs.    New customers also come to us by clicking on the Constant Contact link included in the footer of substantially all of the emails sent by our customers. In 2013,2014, our customers sent over 6068 billion emails.

Sales Efforts

Customer Marketing Coaches.    As of December 31, 2013,2014, we employed a team of 159168 phone-based sales professionals who callcover the U.S., Canada-United States, Canada and the United Kingdom. They look to identify potential new customers, assist trialers in their initial use of our products and encourage conversion to a paid subscription or, in some cases, educate potential customers about our products. Our specialists have a deep understanding of marketing goals, best practices and types of online marketing campaigns and offers that generate the best results for our customers. In addition to product knowledge, we offer our customers specialized advice to help make their campaigns successful.

Local Initiatives.    As of December 31, 2013,2014, we employed a team of 2221 regional development directors who focus on educating small organizations on the benefits of our products and online marketing generally in their local markets. These employees are located across the United States and in Canada and typically provide free local

seminars to chambers of commerce and other small business groups about online marketing. We enhance our local reach through approximately 275 independent authorized local experts thatwho deliver seminars on our behalf.

Distance Learning.    We offer free online webinars to prospects and customers on a wide variety of topics designed to educate them about the benefits of online marketing and guide them in the use of our products.

Other Initiatives

Press Relations and Thought Leadership.    We conduct a variety of public relations and thought leadership campaigns throughout the year. We seek to secure press coverage of company news and events, including product updates, new partnerships, and other corporate initiatives via press releases or media pitching on a regular basis. We also survey our customer base on a periodic basis to assess small business expectations, attitudes and challenges, and publish those results in an effort to secure media coverage. We publish online marketing best practices and advice through ourHints & Tipsnewsletters, on our blog and via our social media channels.

Customer Cross-Sell.    We work to understand the best time and methods to introduce our multiple products to our customers. These methods include in-product promotions, website promotions, email promotions, personal coaching and other methods. We target these cross promotions based upon trends, product usage patterns, industry and other factors.

Customer Retention.    We analyze the reasons why customers leave us and try to use that information to make changes to improve our retention rates. We coach our customers on the effective use of our products. In addition, our research has shown that customers who use more than one of our products have higher retention rates; therefore, we encourage our customers to consider additional products and add-ons.

Vertical Marketing.    We specifically develop marketing programs and target public relations efforts at certain vertical markets that have demonstrated an affinity for our products. We adjust our target vertical markets based on our existing customer base, market opportunity and overall value to our business.

Community.    We maintain an online user community for both trial and paying customers with discussion boards, a resource center, member spotlights and other features.

Constant Contact Marketplace.    The Constant Contact Marketplace offers one of the largest collections of apps, integrations, and marketing experts specifically to help small businesses and non-profits maximize their marketing efforts andMarketPlace is the only free,an online resource exclusively focused on small businesses and non-profits looking for marketing tools and professional services. The Constant Contact MarketPlace offers one of the largest collections of apps and integrations to help small businesses and non-profits maximize their marketing efforts. More than 100,000 small organizations have discoveredused it to find mobile apps and social integrations throughintegrations. Small businesses can leverage the Constant Contact Marketplace.MarketPlace to connect with a network of over 10,000 local independent marketing professionals who can help them achieve their marketing goals.

Small Business Organization Initiatives.    We partner with chambers of commerce, small business development centers and SCORE chapters to offer our products, educational resources and knowledge base to their members. SCORE provides free expert business counseling services to small businesses. We typically offer the chamber, center or chapter a free account and discounts to theirits members.

Small Business Innovation Loft.    In 2014, we announced the launch of the Constant Contact Small Business Innovation Loft, the home to a new small business innovation program designed to support entrepreneurs as they solve problems for small businesses through the development of new products, features, and services. StartupsOrganizations selected for the program will reside at a newthe SMB InnoLoft space at our headquarters in Waltham, Massachusetts and receive resources and mentorship to build their early-stage startups.

In We believe the years ended December 31, 2013, 2012insights we are gaining through the Small Business Innovation Loft contribute to our understanding of the needs and 2011, we spent approximately $111.4 million, $104.5 millionrequirements of small businesses and $89.2 million, respectively, on sales and marketing. Our sales and marketing expense as a percentage of revenue for the years ended December 31, 2013, 2012 and 2011 was 39%, 42% and 42%, respectively. As of December 31, 2013, we had 352 employees working in our sales and marketing organization.non-profits.

Technology and Operations

Our on-demand products use a central application and a single software code base (exceptwith unique accounts for each customer, except for SinglePlatform, which operates on a separate code base) with unique accounts for each customer.base. As a result, we are able to spread the cost of providing our products across our entire customer base. In addition, because we have one central application, we believe we are able to scale our business to meet increases in demand for our products. Scalability is achieved through advanced use of application partitioning to allow for horizontal scaling across multiple sets of applications. This structure enables individual application subsystems to scale independently as required by volume and usage.

Our production system hardware and the disaster recovery hardware for our production system, with the exception of SinglePlatform, are each co-located in third-party hosting facilities. One facility is located in Bedford, Massachusetts and is owned and operated by Digital 55 Middlesex, LLC, an affiliate of Digital Realty Trust, Inc., or DRT, and itDRT. This facility provides services to us under an agreement that will expire in December 2016 with two five-year extension options. The second facility is located in Santa Clara, California and is owned and operated by Digital Alfred, LLC, also an affiliate of DRT. The agreement will expire in May 2017 with two four-year extension options. Both hosting facilities provide around-the-clock security personnel, video surveillance and access controls, and are serviced by onsite electrical generators and fire detection and suppression systems. Both facilities also have multiple Tier 1 interconnects to the Internet.

We own all of the hardware deployed in support of our platform.platform, except for SinglePlatform, which operates on a third party’s infrastructure. We continuously monitor the performance and availability of our products. We have a highly available, scalable infrastructure that utilizes load-balanced web server pools, redundant interconnected network switches and firewalls, replicated databases, and fault-tolerant storage devices. Production data is backed up on a daily basis and stored in multiple locations to ensure transactional integrity and restoration capability.

We protect our customers’ data using security practices and technology solutions that are often unavailable to small organizations. We do not sell or rent customers’ data.

Changes to our production environment are tracked and managed through a formal maintenance request process. Production hardware changes are handled in the same manner as software product releases and are first tested on a quality system, then verified in a staging environment, and finally deployed to the production system, which we generally seek to accomplish without system downtime. As of December 31, 2013,2014, we had 5370 employees working in our operations organization.

Research and Development

We have made substantial investments in research and development as a part of our strategy to continually improve the ease of useease-of-use and technological scalability of our existing products as well as to develop new features and product offerings. Our engineering and product strategy and management teams operate as a single organization under one executive leader. Our engineering team adheres to a well-defined and managed software development lifecycle model. This model, which emphasizes the use of agile development practices, defines how we envision, plan, develop and test our products. Engineering is responsible for defining our technology and operations vision and executing on our product roadmaps. Our product strategy organization includesand management teams include market analysts, product managers and user interface designers. This groupThese groups also performsperform competitive and market analysis and overseesoversee product pricing as well as systematic product usability testing. EngineeringOur engineering and product strategy work cooperatively toand management teams prioritize our research and development efforts by balancing our need for new products, product enhancements, security and scalability.

Our research and development expense totaled approximately $53.1 million for 2014, $45.6 million for 2013 and $38.8 million for 2012 and $29.5 million for 2011.2012. Our research and development expense as a percentage of revenue for each of the years ended December 31, 2014, 2013 2012 and 20112012 was 16%, 15%16% and 14%15%, respectively. As of December 31, 2013,2014, we had 274310 employees working in our engineering and product strategy organizations.

Competition

The market for vendors offering online marketing tools for small businesses is fragmented, competitive and evolving. Few competitors offer multiple products and none offer our complete suite of online marketing tools for small organizations. We believe the following are the principal competitive factors in this market:

Each of our individual products faces competition from multiple competitors. Our email marketing product primarily competes with vendors focused on the small and medium-size business market, or SMB market. Some of the vendors who are focused on the SMB market include: AWeber Systems, Inc., iContact Corporation, a subsidiary of Vocus,Cision, Inc., Protus, a subsidiary of j2 Global, Communications, Inc. (Campaigner^®), The Rocket Science Group LLC (MailChimp^®), VerticalResponse, Inc., a subsidiary of Deluxe Corporation, and VistaPrintCimpress N.V. (VistaPrint^®). These vendors typically charge a low monthly entry fee or a low fee per number of emails sent and, in some cases, they have a free offering. While we generally do not compete in a significant way with vendors focusing on enterprise orof email marketing products serving larger customers, we may compete with themthese providers in the future. We may also face future competition in the email marketing market from new companies entering our market, which may include large, established companies. Our event marketing product competes with offerings by Eventbrite, Inc., Evite, LLC, a wholly-owned operating business of IAC/InterActiveCorp, Regonline, a division of The Active Network,Lanyon Solutions Inc., and Cvent, Inc. Our Social Campaigns product competes with offerings by Offerpop Corporation and Pagemodo, a subsidiary of VistaPrintCimpress N.V., Vocus Social Media LLC doing business as North Social^® and Wildfire Interactive, Inc. Our SaveLocal product competes with offerings by Groupon, Inc., LivingSocial, Inc., Amazon Local^™ and Google Offers^™. Our SinglePlatform product competes with offerings by Yext, Inc. and Locu Inc., a subsidiary of GoDaddy.com, LLC. Our survey product competes with offerings by Surveymonkey.com Corporation and Widgix, LLC doing business as SurveyGizmo^®.

Barriers to entry in delivering online marketing solutions for small organizations are relatively low, which allows new entrants to enter the market without significant impediments and larger, established companies to develop their own competitive products or acquire or establish cooperative relationships with our competitors. In addition, some of these companies may have significantly greater financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their products. These potential competitors may be in a stronger position to respond quickly to new technologies and may be able to undertake more extensive marketing campaigns. These competitors may have more extensive customer bases and broader customer relationships that they could leverage to obtain a significant portion of the market. In addition, these competitors may have longer operating histories and greater name recognition than we do. Moreover, if one or more of our competitors were to merge or partner with another of our competitors or a new market entrant, the change in competitive landscape could adversely affect our ability to compete effectively. Finally, one or more of these businesses could decide to offer competitive products at no cost or low cost in order to generate revenue as part of a larger product offering.

We believe our brand, reach, scale, suite of on-line affordable integrated marketing tools, education, KnowHow and coaching differentiate us from the competition.

Government Regulation

The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or CAN-SPAM Act, establishes requirements in the U.S.United States for commercial email and specifies penalties for commercial email that violates the CAN-SPAM Act. In addition, the CAN-SPAM Act gives consumers the right to require emailers to stop sending them commercial email.

The CAN-SPAM Act covers email sent for the primary purpose of advertising or promoting a commercial product, service, or Internet website. The U.S.United States Federal Trade Commission, or the FTC, a federal consumer protection agency, is primarily responsible for enforcing the CAN-SPAM Act, and the U.S.United States Department of Justice, other federal agencies, state attorneys general, and ISPs also have authority to enforce certain of its provisions.

The CAN-SPAM Act’s main provisions include:

The CAN-SPAM Act also prohibits unlawful acquisition of email addresses, such as through directory harvesting, and transmission of commercial emails by unauthorized means, such as through relaying messages with the intent to deceive recipients as to the origin of such messages.

Violations of the CAN-SPAM Act’s provisions can result in criminal and civil penalties, including statutory penalties that can be based in part upon the number of emails sent, with enhanced penalties for commercial emailers who harvest email addresses, use dictionary attack patterns to generate email addresses, and/or relay emails through a network without permission.

The CAN-SPAM Act acknowledges that the Internet offers unique opportunities for the development and growth of frictionless commerce, and the CAN-SPAM Act was passed, in part, to enhance the likelihood that wanted commercial email messages would be received. We believe we are a leader in developing policies and practices affecting our industry and that our permission-based email marketing model and our anti-spam policy are compatible with current CAN-SPAM Act regulatory requirements. We are a founding member of the Email Sender and Provider Coalition, or ESPC, a cooperative industry organization founded to develop and implement industry-wide improvements in spam protection and solutions to prevent inadvertent blocking of legitimate commercial email. We maintain high standards that apply to all of our customers, including non-profits and political organizations, whether or not they are covered by the CAN-SPAM Act.

The CAN-SPAM Act preempts most state laws specific to email, except for common law trespass, contract, or tort laws, state laws specifically prohibiting falsity or deception in commercial email and state laws relating to fraud and computer crime. The scope of these exceptions, however, is not settled, and some states have adopted email regulations that, if upheld, could impose liabilities and compliance burdens on us and on our customers in addition to those imposed by the CAN-SPAM Act.

In addition, we may be subject to regulation by the FTC and each of the states under general consumer protection statutes prohibiting unfair or deceptive acts and practices. Certain areas of marketing activity, including email marketing and online advertising, are subject to specific statutes such as the CAN-SPAM Act discussed

above. These federal or state statutes and rules also effectively regulate online user’s privacy and data security, particularly in the e-commerce area where the FTC and state attorneys general actively investigate the policies and practices of online companies regarding the protection, sharing or use of personal information furnished by customers to the websites. To the extent our customers are small businesses or individuals, we may be subject to regulation and enforcement oversight in these areas.

Moreover, some foreign countries, including the countries of the European Union, Israel and Canada, have regulated or are in the process of regulating the distribution of commercial email and the online collection and disclosure of personal information. To the extent we conduct business operations in certain foreign countries, such as the United Kingdom and Canada, we may be subject directly to the laws in these countries. In addition, foreign governments may attempt to apply their laws extraterritorially or through treaties or other arrangements with U.S.United States governmental entities.

Our customers may be subject to the requirements of the CAN-SPAM Act, and/or other applicable state or foreign laws and regulations affecting email marketing. If our customers’ email campaigns are alleged to violate applicable email laws or regulations and we are deemed to be responsible for such violations, or if we were deemed to be directly subject to and in violation of these requirements, we could be exposed to liability.

In addition, the United States and various state and foreign governments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiable information of individuals, and the FTC and many state attorneys general are applying federal and state consumer protection laws to impose standards on the online collection, use and dissemination of data. Self-regulatory obligations, other industry standards and policies, and other legal obligations may apply to our collection, distribution, use, security or storage of personally identifiable information or other data relating to individuals.

Intellectual Property

Our intellectual property rights are important to our business. We rely on a combination of copyright, trade secret, trademark, patent and other rights in the United States and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our proprietary technology, processes and other intellectual property.

Others may develop products that are similar to our technology. We enter into confidentiality and other written agreements with our employees, consultants, partners and vendors, and through these and other written agreements, we attempt to control access to and distribution of our software, documentation and other proprietary technology and other information. These confidentiality and other written agreements, however, offer only limited protection, and we may not be able to enforce our rights under such agreements. Despite our efforts to protect our proprietary rights, third parties may, in an unauthorized manner, attempt to use, copy or otherwise obtain and market or distribute our intellectual property rights or technology or otherwise develop a product with the same functionality as our product. Policing unauthorized use of our products and intellectual property rights is difficult and nearly impossible on a worldwide basis. Therefore, we cannot be certain that the steps we have taken or will take in the future will prevent misappropriations of our technology or intellectual property rights.

“Constant Contact^®” is a registered trademark in the United States, Canada and in the European Union. We also hold trademarks and service marks identifying certain of our products or features of our products. We currently hold two issued U.S.United States patents and have onetwo patent applicationapplications pending in the U.S.United States Patent and Trademark office.

Employees

As of December 31, 2013,2014, we had 1,2351,400 employees. None of our employees is represented by a labor union. We have not experienced any work stoppages and believe that our relations with our employees are good.

Facilities

Our corporate headquarters, including our principal administrative, marketing, sales and support and research and development organizations, is located in Waltham, Massachusetts. We currently lease approximately 190,000 square feet in this facility under a lease agreement, as amended, that expires in September 2022 with one ten-year extension option. We expect to occupy approximately 61,00056,000 additional square feet in this facility over the next two years.year and an additional 5,000 square feet in 2018. As of December 31, 2013, 7522014, 859 of our employees were based in this facility. We also lease approximately 50,000 square feet of office space in Loveland, Colorado under a lease agreement that will expire in April 2019 with three three-year extension options. This facility is used for sales and support personnel and, as of December 31, 2013, 2802014, 320 employees were based in this location. We lease a small amount of general office space in Delray, Florida, San Francisco, California, New York, New York (two facilities) and London, England under lease agreements that expire at varying dates through 2018. The facilities in California and Florida and one of the New York locations are used for research and development personnel. The other New York facility houses personnel who operate our SinglePlatform personnelproduct and our London facility houses marketing personnel. As of December 31, 2013, five2014, six employees were based in Florida, 2728 employees were based in California, 135149 employees were based in New York and three employees were based in London. If we require additional space, we believe that we will be able to obtain such space on acceptable, commercially reasonable terms.

Our business is subject to numerous risks. You should carefully consider the risks described below as well as other information provided to you in our Annual Report on Form 10-K, including information in the section of this document entitled “Forward-Looking Statements.” If any of the following risks actually occur, our business, financial condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you may lose all or part of your investment. We caution you that the following important factors, among others, could cause our actual results to differ materially from those expressed in forward-looking statements made by us or on our behalf in filings with the SEC, press releases, communications with investors and oral statements. Any or all of our forward-looking statements in this Annual Report on Form 10-K and in any other public statements we make may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially from those anticipated in forward-looking statements. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosure we make in our reports filed with the SEC.

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

If we are unable to attract new customers and retain existing customers, our business and results of operations will be affected adversely.

To succeed, we must continue to attract and retain customers and increase sales to new and existing customers. The rate at which new and existing customers purchase and renew subscriptions to our products depends on a number of factors, including those outside of our control. In future periods, our total customers and revenue could decline or grow more slowly than we expect.

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 customersprospects to our website, television and radio advertising, the efforts of our partners and the inclusion of a link to our website in substantially all of our customers’ emails. In addition, we are committed to providing our customers with a high level of support. As a result, we believe many of our new customers are referred to us by existing customers. However, customers cancel their accounts for many reasons, including economic concerns, business failure, credit card failure, the timeliness and success of product enhancements and introductions by us

and those of our competitors, the pricing offered by us and our competitors, the frequency and severity of any system outages and technological change or a perception that they do not use our products effectively, the service is not a good value and that they can manage their online marketing efforts without our products. In some cases, we terminate an account because the customer fails to comply with our standard terms and conditions.

Our future success also depends on retaining our current customers at acceptable retention levels. As our customer base continues to grow, even if our customer retention rates remain the same on a percentage basis, the absolute number of customers we lose each month will increase. 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 we are unable to use any of our

current marketing initiatives or the cost of suchour marketing initiatives were to significantly increase or such initiatives 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 business and results of operations would be affected adversely.

In addition,Beginning in April 2014, we continue to aggressievely test bundlingformally launched Constant Contact Toolkit, our integrated online marketing platform. We have relatively little experience selling an integrated product and new pricing packages that will allow customers access to multiple products for a monthly fee. We expect to offer a variety of packages that will contain different product combinations and pricing tiers. These new packages may impact the number of customerscurrently, we are ablenot offering the product to attract toall of our service, the number of customers we are able to convert from trialers to paying customers and the amount such customers pay us for use of the products.prospects. To the extent that these packages leadoffering this integrated platform leads to a decline in the number of customers paying for our products or a decline in revenue, or negatively impacts our existing customers or our existing products, which still account for a significant majority of our revenue, or results in higher customer attrition, or causes our executives and employees to have to expend time and resources to support two different offerings, our business and results of operations may 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, a substantial portion of our revenue from our email marketing product for small organizations, including small businesses, associations and non-profits. For the yearyears ended December 31, 2014 and 2013, our revenue from our email marketing product alone was approximately 80% and 84%, respectively, of our total revenue. In addition, email marketing is the most prominent offering within our Toolkit product. Widespread acceptance of email marketing among small organizations will continue to be critical to our future growth and success. There is no certainty regarding how the market for email marketing will continue to 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 or utilize alternative or new electronic methods of communicating with their customers, existing customers may cancel their accounts and potential customers may decide not to adopt email marketing. If the market for email marketing services fails to continue to grow or grows more slowly than we currently anticipate, demand for our services may decline and our revenue would suffer.

Our growth strategy requires us to expand our product offerings beyond email marketing and this expansion may not be successful.

We have traditionally focused our business on providing our email marketing product for small organizations, but inover the last fewseveral years we have significantly expanded our product offerings. In 2007, we introduced our survey product and our add-on email archive service that enables our customers to archive their past email campaigns. In 2009, we launched our event marketing product. Through our acquisition of Nutshell Mail, Inc., which we completed in May 2010, we provide a tool for small organizations to monitor and engage with social media networks. In January 2012, we launched our Social Campaigns product which allows small businesses the ability to run multi-step, results-oriented campaigns on their social networks. Also, in January 2012, we acquired CardStar, a leading developer of mobile applications that extend the use of loyalty, rewards and membership cards and mobile coupons among consumers. In February 2012, we introduced our SaveLocal product, which makes it quick and easy for our customers to create, run and manage local deals. In June 2012, we acquired SinglePlatform, Corp. or SinglePlatform, a company that helps small businesses get discovered through web and mobile searches by providing a single place to update relevant business information. Our efforts to introduce new products beyond our email marketing product or to offer a bundled offering of two or more of our products, such as Toolkit, may not result in significant revenue growth, may not be complementary to our email marketing product, may not be timely, may divert management resources from our existing operations and require us to commit significant financial resources to an unproven business or product or may be confusing to our customers, any of which may harm our financial performance and impede our long-term growth strategy.

If the security of our customers’ confidential information stored in our systems is breached or otherwise subjected to unauthorized access, our reputation may be severely harmed, we may be exposed to liability and we may lose the ability to offer our customers a credit card payment option.

Our system stores our customers’ proprietary email contacts lists, credit card information, personally identifiable information and other critical data. Any accidental or willful security breaches or other unauthorized access could expose us to liability for the loss of such information, adverse regulatory action by federal and state governments, time-consuming and expensive litigation and other possible liabilities as well as negative publicity, which could severely damage our reputation. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our software are exposed and exploited, and, as a result, a third party obtains unauthorized access to any of our customers’ data, our relationships with our customers will be severely damaged, and we could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we and our third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, as we continue to grow our customer base and our brand becomes more widely known and recognized, we may become a more inviting target for third parties seeking to compromise our security systems.

The federal government Any security breach, whether actual or perceived, would harm our reputation, and many states, including Massachusetts, have enacted laws requiring companieswe could lose customers and fail to notify individuals of data security breaches involving certain types of personal data. Theseacquire new customers. Further, any mandatory disclosures regarding a security breach often lead to widespread negative publicity, which may cause our customers to lose confidence in the effectiveness of our data security measures.

We are subject to a variety of laws and regulations, including regulation by various federal government agencies, including the FTC and state and local agencies. The United States and various state and foreign governments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiable information of individuals, and the FTC and many state attorneys general are applying federal and state consumer protection laws to impose standards on the online collection, use and dissemination of data. Self-regulatory obligations, other industry standards, policies, and other legal obligations may apply to our collection, distribution, use, security or storage of personally identifiable information or other data relating to individuals. In addition, the federal government and many states, including Massachusetts, have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data. These obligations may be interpreted and applied in an inconsistent manner from one jurisdiction to another and may conflict with one another, other regulatory requirements or our internal practices. Any security breach, whether actualfailure or perceived would harmfailure by us to comply with United States, European Union or other foreign privacy or security laws, policies, industry standards or legal obligations or any security incident that results in the unauthorized access to, or acquisition, release or transfer of, personally identifiable information or other customer data may result in governmental enforcement actions, litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse effect on our reputation and business. We expect that there will continue to be new proposed laws, regulations and industry standards concerning privacy, data protection and information security in the United States, the European Union and other jurisdictions, and we cannot yet determine the impact such future laws, regulations and standards may have on our business. Future laws, regulations, standards and other obligations could loseimpair our ability to collect or use information that we utilize to provide targeted advertising to our customers, thereby impairing our ability to maintain and grow our total customers and failincrease revenue. Future restrictions on the collection, use, sharing or disclosure of our customers’ data or additional requirements for express or implied consent of customers for the use and disclosure of such information limit our ability to acquiredevelop new customers. products and features.

In addition, failure to maintain compliance with the data protection policy standards adopted by the major credit card issuers may limit our ability to offer our customers a credit card payment option. Any loss of our ability to offer our customers a credit card payment option would harm our reputation and make our products less attractive to many small organizations by negatively impacting our customer experience and significantly increasing our administrative costs related to customer payment processing.

Our existing general liability insurance may not cover any, or cover only a portion of any, potential claims related to security breaches to which we are exposed or may not be adequate to indemnify us for all or any portion of liabilities that may be imposed. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage would increase our operating expenses and reduce our net income.

U.S.United States federal legislation and the laws of many foreign countries impose certain obligations on the senders of commercial emails, which could minimize the effectiveness of our products, particularly our email marketing product, and establish financial penalties for non-compliance, which could increase the costs of our business.

The CAN-SPAM Act 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 products. 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 such as the laws of Canada and the United Kingdom, 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, and our reputation would suffer. 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 could increase our operating costs.

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

The market for our products is highly competitive and rapidly changing, and the barriers to entry are relatively low. In addition, this market is highly fragmented with some vendors providing part of the solution or addressing specific solutions or segments of the market. Given our broad product offering, we compete with both point-solutions and broader solution providers. 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, limit customer attrition and maintain our prices.

Our principal email marketing competitors include providers of email marketing products for small to medium size businesses such as AWeber Systems, Inc., iContact Corporation, a subsidiary of Vocus,Cision, Inc., Protus, a subsidiary of j2 Global, Communications, Inc. (Campaigner), The Rocket Science Group LLC (MailChimp), VerticalResponse, Inc., a subsidiary of Deluxe Corporation, and VistaprintCimpress N.V. (VistaPrint). These vendors typically charge a low monthly fee or a low fee per number of emails sent and, in some cases, they have a free offering. Competition could result in reduced sales, reduced margins or the failure of our email marketing product 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 on providing email marketing products for larger organizations, including Alterian, a subsidiary of SDL, plc, CheetahMail, Inc., a subsidiary of Experian Group Limited,

ExactTarget, Inc., a subsidiary of Salesforce.com, Inc., Responsys Inc. and Eloqua Limited, subsidiaries of Oracle Corporation, Silverpop, Systems Inc.,an IBM Company, and StrongMail Systems, Inc. While we do not compete currentlyin a significant way with vendors of email marketing products serving larger customers, we may compete with these providers in the

future. Finally, in the future, our email marketing product may experienceexperiences some competition from ISPs, web hosting companies, advertising and direct marketing agencies and other large established businesses, possessing large, existing customer bases, substantial financial resources and established distribution channels. If these companies decide to further invest in and develop, market or resell competitive email marketing products, acquire one of our existinglarger competitors or form a strategic alliance with one of our competitors, our ability to compete effectively could be significantly compromised and our operating results could be harmed. In addition, one or more of these entities could decide to offer a competitive email marketing product at no cost or low cost in order to generate revenue as part of a larger product offering.

Our other products also face intense competition. EventSpot, our event marketing product, competes with offerings by Eventbrite, Inc., Evite, LLC, a wholly-owned, operating business of IAC/InterActiveCorp, Regonline, a division of The Active Network,Lanyon Solutions Inc., and Cvent, Inc. Our Social Campaigns product competes with offerings by Offerpop Corporation and Pagemodo, a subsidiary of VistaPrintCimpress N.V., Vocus Social Media LLC doing business as North Social and Wildfire Interactive, a subsidiary of Google Inc. Our survey product competes with similar offerings by Surveymonkey.com Corporation and Widgix, LLC doing business as SurveyGizmo. Our SaveLocal product competes with offerings by Groupon, Inc., LivingSocial, Inc., Amazon Local and Googleoffers. Our SinglePlatform product competes with offerings by Yext, Inc. and Locu Inc,Inc., a subsidiary of GoDaddy.com, LLC. In addition, our bundled product offerings, including Toolkit, could face competition from new competitors who are different from the companies we currently compete with on our individual products.

Our current and potential competitors may have significantly more financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their products. Our current and potential competitors may have more extensive customer bases and broader customer relationships than we have. In addition, these companies may have longer operating histories and greater name recognition than we have and may be able to bundle email marketing, event marketing or survey products with other products that have already gained widespread market acceptance and offer them at no cost or low cost. These competitors may be better able to respond quickly to new technologies and to undertake more extensive marketing campaigns. In an attempt to gain market share, competitors may offer aggressive price discounts or alternative pricing models on the products they offer, such as so-called “freemium” pricing in which a basic offering is provided for free with advanced features provided for a fee. As a result, increased competition could result in lower sales, price reductions, reduced margins and the loss of market share. If we are unable to compete with suchthese companies and their offerings, the demand for our products could substantially decline.

Any significant disruption in service on our website or in our computer systems, or in our customer support services, could result in a loss of customers.

The satisfactory performance, reliability and availability of our technology and our underlying network infrastructure are critical to our operations, level of customer service, reputation and ability to attract new customers and retain existing customers. Despite the implementation of security measures, our infrastructure may be vulnerable to computer viruses, worms, other malicious software programs, illegal or abusive content or similar disruptive problems caused by our customers, employees, consultants or other Internet users who attempt to invade or disrupt public and private data networks. In the past, we have been subject to distributed denial of service, or DDOS, attacks by hackers intent on disrupting our products, and we may be subject to DDOS attacks or other abuse in the future.

In providing our services, we also rely on third-party hosting facilities, bandwidth providers, ISPs and mobile networks. Our production system hardware and the disaster recovery operations for our production system hardware are co-located in third-party hosting facilities. These facilities do not guarantee that our customers’ access to our products will be uninterrupted, error-free or secure. Our operations also depend on the ability of our third-party hosting facilities to protect their and our systems against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity and other environmental concerns, computer viruses or other attempts to harm our systems, criminal acts and similar events. In the event that our third-party hosting arrangements are terminated, or there is a lapse of service or damage to these facilities, we could experience interruptions in our service as well as delays and additional expense in arranging new facilities. In addition, our customer support services, which are located at our headquarters in Waltham, Massachusetts and at our sales and support office in Loveland, Colorado, would experience interruptions as a result of any disruption of electrical, phone or any other similar facility support services. Any interruptions or delays in access to our products or customer support, whether as a result of third-party error, our own error, natural disasters, security breaches or malicious actions, such as denial-of-service or similar attacks, whether accidental or willful, could harm our relationships with customers and our reputation. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. These factors could damage our brand and reputation, divert our employees’ attention, reduce our revenue, subject us to liability and cause customers to cancel their accounts, any of which could adversely affect our business, financial condition and results of operations.

Our production disaster recovery system is located at one of our third-party hosting facilities. Our corporate disaster recovery system is located at our headquarters in Waltham, Massachusetts. Neither system providesThese systems do not provide real-time backup or has been tested under actual disaster conditions and neither system may have sufficient capacity to recover all data and services in the event of an outage.outage and we cannot guarantee that our backup systems, regular data backups, security protocols, network protection mechanisms and other procedures currently in place, or that may be in place in the future, will be adequate to prevent network and service interruption, system failure, damage to one or more of our systems or data loss. In the event of a disaster in which our production system hardware and the disaster recovery operations for our production system hardware are irreparably damaged or destroyed, we would experience interruptions in access to our products. Moreover, our headquarters and one of the third-party facilities that hosts our production system hardware are located within several miles of each other. As a result, any regional disaster could affect these locations equally.

Any interruptions or all of these events could cause our customers to losedelays in access to our products or customer support, whether as a result of third-party error, our own error, natural disasters, security breaches or malicious actions, whether accidental or willful, could harm our relationships with customers and our reputation and lead to liability. These factors could damage our brand and reputation, divert our employees’ attention, reduce our revenue, subject us to liability and cause customers to cancel their accounts, any of which could adversely affect our business, financial condition and results of operations. Also, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur and our results of operations may be negatively impacted.

If we fail to enhance our existing products, develop new products or offer a bundle of our products that our customers and prospective customers find compelling, our products may become obsolete or less competitive and our financial performance could be impacted.

The markets in which we compete are characterized by constant change and innovation, and we expect them to continue to evolve rapidly. To the extent we are not able to continue to identify challenges faced by small businesses and organizations and provide products that respond in a timely and effective manner to their evolving needs, or if we are unable to enhance our existing products successfully, including our recent enhancements to our contact management functionality and our plans to update our editing environment, our business, operating results and financial condition will be adversely affected.

Creating and designing such enhancements and new products entails significant technical and business risks and requires substantial expenditures and lead-time, and there is no guarantee that such enhancements and new products will be completed in a timely fashion, nor is there any guarantee that any new product offerings will anticipate our customer’s needs or gain acceptance among our customers or in the broader market. In addition, such enhancements and new products may not be profitable for a number of years, if at all, and even if they are profitable, operating margins for new products may not be as high as the margins we have experienced historically. Our existing customers and prospective new customers may be dissatisfied with our enhancements to our existing products and may leave us or choose competing providers, or may not view any new product as complementary to our other product offerings and not purchase such additional products.

We must continue to commit significant resources to develop our technology in order to maintain our competitive position, and these commitments will be made without knowing whether such investments will result in products the market will accept. Our new products or product enhancements could fail to attain meaningful market acceptance for many reasons, including:

Similarly, if we offer a bundle of our products, such as Toolkit, that our customers and prospective customers do not find compelling, our business will also be harmed. Creating, designing and marketing these packages (and converting our current customer base to these new packages) entails significant technical and business risks and requires substantial expenditures, lead-time and management attention, and there is no guarantee that such packages will anticipate our customers’ needs or gain acceptance among our customers or in the broader market.

If we cannot successfully enhance our existing services or develop new products or if we are not successful in implementing such enhancements and selling new products or new packages of our products to our customers, we could lose customers or have difficulty attracting new customers, which would adversely impact our financial performance.

Our relationships with our partners may not be as successful in generating new customers as we anticipate, which could adversely affect our ability to increase our customer base.

We maintain a network of different types of partners, some of whom refer customers to us through links on their websites and outbound promotion to their customers, resell our products and create integrations with our products. We have invested and will continue to invest in programs to enhance our partners’ effectiveness; however, these programs could require substantial investment while providing no assurance of return or incremental revenue. We also rely on some of our partners to create integrations with third-party applications and platforms used by our customers. If we fail to encourage our partners to create such integrations or if we do not adequately facilitate these integrations from a technology perspective, demand for our products could decrease, which would harm our business and resultsoperating results. If we are unable to maintain our contractual relationships with existing partners or establish new contractual relationships with potential partners, we may experience delays and increased costs in adding customers, which could have a material adverse effect on us. The number of operations.customers we are able to add through these relationships is dependent on the marketing efforts of our partners over which we exercise very little control, and a significant decrease in the number of new customers generated through these relationships or failure of our investment in partner programs to be effective could adversely affect the size of our customer base and revenue.

Third parties have asserted, and may in the future assert, claims that we are infringing their intellectual property, which, whether successful or not, could subject us to costly and time-consuming litigation or require us to obtain expensive licenses, and our business may be adversely affected.

The software and Internet industries are characterized by the existence of a large number of patents, trademarks and copyrights and by frequent litigation based on allegations of infringement or other violations of intellectual property rights. Third parties, including so-called non-practicing entities, which are entities that have no operating business but exist purely as collectors of patents, have asserted, and in the future may assert, patent and other intellectual property infringement claims against us in the form of lawsuits, letters or other forms of communication. These claims, whether or not successful, could:

As a result, any third-party intellectual property claims against us could increase our expenses and adversely affect our business. In addition, many of our agreements with our partners and others require us to indemnify them for third-party intellectual property infringement claims, which would increase the cost to us resulting from an adverse ruling on any such claim. Even if we have not infringed any third party’s intellectual property rights, we cannot be sure our legal defenses will be successful, and even if we are successful in defending against such claims, our legal defense could require significant financial resources and management time. Finally, if a third party successfully asserts a claim that our products infringe its proprietary rights, royalty or licensing agreements might not be available on terms we find acceptable or at all and we may be required to pay significant monetary damages to such third party.

We may be subject to time-consuming and costly litigation.

From time to time, we may be subject to various claims and lawsuits by partners, customers, or other parties arising in the ordinary course of business, including lawsuits alleging patent infringement. We are currently a party to the actions that are described in Part I, Item 3 “Legal Proceedings” included elsewhere in this Annual Report on Form 10-K. These matters can be time-consuming, divert management’s attention and resources, and cause us to incur significant expenses. Furthermore, the results of any of these actions may have a material adverse effect on our results of operations, financial condition and cash flows.

Current economic conditions may further negatively affect the small business sector, which may cause our customers to terminate existing accounts with us or cause potential customers to fail to purchase our products, resulting in a decrease in our revenue and impairing our ability to operate profitably.

Our products are designed specifically for small organizations. These organizations frequently have limited budgets and are often resource and time-constrained and, as a result, may be more likely to be significantly affected by economic downturns than their larger, more established counterparts. We believe that small organizations continue to experience some amount of economic hardship. As a result, small organizations may choose to spend the limited funds that they have on items other than our products and may experience higher failure rates. Moreover, if small organizations experience economic distress, they may be unwilling or unable to expend time and financial resources on marketing, which would negatively affect the overall demand for our products, increase customer attrition and could cause our revenue to decline. There can be no assurance, therefore, that current economic conditions or worsening economic conditions, or a recurring recession, will not have a significant adverse impact on our operating and financial results.

If the delivery of our customers’ emails is limited or blocked or our customers’ emails are directed to an alternate or “tabbed” section of the recipient’s inbox, customers may cancel their accounts.

ISPs can block emails from reaching their users. TheWhile we continually improve our own technology and work closely with ISPs to maintain our deliverability rates, the implementation of new or more restrictive policies by ISPs may make it more difficult to deliver our customers’ emails. We continually improve our own technology and work closely with ISPs to maintain our deliverability rates. In addition, some ISPs have started to categorize as promotional or otherwise“promotional” emails that originate from email service providers and, as a result, direct them to an alternate or “tabbed” section of the recipient’s inbox. If ISPs materially limit or halt the delivery of our customers’ emails, or if we fail to deliver our customers’ emails in a manner compatible with ISPs’ email handling or authentication technologies or other policies, or if the open rates of our customers’ emails are negatively impacted by the actions of ISPs to categorize emails, then customers may question the effectiveness of our products and cancel their accounts. This, in turn, could harm our business and financial performance.

If we fail to promote and maintain our brands in a cost-effective manner, we may lose market share and our revenue may decrease.

We believe that developing and maintaining awareness of the Constant Contact brands in a cost-effective manner is critical to our goal of achieving widespread acceptance of our online marketing platform and attracting new customers. Furthermore, we believe that the importance of brand recognition will increase as competition in our industry increases. Successful promotion of our brands will depend largely on the effectiveness of our marketing efforts and the effectiveness and affordability of our products for our target customer demographic. Historically, our efforts to build our brands have involved significant expense, and it is likely that our future marketing efforts

will require us to incur additional significant expenses. Such brand promotion activities may not yield increased revenue and, even if they do, any revenue increases may not offset the expenses we incur to promote our brands. If we fail to promote and maintain our brands successfully, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may lose our existing customers to our competitors or be unable to attract new customers, which would cause our revenue to decrease.

We depend on search engines to attract a significant percentage of our customers, and if those search engines change their listings or our relationship with them deteriorates or terminates, we may be unable to attract new customers, which would adversely affect our business and results of operations.

Many of our customers located our website by clicking through on search results displayed by search engines such as Google^®, Yahoo!^® and Bing^®. Search engines typically provide two types of search results, algorithmic and purchased listings. Algorithmic listings cannot be purchased, and instead are determined and displayed solely by a set of formulas designed by the search engine. Purchased listings can be purchased by advertisers in order to attract users to their websites. We rely on both algorithmic and purchased listings to attract a significant percentage of the customers we serve to our website. Search engines revise their algorithms from time to time in an attempt to optimize their search result listings. If search engines on which we rely for algorithmic listings modify their algorithms, this could result in fewer potential customers clicking through to our website, requiring us to resort to other costly resources to attempt to replace this traffic, which, in turn, could reduce our revenue and negatively impact our operating results, harming our business. If one or more search engines on which we rely for purchased listings modifies or terminates its relationship with us, our expenses could rise, or our revenue could decline and our business may suffer. The cost of purchased search listing advertising fluctuates and may increase as demand for these channels grows, and any such increases could negatively affect our financial results.

Furthermore, competitors may in the future bid on our brand names and other search terms that we use to drive traffic to our websites. Such actions could increase our advertising costs and result in decreased traffic to our website.

Mobile devices are increasingly being used to access the Internet, and our products may not be as effective when accessed through these devices, which could harm our business.

We offer our products across a variety of operating systems and through the Internet. Historically, we designed our products for use on a desktop or laptop computer; however, mobile devices, such as smartphones and tablets, are increasingly being used as the primary means for accessing the Internet. We are dependent on the interoperability of our products with third-party mobile devices and mobile operating systems, as well as web browsers that we do not control. Any changes in such devices, systems or web browsers that degrade the functionality of our products could adversely affect usage of our products. In addition, because a growing number of our customers access our products through mobile devices, we are dependent on the interoperability of our products with mobile devices and operating systems. Improving mobile functionality is an integral component of our product development plans. In the event that our customers have difficulty accessing and using our products on mobile devices, our customer growth, business and operating results could be adversely affected.

The success of our business depends on the continued growth and acceptance of email as a communications tool and the related expansion and reliability of the Internet infrastructure. If consumers do not continue to use email or alternative communications tools gain popularity, such as social media or text messaging, demand for our email marketing product may decline.

The future success of our business depends on the continued and widespread adoption of email as a primary means of communication. Security problems such as “viruses,” “worms” and other malicious programs or reliability issues arising from outages and damage to the Internet infrastructure could create the perception that email is not a safe and reliable means of communication, which would discourage businesses and consumers from using email. Use of email by businesses and consumers also depends on the ability of ISPs to prevent unsolicited bulk email, or “spam,” from overwhelming consumers’ inboxes. In recent years, ISPs have developed new technologies to filter unwanted messages before they reach users’ inboxes. In response, spammers have employed more sophisticated techniques to reach consumers’ inboxes. Although companies in the anti-spam industry have started to address the techniques used by spammers, if security problems become widespread or frequent or if ISPs cannot effectively control spam, the use of email as a means of communication may decline as consumers find alternative ways to communicate. In addition, if alternative communications tools, such as social media or text messaging, gain widespread acceptance, the need for email may lessen. Any decrease in the use of email would reduce demand for our email marketing product and harm our business.

Various private spam blacklists have in the past interfered with, and may in the future interfere with, the effectiveness of our products and our ability to conduct business.

We depend on email to market to and communicate with our customers, and our customers rely on email to communicate with their customers and members. Various private entities attempt to regulate the use of email for commercial solicitation. These entities often advocate standards of conduct or practice that significantly exceed current legal requirements and classify certain email solicitations that comply with current legal requirements as spam. Some of these entities maintain “blacklists” of companies and individuals, and the websites, ISPs and Internet protocol addresses associated with those entities or individuals, that do not adhere to those standards of conduct or practices for commercial email solicitations that the blacklisting entity believes are appropriate. If a company’s Internet protocol addresses are listed by a blacklisting entity, emails sent from those addresses may be blocked if they are sent to any Internet domain or Internet address that subscribes to the blacklisting entity’s service or purchases its blacklist.

Some of our Internet protocol addresses currently are listed with one or more blacklisting entities and, in the future, our other Internet protocol addresses may also be listed with these and other blacklisting entities. There can be no guarantee that we will not continue to be blacklisted or that we will be able to successfully remove ourselves from those lists. Blacklisting of this type could interfere with our ability to market our products and services and communicate with our customers and could undermine the effectiveness of our customers’ marketing campaigns, all of which could have a material negative impact on our business and results of operations.

Our customers’ use of our products and website to transmit negative messages or website links to harmful applications in violation of our policies or otherwise could damage our reputation, and we may face liability for unauthorized, inaccurate or fraudulent information distributed via our products.

Our customers could use our products or website to transmit negative messages or website links to harmful applications, reproduce and distribute copyrighted material or the trademarks of others without permission, or report inaccurate or fraudulent data or information. Any such use of our products could damage our reputation and we could face claims for damages, copyright or trademark infringement, defamation, negligence or fraud. Moreover, our customers’ promotion of their products and services through our products may not comply with federal, state and foreign laws. We cannot predict whether our role in facilitating these activities would expose us to liability under these laws. Even if claims asserted against us do not result in liability, we may incur substantial costs in investigating and defending such claims. If we are found liable for our customers’ activities, we could be required to pay fines or penalties, redesign business methods or otherwise expend resources to remedy any damages caused by such actions and to avoid future liability.

Our customers’ use of our SaveLocal product may negatively impact our reputation and could subject us to legal and regulatory risks, each of which could harm our business and results of operations.

Our brand and reputation may be harmed by our customers’ use of our SaveLocal product. Any shortcomings of one or more of our SaveLocal customers, particularly with respect to an issue affecting the quality of the deal offered or the products or services sold or such customer’s fraudulent or deceptive conduct, may be attributed to us, potentially damaging our reputation and brand value, reducing our ability to attract new customers or retain our current customers and subjecting us to potential liability, thereby negatively affecting our results of operations.

The application of certain U.S.United States and international laws and regulations to SaveLocal deals and to our role in facilitating our customers’ offer of SaveLocal deals is uncertain. These include laws and regulations such as the Credit Card Accountability Responsibility and Disclosure Act of 2009, or the CARD Act, the laws of most states, which contain provisions governing product terms and conditions of gift cards, gift certificates, stored value or pre-paid cards or coupons, and unclaimed and abandoned property laws. These laws may include provisions prohibiting or limiting the use of expiration dates on gift cards or the amount of fees charged in connection with gift cards or requiring specific disclosures on or in connection with gift cards and the imposition of certain fees.

If we are required to alter our business practices as a result of any laws or regulations, our revenue could decrease, our costs could increase and our business could otherwise be harmed. In addition, the costs and expenses associated with defending any actions related to such additional laws and regulations and any payments of related penalties, judgments or settlements could adversely impact our financial results.

In addition, if any laws or regulations require that the face value of SaveLocal coupons have a minimum expiration period beyond the period desired by our SaveLocal customers for their promotional programs, or no expiration period, this may affect the willingness of our customers to use our SaveLocal product in jurisdictions where these laws apply.

Our business may be negatively impacted by seasonal trends.

Sales of our products are impacted by seasonality. Small organizations are typically less active during the summer months. Thus, we generate fewer new customers during this time. As a result, we adjust our sales and marketing activities accordingly. If these seasonality trends change materially, our financial and operating results for any given quarter may be negatively impacted and may differ materially from results in prior quarterly periods.

If we fail to enhance our existing products, develop new products or offer a bundle of our products that our customers and prospective customers find compelling, our products may become obsolete or less competitive and we could lose customers.

If we are unable to enhance our existing products successfully, including our current recent enhancements to our contact management functionality and our plans to update our editing environment, or develop new products that keep pace with rapid technological developments and meet our customers’ needs, our business will be harmed. Creating and designing such enhancements and new products entails significant technical and business risks and requires substantial expenditures and lead-time, and there is no guarantee that such enhancements and new products will be completed in a timely fashion, nor is there any guarantee that any new product offerings will anticipate our customer’s needs or gain acceptance among our customers or in the broader market. In addition, such enhancements and new products may not be profitable for a number of years, if at all, and even if they are profitable, operating margins for new products may not be as high as the margins we have experienced historically. Our existing customers and prospective new customers may be dissatisfied with our enhancements to our existing products and may leave us or choose competing providers, or may not view any new product as complementary to our other product offerings and not purchase such additional products.

Similarly, if we offer a bundle of our products that our customers and prospective customers do not find compelling, our business will also be harmed. Creating, designing and marketing these packages (and converting our current customer base to these new packages) entails significant technical and business risks and requires substantial expenditures and lead-time, and there is no guarantee that such packages will anticipate our customers’ needs or gain acceptance among our customers or in the broader market.

If we cannot successfully enhance our existing services or develop new products or if we are not successful in implementing such enhancements and selling new products and/or new packages of our products to our customers, we could lose customers or have difficulty attracting new customers, which would adversely impact our financial performance.

Our relationships with our partners may not be as successful in generating new customers as we anticipate, which could adversely affect our ability to increase our customer base.

We maintain a network of different types of partners, some of whom refer customers to us through links on their websites and outbound promotion to their customers, resell our products and create integrations with our products. We have invested and will continue to invest in programs to enhance our partners’ effectiveness; however, these programs could require substantial investment while providing no assurance of return or incremental revenue. We also rely on some of our partners to create integrations with third-party applications and platforms used by our customers. If we fail to encourage our partners to create such integrations, demand for our products could decrease, which would harm our business and operating results. If we are unable to maintain our contractual relationships with existing partners or establish new contractual relationships with potential partners, we may experience delays and increased costs in adding customers, which could have a material adverse effect on us. The number of customers we are able to add through these relationships is dependent on the marketing efforts of our partners over which we exercise very little control, and a significant decrease in the number of new customers generated through these relationships or failure of our investment in partner programs to be effective could adversely affect the size of our customer base and revenue.

Competition for employees in our industry is intense, and we may not be able to attract and retain the highly skilled employees whom we need to support our business.

Competition for highly skilled engineering and marketing personnel is intense and we continue to face difficulty identifying and hiring qualified personnel in certain areas of our business and in certain locations. We may not be able to hire and retain such personnel at compensation levels consistent with our existing compensation and salary structure. In particular, candidates making employment decisions, particularly in high-technology industries, often consider the value of any equity they may receive in connection with their employment. As a result, any significant volatility in the market price of our common stock may adversely affect our ability to attract or retain highly skilled engineering and marketing personnel.

In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to serve our customers could diminish, resulting in a material adverse effect on our business.

The success of our SinglePlatform offering is based, in part, on the quality of the content provided by our SinglePlatform customers, including our SingleAPI merchants, and our ability to maintain a strong network of publishers.

Our SinglePlatform customers, including our SingleAPI merchants, provide us with current information about their business and offerings that we, in turn, provide to our network of electronic publishers, including but not limited to Yelp, foursquare, YP.com and Urbanspoon. The success of the SinglePlatform offering depends,and SingleAPI offerings depend, in part, on our ability to provide these publishers and their consumers with the information and access to the services or products they seek, which in turn depends on the quantity and quality of the content and services provided by our SinglePlatformthese customers. For example, we may be unable to provide these publishers and their consumers with the information they seek if our customers do not contribute content or services that isare helpful, reliable and up-to-date, or if they remove content they previously submitted. If our SinglePlatform product doesproducts do not provide content that is helpful, reliable and up-to-date or access to services that end users are interested in using, our ability to maintain our current network of electronic publishers and sign up new publishers could be harmed. If we are unable to provide our electronic publishers and their consumers with the information or services they seek, or if they can find equivalent content or services on other services,platforms, they may stop or reduce their use of our product, which could negatively impact our ability to retain existing customers and obtain new customers and merchants and our business would be harmed.

If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

Our futuresuccess depends, in part, on our ability to attract and retain key personnel. Our futuresuccess also depends on the continued contributions of our executive officers and other key technical and marketing personnel, each of whom would be difficult to replace. In particular, Gail F. Goodman, our Chairman, President and Chief Executive Officer, is critical to the management of our business and operations and the development of our strategic direction. The loss of the services of Ms. Goodman or other executive officers or key personnel and the process to replace any of our key personnel would involve significant time and expense, may take longer than anticipated and may significantly delay or prevent the achievement of our business objectives.

We may be subject to time-consuming and costly litigation.

From time to time, we may be subject to various claims and lawsuits by partners, customers, or other parties arising in the ordinary course of business, including lawsuits alleging patent infringement. We are currently a party to the actions that are described in Part I, Item 3 “Legal Proceedings”, included elsewhere in this Annual Report on Form 10-K. These matters can be time-consuming, divert management’s attention and resources, and cause us to incur significant expenses. Furthermore, the results of any of these actions may have a material adverse effect on our results of operations, financial condition and cash flows.

Economic conditions may negatively affect the small business sector, which may cause our customers to terminate existing accounts with us or cause potential customers to fail to purchase our products, resulting in a decrease in our revenue and impairing our ability to operate profitably.

Our products are designed specifically for smaller organizations. These organizations frequently have limited budgets and are often resource- and time-constrained and, as a result, may be more likely to be significantly affected by economic downturns than their larger, more established counterparts. As a result, smaller organizations may choose to spend the limited funds that they have on items other than our products. Moreover, if smaller organizations experience economic distress, they may be unwilling or unable to expend time and financial resources on marketing, which would negatively affect the overall demand for our products, increase customer attrition and could cause our revenue growth to decline. Uncertain and adverse economic conditions may also lead to a decline in the ability of our customers to use or access credit, including through credit cards, as well as increased refunds and chargebacks, any of which could adversely affect our business. Economic conditions may also adversely affect third parties with which we have entered into relationships and upon which we depend in order to grow our business. There can be no assurance, therefore, that current economic conditions or worsening economic conditions, or a recurring recession, will not have a significant adverse impact on our operating and financial results.

If we are unable to protect the confidentiality of our unpatented proprietary information, processes and know-how and trade secrets, the value of our technology and products could be adversely affected.

We rely heavily upon unpatented proprietary technology, processes and know-how and trade secrets. Although we try to protect this information in part by executing confidentiality agreements with our employees, consultants and third parties, such agreements may offer only limited protection and may be breached. Any unauthorized disclosure or dissemination of our proprietary technology, processes and know-how or our trade secrets, whether by breach of a confidentiality agreement or otherwise, may cause irreparable harm to our business, and we may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise be independently developed by our competitors or other third parties. If we are unable to protect the confidentiality of our proprietary information, processes and know-how or our trade secrets are disclosed, the value of our technology and services could be adversely affected, which could negatively impact our business, financial condition and results of operations.

The process of obtaining patent protection is expensive and time-consuming, and we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. We may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions, and under the laws of certain jurisdictions, patents or others intellectual property may be unavailable or limited in scope. Furthermore, it is possible that our patent applications may not issue as granted patents, that the scope of our issued patents will be insufficient or not have the coverage originally sought, that our issued patents will not provide us with any competitive advantages, and that our patents and other intellectual property rights may be challenged by others or invalidated through administrative processes or litigation. In addition, issuance of a patent does not assure that we have an absolute right to practice the patented invention, or that we have the right to exclude others from practicing the claimed invention. As a result, we may not be able to obtain adequate patent protection or to enforce our issued patents effectively.

Competitors and others may have adopted, and in the future may adopt, tag lines or service or product names similar to ours, which could impede our ability to build our brands’ identities and possibly lead to confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of the terms or designs of one or more of our trademarks.

From time to time, legal action by us may be necessary to enforce our patents, trademarks and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the intellectual property rights of others or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources, distract management and technical personnel and negatively affect our business, operating results, financial condition and cash flows. If we are unable to protect our intellectual property rights, we may find ourselves at a competitive disadvantage to others. Any inability on our part to protect adequately our intellectual property may have a material adverse effect on our business, operating results and financial condition.

Our use of open source software could impose limitations on our ability to commercialize our products.

We incorporate open source software into our products. Although we monitor our use of open source software closely, the terms of many open source licenses to which we are subject have not been interpreted by United States or foreign courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to commercialize our products. In such event, we could be required to seek licenses from third parties in order to continue offering our products, to re-engineer our products or to discontinue sales of our products, or to release our software code under the terms of an open source license, any of which could materially adversely affect our business. Given the nature of open source software, there is also a risk that third parties may assert copyright and other intellectual property infringement claims against us based on our use of certain open source software programs.

Our anticipated growth could strain our personnel resources and infrastructure, and if we are unable to implement appropriate controls and procedures to manage our anticipated growth, we may not be able to implement our business plan successfully.

We are currently experiencing a period of rapid growth in our headcount and operations, which has placed, and will continue to place, to the extent that we are able to sustain such growth, a significant strain on our management and our administrative, operational and financial reporting infrastructure. Our success will depend in part on the ability of our senior management to manage this expected growth effectively. To do so, we believe we will need to continue to hire, train and manage new employees as needed. If our new hires perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our existing employees, our business may be harmed. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational and financial controls and update our reporting procedures and systems. The expected addition of new employees and the capital investments that we anticipate will be necessary to manage our anticipated growth will increase our cost base, which will make it more difficult for us to offset any future revenue shortfalls by reducing expenses in the short term. If we fail to manage our anticipated growth successfully, we will be unable to execute our business plan successfully.

Providing our products to customers outside the United States exposes us to risks inherent in international business.

Customers in more than 180 countries and territories currently use our products. We have two regional development directors in Canada and in 2011, we opened a marketing office in the United Kingdom. We may continue to expand our international operations in the future. Accordingly, we are subject to risks and challenges that we would otherwise not face if we conducted our business only in the United States. The risks and challenges associated with providing our products to customers outside the United States include:

If we fail to meet these risks and challenges, we will be unable to execute our business plan and may be subject to fines and regulatory actions. Furthermore, expansion of our international operations may not be commercially successful.

Failure to maintain effective internal control over financial reporting and disclosure controls and procedures would have a material adverse effect on our business.

The Sarbanes-Oxley Act of 2002 requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In order to comply with Section 404 of the Sarbanes-Oxley Act’s requirements relating to internal control over financial reporting, we incur substantial accounting expense and expend significant management time on compliance-related issues. We expect to continue to incur such expenses and expend such time in the future. If in the future we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock would likely decline and we could be subject to sanctions or investigations by the NASDAQ Stock Market, the SEC or other regulatory authorities, which would require additional financial and management resources.

Our ability to use net operating loss carry-forwards in the United States may be limited.

As of December 31, 2013, we had net operating loss carry-forwards of $33.5 million for U.S. federal tax purposes and $849,000 for state tax purposes. These loss carry-forwards expire at varying dates between 2014 and 2033. To the extent available, we intend to use these net operating loss carry-forwards to reduce the corporate income tax liability associated with our operations. Section 382 of the Internal Revenue Code of 1986, as amended, generally imposes an annual limitation on the amount of net operating loss carry-forwards that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership. While our analysis shows that our public stock offerings and prior private financings have not resulted in ownership changes that would limit our ability to utilize net operating loss carry-forwards, any subsequent ownership changes could result in such a limitation. To the extent our use of net operating loss carry-forwards is significantly limited, our income could be subject to corporate income tax earlier than it would if we were able to use net operating loss carry-forwards, which could have a negative effect on our financial results.

Our quarterly results may fluctuate and if we fail to meet the expectations of analysts or investors, our stock price could decline substantially.

Our quarterly operating results may fluctuate, and if we fail to meet or exceed the expectations of securities analysts or investors, the trading price of our common stock could decline. Some of the important factors that could cause our revenue and operating results to fluctuate from quarter to quarter include:

Any one of the factors above, or the cumulative effect of some of the factors referred to above, may result in significant fluctuations in our quarterly or annual operating results, including our key financial and operating metrics. This variability and unpredictability could result in our failing to meet our revenue or operating results expectations or those of securities analysts or investors for any period. In addition, a significant percentage of our operating expenses are fixed in nature and based on forecasted revenue. Accordingly, in the event of revenue shortfalls, we may be unable to mitigate the negative impact on operating results in the short term. If we fail to meet or exceed such expectations for these or any other reasons, our business and stock price could be materially and adversely affected and we could face costly lawsuits, including securities class action suits.

Some of these factors are not within our control, and the occurrence of one or more of them may cause our operating results to vary widely. As such, we believe that quarter-to-quarter comparisons of our revenue and operating results may not be meaningful and should not be relied upon as an indication of future performance.

We may engage in future acquisitions that could disrupt our business, dilute stockholder value and harm our business, operating results or financial condition.

We have completed several acquisitions in the past, three years, including our most recent acquisition of SinglePlatform Corp. in June 2012. We have, from time to time, evaluated other acquisition opportunities and may pursue acquisition opportunities in the future. Acquisitions involve numerous risks, including:

In addition, any acquisitions we complete may not ultimately strengthen our competitive position or achieve our goals, or such an acquisition may be viewed negatively by our customers, stockholders or the financial markets.

We may need additional capital in the future, which may not be available to us on favorable terms, or at all, and may dilute the ownership of our existing stockholders.

We have historically relied on cash from operations to fund our operations, capital expenditures and growth. We may require additional capital from equity or debt financing in the future to:

We may not be able to secure timely additional financing on favorable terms, or at all. The terms of any additional financing may place limits on our financial and operating flexibility. If we raise additional funds through issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution, and any new securities we issue could have rights, preferences and privileges senior to those of our common stock. If we are unable to obtain adequate financing or financing on terms satisfactory to us, if and when we require it, our ability to grow or support our business and to respond to business challenges could be significantly limited.

Our business is exposed to risks associated with credit card and other online payment chargebacks and fraud.

A majority of our revenue is processed through credit cards and other online payments. If our refunds or chargebacks increase, our processors could require us to increase reserves or terminate their contracts with us, which would have an adverse effect on our financial condition.

Our failure to limit fraudulent transactions conducted on our websites, such as through the use of stolen credit card numbers, could also subject us to liability. Under credit card association rules, penalties may be imposed at the discretion of the association for inadequate fraud protection. Any such potential penalties would be imposed on our credit card processor by the association. Under our contracts with our payment processors, we are required to reimburse our processors for such penalties. However, we face the risk that we may fail to maintain an adequate level of fraud protection and that one or more credit card associations or other processors may, at any time, assess penalties against us or terminate our ability to accept credit card payments or other forms of online payments from customers, which would have a material adverse effect on our business, financial condition and operating results.

RISKS RELATED TO THE OWNERSHIP OF OUR COMMON STOCK

The market price of our common stock has been and may continue to be volatile.

The trading price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations in response to various factors. Some of the factors that may cause the market price of our common stock to fluctuate include:

In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to litigation that, even if unsuccessful, could be costly to defend and a distraction to management.

There can be no assurance that our stock repurchase program will enhance long-term stockholder value and stock repurchases could increase the volatility of the price of our common stock and will diminish our cash and cash equivalents.

In July 2014, we announced that our Board of Directors approved a stock repurchase program for up to $30 million of our common stock through July 31, 2015. Under the repurchase program, we are authorized to repurchase shares in the open market, which may include the use of 10b5-1 trading plans, or through privately negotiated transactions. The timing and amount of repurchases will depend upon several factors, including market and business conditions. The repurchase program may be suspended or discontinued at any time without prior notice. Repurchases pursuant to our stock repurchase program could affect our stock price and increase its volatility. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. Additionally, our stock repurchase program will diminish our cash and cash equivalents, which may reduce our flexibility with respect to future activities, including acquisitions. There can be no assurance that any stock repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of stock. Although our stock repurchase program is intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce the program’s effectiveness.

If securities or industry analysts do not continue to publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or our business. We do not control these analysts. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change of control of our company and may affect the trading price of our common stock.

We are a Delaware corporation and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay or prevent a change of control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change of control would be beneficial to our existing stockholders. In addition, our restated certificate of incorporation and second amended and restated bylaws may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Among other things, our restated certificate of incorporation and second amended and restated bylaws:

We do not currently intend to pay dividends on our common stock and, consequently, the ability to achieve a return on an investment in our common stock will depend on appreciation in the price of our common stock.

We do not expect to pay cash dividends on our common stock. Any future dividend payments are within the absolute discretion of our board of directors and will depend on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial condition, contractual restrictions, business opportunities, anticipated cash needs, provisions of applicable law and other factors that our board of directors may deem relevant. We may not generate sufficient cash from operations in the future to pay dividends on our common stock.

None.

We conduct our operations in leased facilities. We currently lease approximately 190,000 square feet of office space in Waltham, Massachusetts pursuant to a lease agreement, as amended, that expires in September 2022 with one ten-year extension option. This facility serves as our corporate headquarters. The functions performed at our headquarters include finance, human resources, legal, marketing, sales, customer support, operations, product strategy and management and research and development. We expect to occupy approximately 61,00056,000 additional square feet of space in this facility over the next two years.year and an additional 5,000 square feet in 2018.

In Loveland, Colorado, we lease approximately 50,000 square feet of office space under a lease agreement that will expire in April 2019 with three three-year extension options. This facility is used for sales and support personnel. We lease approximately 8,000 and 2,000 square feet of office space in San Francisco, California and Delray, Florida, respectively, pursuant to lease agreements that expire in 2017 and 2016, respectively, and approximately 27,000 square feet of office space in two facilities in New York, New York pursuant to lease agreements that expire in 2016 and 2018. The facilities in California and Florida and one of the New York locations are used for research and development personnel. The other New York facility houses personnel who operate our SinglePlatform personnel.product. We also lease a small amount of office space in London pursuant to a lease agreement that expires in 2014,2015, which is used to house marketing personnel.

Our production system hardware and the disaster recovery hardware for our production system, with the exception of SinglePlatform, are currently co-located in third-party hosting facilities. One facility, located in Bedford, Massachusetts, is owned and operated by Digital 55 Middlesex, LLC, an affiliate of DRT, which provides services to us under an agreement that expires in December 2016 with two five-year extension options. The other facility, located in Santa Clara, California, is owned and operated by Digital Alfred, LLC, also an affiliate of DRT. The agreement will expire in May 2017 with two four-year extension options.

We believe that the total space available to us in the facilities under our current leases and third-party hosting arrangements or obtainable by us on commercially reasonable terms, will meet our needs for the foreseeable future.

For more information about our lease and third-party hosting commitments, see also Note 10,Commitments and Contingencies, of the Notes to our Consolidated Financial Statements, included elsewhere in this Annual Report on Form 10-K.

On August 7, 2012, two former employees, on behalf of themselves and all other similarly situated individuals, or collectively, the FLSA Plaintiffs, filed a complaint in the U.S. District Court for the District of Massachusetts that named us as a defendant in a lawsuit. The complaint, which was served on us on August 9, 2012, alleged that we violated the Fair Labor Standards Act and the Massachusetts overtime law with respect to certain of our current and former sales employees. The FLSA Plaintiffs’ complaint sought an award for damages in an unspecified amount. We participated in a court-sanctioned mediation session with an independent mediator in March 2013 and, during the three months ended March 31, 2013, we recorded an accrual of $820,000. In July 2013, we executed a settlement agreement with the FLSA Plaintiffs that would terminate the litigation and settle all pending claims against us in exchange for an aggregate payment of $800,000. The U.S. District Court approved the settlement and settlement payments were distributed to all FLSA Plaintiffs in the fourth quarter of 2013. See also Note 10,Commitments and Contingencies,of the Notes to Consolidated Financial Statements, included elsewhere in this Annual Report on Form 10-K.

On September 24, 2012, RPost Holdings, Inc., RPost Communications Limited and RMail Limited, or collectively, RPost, filed a complaint in the U.S.United States District Court for the Eastern District of Texas that named us as a defendant in a lawsuit. The complaint which was served on us on December 26, 2012, alleges that certain elements of our email marketing technology infringe five patents held by RPost. RPost seeks an award for damages in an unspecified amount and injunctive relief. OnIn February 11, 2013, RPost amended its complaint to name five of our marketing partners as defendants. Under our contractual agreements with these marketing partners, we are obligated to indemnify them for claims related to patent infringement. We filed a motion to sever and stay the claims against our partners and multiple motions to dismiss the claims against us. In January 2014, the case was stayed pending the resolution of certain state court and bankruptcy actions involving RPost, to which we are not a party. RPost has askedThe stay was extended by agreement of the court to reconsider the order to stay the case.parties in December 2014. This litigation is in its very early stages. As a result, neither the ultimate outcome of this litigation nor an estimate of a probable loss or any reasonably possible losses can be assessed at this time. Nevertheless, we believe we have meritorious defenses to any claim of infringement and intend to defend the lawsuit vigorously.

On November 14, 2012, we filed a complaint in the U.S. District Court for the District of Delaware against Umbanet, Inc., or Umbanet, seeking a declaratory judgment that two patents held by Umbanet, or collectively, the Umbanet Patents, are not infringed by a customer’s use of our email marketing product and that such patents are invalid. We refer to this matter as the Delaware Case. We filed the Delaware Case in response to a complaint filed by Umbanet in the U.S. District Court for the District of New Jersey against one of our customers alleging that the customer’s use of our email marketing product infringed the Umbanet Patents. We refer to this matter as the New Jersey Case. Umbanet filed a motion in the Delaware Case seeking to dismiss the complaint or, in the alternative, stay the case pending resolution of the New Jersey Case. We filed a motion in the New Jersey Case seeking to stay the case pending resolution of the Delaware Case. In January 2014, the judge in the New Jersey

Case ordered that the case should proceed notwithstanding the pending Delaware case. This litigation is in its very early stages. As a result, neither the ultimate outcome of this matter nor an estimate of a probable loss or any reasonably possible losses can be assessed at this time. Nevertheless, we believe that we have meritorious defenses to any claim of infringement and intend to defend the lawsuit vigorously.

On March 7, 2013, CreateAds LLC, or CreateAds, filed a complaint in the U.S.United States District Court for the District of Delaware that named us as a defendant in a lawsuit. The complaint which was served on us on March 8, 2013, alleges that certain elements of our email marketing technology infringe a patent held by CreateAds. CreateAds seeks an award for damages in an unspecified amount and injunctive relief. We have filed a motion to dismiss the complaint. In February 2014, the case was stayed pending a decision by the United States Supreme Court in the appeal of a patent case with issues very similar to the ones pending in our motion to dismiss. Following the Supreme Court’s decision which is expected in June 2014, we filed a motion for summary judgment seeking to invalidate the district court will decide our motionpatent for lack of patent-eligible subject matter. By agreement of the parties, the case was dismissed with prejudice as to dismiss the claims raised by CreateAds complaint. This litigation matter is in its very early stages. As a result, neither the ultimate outcome of this matter nor an estimate of a probable loss or any reasonably possible losses can be assessed at this time. Nevertheless, we believe that we have meritorious defenses to any claim of infringement and intend to defend the lawsuit vigorously.February 2015.

From time to time we may become subject to various other legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of our business. While the outcome of these other claims cannot be predicted with certainty, we do not believe that the outcome of any of these other legal matters will have a material adverse effect on our results of operations, financial condition or cash flows.

Not applicable.

PART II

Certain Information Regarding the Trading of Our Common Stock

Our common stock trades under the symbol “CTCT” on the NASDAQ Global Select Market. The following table sets forth, for the periods indicated, the high and low sale price per share of our common stock on the NASDAQ Global Select Market:

Holders of Our Common Stock

As of February 28, 2014,20, 2015, there were 4741 holders of record of shares of our common stock. This number does not include stockholders for whom shares are held in “nominee” or “street” name. While we are unable to estimate the actual number of beneficial holders of our common stock, we believe the number of beneficial holders is substantially higher than the number of holders of record of shares of our common stock.

Dividends; Equity Repurchases

We have never paid or declared any cash dividends on our common stock and do not anticipate paying any cash dividends in the foreseeable future. We currently intend to retain all future earnings, if any, for use in the operation of our business. The following is a summary of our repurchases of our common stock during the three monththree-month period ended December 31, 2013:2014:

Recent Sales of Unregistered Securities

We did not sell any unregistered securities during the year ended December 31, 2013.2014.

Securities Authorized for Issuance Under Equity Compensation Plans

Information regarding our equity compensation plans and the securities authorized for issuance thereunder is set forth herein under Part III, Item 12 below.

Stock Performance Graph

The following stock performance graph compares the cumulative total return to stockholders for our common stock for the period from December 31, 20082009 through December 31, 20132014 against the cumulative total return of the NASDAQ Composite Index and the NASDAQ Computer and Data Processing Index.

The comparison assumes $100.00 was invested in our common stock, the NASDAQ Composite Index and the NASDAQ Computer and Data Processing Index and assumes reinvestment of dividends, if any. The stock performance shown on the graph below is not necessarily indicative of future price performance.

Cumulative Total Return for Periods Presented

Among Constant Contact, Inc., the NASDAQ Composite Index (Total Returns) *

and the NASDAQ Computer and Data Processing Index**

Chart is prepared by Zacks Investment Research, Inc. Used with permission. All rights reserved. Copyright1980-2014 1980-2015

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or incorporated by reference into any filing of under the Securities Act of 1933, as amended, or the Securities Act, except as shall be expressly set forth by specific reference in such filing.

ITEM 6.

SELECTED FINANCIAL DATA

The selected statements of operations data for the years ended December 31, 2014, 2013 2012 and 20112012 and the balance sheet data as of December 31, 20132014 and 20122013 have been derived from our audited consolidated financial statements, which are included elsewhere in this Annual Report on Form 10-K. The selected statements of operations data for the years ended December 31, 20102011 and 20092010 and the balance sheet data as of December 31, 2012, 2011 2010 and 20092010 have been derived from our audited consolidated financial statements, which are not included in this Annual Report on Form 10-K. The selected financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes, included elsewhere in this Annual Report on Form 10-K. The historical results are not necessarily indicative of the results to be expected in any future period.

(2)

Income tax (expense) benefit for the years ended December 31, 2012 and 2011 have been revised to correct prior period errors in our accounting for deferred income taxes associated with certain stock-based compensation awards. These revisionsUnique customers are described in detail in Note 2,Summary of Significant Accounting Policies,of the Notes to Consolidated Financial Statements, included elsewhere in this Annual Report on Form 10-K.

(3)

We define our end of period number of unique customers as the number of customers that we invoiced for one or more of our products during the last month of the period rounded to the nearest 5,000.5,000 and we define unique customers as customers of all of our products and services, inclusive of both subscription and transaction-based products. Transactional customers are included in the customer count for the period if they transacted within the prior 12-month period. A customer of multiple products and services is counted as one unique customer.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information, included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” section of this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a leading provider of online marketing tools that are designed for small organizations, including small businesses, associations and non-profits. We seek to help our customers succeed by creating and growing their customer and member relationships through our easy-to-use products combined with education, support, KnowHow and coaching. Our tools include our email marketing, social media marketing, event marketing, local deals, online listings and survey products.

In April 2014, we formally launched Constant Contact Toolkit, an integrated online marketing platform that simplifies small business marketing by bringing together the tools needed to drive repeat customers and reach new ones. Toolkit combines new and existing elements of our product set to make it easy for small organizations to find and engage with current and new customers across multiple marketing channels, including email, social, mobile and web. Toolkit is available to new customers through three different packages: Email, Email Plus and Personal Marketer. We also plan to migrate existing customers to Toolkit over time. We believe Toolkit makes it easier for smaller organizations to find and engage with current and new customers, which, in turn, will allow us to achieve increased product usage, increased revenue per customer and higher retention rates. We market our products and acquire our customers through a variety of sources including online marketing, such as search engines and advertising onwith online networks and other websites, offline marketing through television and radio advertising, local seminars, relationships with our partners, outbound sales efforts, referrals from our growing customer base, general brand awareness and a link to our website in the footer of substantially all of the emails sent by our customers.

We have grown rapidly since launching our first on-demand product in 2000. We ended 2013 withAs of December 31, 2014, we had approximately 595,000635,000 unique paying customers and had revenue of $332 million. Unique customers are rounded to the nearest 5,000 and we define unique customers as customers of all of our products and services, inclusive of both subscription and transaction-based products. Transactional customers are included in the customer count for that yearthe period if they transacted within the prior 12-month period. A customer of $285 million.multiple products and services is counted as one unique customer.

Our business strategy is to expand beyond email marketing to provide an integrated multi-product offering, that drivesConstant Contact Toolkit, to drive higher customer life-timelifetime value driven by improvementsoffering gains in average revenue per customer and retention. We believe increasing our customer’s life-timelifetime value will be a key contributor to our continued success. To drive life-timelifetime value, we intend to continue to focus on acquiring and supporting customers in a cost-effective manner, increasing average revenue per customer (through cross-selling, list size growth and bundling of our products)Toolkit) and improving customer retention rates. We continue to test pricing and product bundling. Bundled product offerings provide access to multiple products for one set monthly fee. We expect to offer a variety of packages that will contain different product combinations and pricing tiers. We believe, when used in combination, our integrated products provide customers with a unified online marketing platform and that by offering bundles,

In July 2014, we will be able to achieve increased product usage, increased revenue per customer and higher retention rates.

Recent highlights include:

Key Financial and Operating Metrics

In connection with the ongoing operation of our business, our management and our Board of Directors regularly reviewsreview key financial and operating metrics. Given our growth strategy, we pay particular attention to customer life-timelifetime value, customer acquisition metrics, trialer growth, customer attrition, success in cross-selling and growing customer list sizes, number of products per customerunique paying customers and average revenue per customer. We also consider other financial and operating metrics such as revenue, quarterly revenue growth, gross margin, expenses, customer satisfaction rates, average speed of answer for customer support calls, email deliverability rates and capital expenditures, among others. Management considers these financial and operating metrics critical to understanding and improving our business, reviewing our historical performance, benchmarking our performance versus other companies and identifying current and future trends, and for planning purposes.

In addition, we believe that certain financial measures, which are not measures of financial performance under accounting principles generally accepted in the United States of America, or GAAP, are useful to management and investors in evaluating our operating performance for the periods presented and provide a tool for evaluating our ongoing operations. These non-GAAP financial measures, however, should not be considered a substitute for GAAP financial measures, including but not limited to net income (loss) or cash flows from operating, investing and financing activities and may not be comparable to similarly titled measures reported by other companies.

We consider the following non-GAAP financial measures to be key indicators of our financial performance:

We believe that these non-GAAP financial measures are useful to management and investors in evaluating our operating performance for the periods presented and provide a tool for evaluating our ongoing operations. These non-GAAP financial measures, however, are not a measure of financial performance under accounting principles generally accepted in the United States of America, or GAAP, and should not be considered a substitute for GAAP financial measures, including but not limited to net income (loss) or cash flows from operating, investing and financing activities and may not be comparable to similarly titled measures reported by other companies.

Certain Trends and Uncertainties

The following represents a summary of certain trends and uncertainties, which could have a significant impact on our financial condition and results of operations. This summary is not intended to be a complete list of potential trends and uncertainties that could impact our business in the long or short term. This summary should be considered along with the factors set forth under Part I, Item 1A—“Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.GAAP. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We believe that the estimates, assumptions and judgments involved in the accounting policies described below may have the greatest potential impact on our financial statements and, therefore, consider these to be our critical accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. See also Note 2,Summary of Significant Accounting Policies,of the Notes to Consolidated Financial Statements, included elsewhere in this Annual Report on Form 10-K for information about these critical accounting policies, as well as a description of our other significant accounting policies.

Revenue Recognition.    We provide access to our products primarily through subscription arrangements whereby the customer is charged a fee for access for a defined term. Subscription arrangements include access to use our software via the Internet and support services, such as telephone, email and chat support. When there is evidence of an arrangement, the fee is fixed or determinable and collectability is deemed reasonably assured, we recognize revenue on a daily basis over the subscription period as the services are delivered. Delivery is considered to have commenced at the time the customer has paid for the products and has access to the account via a log-in and password. We also generate a small amount of revenue from our SaveLocal product by charging a fee to our customers based on the number of deals sold by our customers and the value of the successful deal. We recognize revenue from the fee charged when there is evidence of an arrangement, the fee is fixed or determinable and collectability is deemed reasonably assured. We also offer ancillary services to our customers related to our subscription-based products such as custom services and training. When sold together, revenue from custom services, training and our subscription products are accounted for separately based on vendor specific objective evidence of fair value of each of the services as those services have value on a standalone basis and do not involve a significant degree of risk or unique acceptance criteria. Revenue from custom services and training is recognized as the services are performed. Revenue from transaction-based products and services is recognized based on the transactional fee charged when there is evidence of an arrangement, the fee is fixed or determinable, collectability is deemed reasonably assured and the transaction has occurred.

Income Taxes.    Income taxes are provided for tax effects of transactions reported in the financial statements and consist of income taxes currently due plus deferred income taxes related to timing differences between the basis of certain assets and liabilities for financial statement and income tax reporting purposes. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using

enacted tax rates in effect in the years in which the differences are expected to reverse. A valuation allowance is provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We account for uncertainty in income taxes recognized in our financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.

Goodwill and Acquired Intangible Assets.    We record goodwill when consideration paid in a purchase acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. Goodwill is not amortized, but rather is tested for impairment annually or more frequently if facts and circumstances warrant a review. We perform our assessment for impairment of goodwill on an annual basis and we have determined that there is a single reporting unit for the purpose of conducting this annual goodwill impairment assessment. For purposes of assessing potential impairment, we annually estimate the fair value of the reporting unit (based on our market capitalization) and compare this amount to the carrying value of the reporting unit (as reflected by our total stockholders’ equity). If we determine that the carrying value of the reporting unit exceeds its fair value, an impairment charge would be required. We completed our most recent annual impairment test of goodwill on November 30, 2013.2014. Based upon that evaluation, we determined that our goodwill was not impaired.

Intangible assets are recorded at their estimated fair values at the date of acquisition. We amortize acquired intangible assets over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis.

Software and Website Development Costs.    Relative to development costs of our on-demand products and website, we capitalize certain direct costs to develop functionality as well as certain upgrades and enhancements that are probable to result in additional functionality. The costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct and incremental, are capitalized as part of property and equipment until the software is substantially complete and ready for its intended use. Once placed in use, capitalized software is amortized over a three-year period in the expense category to which the software relates.

Stock-Based Compensation.    We value all stock-based compensation, including grants of stock options, restricted stock and restricted stock units, at fair value on the date of grant, and expense the fair value over the applicable service period. The straight-line method is applied to all awards with service and market conditions, while the graded vesting method is applied to all awards with both service and performance conditions.

We base the fair value of common stock on the quoted market price of our common stock. The fair value of restricted stock and restricted stock units for awards with time-based and performance-based vesting conditions areis based on the fair value of common stock on the date of grant. We value restricted stock units with market-based vesting criteria using a Monte Carlo simulation model. The number of shares expected to be earned, based on achievement of the market condition, is factored into the grant date Monte Carlo valuation for the awards. The grant date fair value is not subsequently adjusted regardless of the eventual number of shares that are earned based on the market condition.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. TheWe estimate expected term assumption is based on historical exercise activity, giving consideration to the “simplified method” for estimatingcontractual term of the expected term for awards that qualify as “plain-vanilla” options.options and vesting schedules. Expected volatility is based on our historical volatility for the expected term of the publicly traded stocks of a peer group of companies, inclusive of us, commencing October 2007.award. The risk-free interest rate is determined by reference to U.S.United States Treasury bond yields at

or near the time of grant for time periods similar to the expected term of the award. The relevant data used to determine the fair value of the stock option grants is as follows:

These assumptions representedrepresent our best estimates, but the estimates involve inherent uncertainties and the application of our judgment. As a result, if factors change and we use significantly different assumptions or estimates, our stock-based compensation expense could be materially different. Authoritative guidance requires that we recognize compensation expense for only the portion of awards that are expected to vest. In developing a forfeiture rate estimate, we have considered our historical experience to estimate pre-vesting forfeitures for awards with service conditions. For awards with performance conditions we estimate the probability that the performance condition will be met. If our actual forfeiture rate is materially different from the estimate, our stock-based compensation expense could be significantly different from what we have recorded in the current period. As of December 31, 2013,2014, we had $24.4$28.0 million of unrecognized compensation expense associated with outstanding equity awards, which is expected to be recognized over a weighted-average period of 2.542.74 years.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. A fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, are used to measure fair value:

Sources of Revenue

We derive our revenue principally from subscription fees from our customers. Our revenue is driven primarily by the number of paying customers and the subscription fees for our products and is not concentrated within any one customer or group of customers. In 2013, our top 100 customers accounted for less than 1% of our total revenue. We generally do not require our customers to commit to a contractual term; however, our customers are required to prepay for subscriptions on a monthly, semi-annual, or annual basis by providing a credit card or bank check. Fees are recorded initially as deferred revenue and then recognized as revenue on a daily basis over the prepaid subscription period. Our pricing for our SaveLocal product is a fee based on the number of deals sold by our customers and the value of the successful deal. We have not yet generated significant revenue from this product.

We also generate a small amount of revenue from ancillary services related to our products, which primarily consist of custom services and training, through our experts program. Revenue generatedand a small amount of revenue from professional servicestransactional fee-based products and training accounted for approximately 1% of total revenue for each of the years ended December 31, 2013, 2012 and 2011.service offerings.

Cost of Revenue and Operating Expenses

We allocate certain occupancy and general office related expenses, such as rent, utilities, office supplies and depreciation of general office assets to cost of revenue and operating expense categories based on headcount. As a result, an occupancy expense allocation is reflected as personnel costs in cost of revenue and each operating expense category.

Cost of Revenue.    Cost of revenue consists primarily of wages and benefits for software operations and customer support personnel, credit card processing fees, depreciation and amortization, and maintenance and hosting of our software applications underlying our product offerings.offerings and other direct costs of delivering our products. We allocate a portion of customer support costs relating to assisting trial customers to sales and marketing expense.

The expenses related to our hosted software applications are affected by the number of customers who subscribe to our products and the complexity and redundancy of our software applications and hosting infrastructure. We expect cost of revenue to increase in absolute dollars as we expect to increase our number of customers but to continue to decrease as a percentage of revenue over time as we gain efficiencies created by our expected revenue growth and cost savings.

Research and Development.    Research and development expenses consist primarily of wages and benefits for product strategy and development personnel. We have focused our research and development efforts on improving ease of use,ease-of-use, functionality and technological scalability of our existing products as well as on the development of new product offerings. We primarily expense research and development costs. However, direct development costs related to software enhancements that add functionality are capitalized and amortized over their useful life. WeOver the shorter term, we expect that on an annual basis research and development expenses will continue to increase both in absolute dollars and as a percentage of revenue due to our expanded investment in our product roadmap. Over the longer term we expect our research and development expenses to increase in absolute dollars but decrease as a percentage of revenue as we expect to grow our revenue at a faster rate.

Sales and Marketing.    Sales and marketing expenses consist primarily of advertising and promotional costs, wages and benefits for sales and marketing personnel, partner referral fees, the portion of customer support costs that relate to assisting trial customers and amortization of sales and marketing relating intangible assets. Advertising costs consist primarily of pay-per-click advertising with search engines, other online and offline advertising media, including television and radio advertisements, as well as the costs to create and produce these advertisements. Advertising costs are expensed as incurred. Promotional costs consist primarily of public relations, memberships and event costs. Additionally, sales and marketing expenses include costs related to our efforts to retain our customers and to cross-sell and increase usage of our products. In order to continue to grow our business and brand and category awareness, we expect that we will continue to commit substantial resources to our sales and marketing efforts. As a result, we expect that on an annual basis, sales and marketing expenses will increase in absolute dollars, but continue to decrease as a percentage of revenue as we expect to grow our revenue at a faster rate.

General and Administrative.    General and administrative expenses consist primarily of wages and benefits for administrative, human resources, internal information technology support, finance, accounting and analytics personnel, professional fees, board compensation and expenses, certain taxes and other corporate expenses. In 2013, we also recorded litigation expense related to the settlement of a lawsuit and an accrual related to estimated personal property taxes. We expect that general and administrative expenses will increase in absolute dollars as we continue to add personnel in connection with the anticipated growth of our business and incur costs related to operating as a public company but to decreaseremain relatively flat as a percentage of revenue as we expect to grow our revenue at a faster rate.revenue.

Acquisition Costs and Other Related Charges.    Acquisition costs and other related charges include expenses associated with third-party professional services we utilize related to the evaluation and execution of successful

acquisitions. Acquisition costs and other related charges also include changes in the fair value of our contingent consideration liability recorded as the result of theour acquisition of SinglePlatform, acquisition.Corp. in June 2012. This liability was measured at fair value on the acquisition date, and until the liability iswas settled, it must bewas remeasured to fair value at each reporting period, with the changes included in our results of operations. We will evaluateevaluated quarterly remeasurements of the fair value of this liability through June 2014, the last settlement date. We may also incur acquisition costs and other related charges in future periods if we complete additional acquisitions.

Results of Operations

The following table sets forth selected statements of operations data for each of the periods indicated as a percentage of total revenue.

Years Ended December 31, 2014, 2013 2012 and 20112012

Revenue

Revenue increased by $46.3 million from 2013 to 2014. The increase resulted primarily from an approximately 7% increase in the number of average monthly customers and an approximately 9% increase in average revenue per customer. The increase in average revenue per customer was primarily due to new packaging and pricing plans applicable to a subset of our customers and to revenue from SinglePlatform, which has a higher monthly price than our other products. We expect our average revenue per customer to increase over time.

Revenue increased by $33.2 million from 2012 to 2013. The increase resulted primarily from an approximately 8% increase in the number of average monthly customers and an approximately 5% increase in average revenue per customer. The increase in average revenue per customer was primarily due to an increase in average customer list size, which increases the monthly amount invoiced to our email marketing customers, and to revenue from our SinglePlatform product, which has a higher monthly price than our other products. We expect our average revenue per customer to increase over time.

Revenue increased by $37.7 million from 2011 to 2012. The increase resulted primarily from an approximately 12% increase in the number of average monthly customers and an approximately 5% increase in average revenue per customer. The increase in average revenue per customer was primarily due to an increase in average customer list size and additional revenue from add-ons to our email marketing product and from our event marketing product. The increase in revenue from our event marketing product was primarily driven by a price increase implemented in September 2011 as well as an increase in the number of event marketing customers in 2012.SinglePlatform.

Cost of Revenue

Cost of revenue increased by $9.4 million from 2013 to 2014 and was 27% and 29% of revenue for 2014 and 2013, respectively. The increase in absolute dollars resulted primarily from increased customer support personnel costs of $3.0 million to support our customer growth and increased number of products. Personnel costs in our operations group, which is responsible for managing our technology infrastructure, increased by $2.4 million. Depreciation, hosting and maintenance costs increased by $1.3 million as a result of scaling and adding capacity to our hosting infrastructure. Merchant card fees increased by $1.1 million due to the higher volume of billing transactions.

Cost of revenue increased by $8.1 million from 2012 to 2013 and was 29% of revenue for both years. The increase in absolute dollars resulted primarily from increased customer support personnel costs of $3.3 million to support our customer growth and increased number of products. Personnel costs in our operations group which is responsible for managing our technology infrastructure, increased by $1.2 million. Depreciation, hosting and maintenance costs increased by $2.0 million as a result of scaling and adding capacity to our hosting infrastructure. Merchant card fees increased by $873,000 due to the higher volume of billing transactions.

Cost of revenue increased by $12.1 million from 2011 to 2012 and was 29% of revenue for both years. The increase in absolute dollars resulted primarily from increased customer support personnel costs of $5.6 million to support our customer growth and increased number of products and increased personnel costs of $1.4 million in our operations group. Depreciation, hosting and maintenance costs increased by $3.9 million as a result of scaling and adding capacity to our hosting infrastructure inclusive of the effects of transitioning to a new third-party hosting facility in California in the third quarter of 2011.

Research and Development Expenses

Research and development expenses increased by $7.5 million from 2013 to 2014. The increase was primarily due to additional personnel costs of $7.9 million as a result of our continued hiring of research and development employees to further develop and enhance our product offerings. This was partially offset by a decrease in consulting costs of $1.2 million

Research and development expenses increased by $6.8 million from 2012 to 2013. The increase was primarily due to additional personnel costs of $4.8 million and additional consulting costs of $1.4 million as a result of our continued hiring of research and development employees and use of contractors, both to further develop and enhance our product offerings.

Research and development expenses increased by $9.3 million from 2011 to 2012. The increase in absolute dollars was primarily due to additional personnel costs of $8.1 million and additional consulting costs of $925,000 as a result of our continued hiring of research and development employees and use of contractors, both to further develop and enhance our product offerings.

Sales and Marketing Expenses

Sales and marketing expenses increased by $14.4 million from 2013 to 2014. The increase in absolute dollars was largely due to increased personnel costs of $11.1 million. In addition, advertising and promotional expenditures increased by $3.2 million and consulting costs increased by $1.0 million. These increases were partially offset by a decrease in partner referral fees of $2.1 million as a result of changes to the structure of our partner program to focus on our more productive partners.

Sales and marketing expenses increased by $6.8 million from 2012 to 2013. The increase in absolute dollars was largely due to increased personnel costs of $3.0 million that resulted primarily from a full year of SinglePlatform personnel, which accounted for a $4.8 million increase. This increase was partially offset by a decrease in salary and stock-based compensation expense during the period and a decrease in the allocation of occupancy and general corporate expenses to sales and marketing. A significant contribution to the decrease in salary and stock-based compensation was due to the departure of an executive within the group. The decrease in the allocation of occupancy and general corporate expenses was due to a decrease in sales and marketing wages as a percentage of total wages within our company. Advertising and promotional expenditures also increased by $3.0 million and partner referral fees increased by $854,000 as the number of new customers generated from our partners increased.

Sales and marketing expenses increased by $15.3 million from 2011 to 2012. The increase in absolute dollars was largely due to increased personnel costs of $10.8 million that resulted primarily from adding employees and increased consulting fees of $929,000, both to focus on customer acquisition, cross-selling to our customer base, partner efforts and enabling increased usage and better retention. SinglePlatform personnel accounted for $2.7 million of the increase in personnel related costs. Partner referral fees increased by $2.1 million as the number of new customers generated from our partners increased. We also incurred an increase in amortization of $833,000 related to the amortization of sales and marketing related intangibles resulting from our acquisitions.

General and Administrative Expenses

General and administrative expenses increased by $3.4 million from 2013 to 2014. The increase in absolute dollars was primarily due to additional personnel costs of $4.6 million as a result of increasing the number of general and administrative employees to support our overall growth, partially offset by a decrease of $1.3 million in legal costs and professional fees. In 2013, we recorded a litigation expense of $820,000 related to the settlement of a lawsuit. Professional fees also decreased in 2014, primarily due to costs incurred in 2013 associated with our defense of certain legal matters that we did not incur in 2014. General and administrative expenses also decreased as a result of a $483,000 expense recorded in 2013 related to an estimated property tax accrual.

General and administrative expenses increased by $7.4 million from 2012 to 2013. The increase in absolute dollars was primarily due to additional personnel costs of $4.9 million as a result of increasing the number of general and administrative employees to support our overall growth, including an increase in the number of employees focused on analytics and business intelligence. We also recorded a litigation expense of $820,000 in 2013 duerelated to the settlement of a lawsuit and professional service fees increased by $555,000 in 2013 primarily due to increased costs associated with our defense of certain legal matters. In 2013, we also recorded an expense of $483,000 related to an estimated property tax accrual.

General and administrative expenses increased by $7.2 million from 2011 to 2012. The increase in absolute dollars was primarily due to additional personnel costs of $5.8 million as a result of increasing the number of general and administrative employees to support our overall growth and additional stock-based compensation expense resulting from an increase in equity awards and their related valuations. We also incurred an increase of approximately $1.5 million in consulting and professional services fees associated with the growth of our business.

Acquisition Costs and Other Related Charges

There were no acquisition costs and other related charges in 2014 or 2013. Acquisition costs and other related charges resulted in income of $11.4 million for 2012 and expenses of $264,000 for 2011.2012. Transaction costs during 2012 were $797,000 related to the CardStar, Inc. and SinglePlatform, Corp. acquisitions. We also recorded an adjustment to decrease the fair value of the contingent consideration liability by $12.2 million in 2012 due to the remeasurement of the fair value of our contingent consideration liability related to the SinglePlatform, Corp. acquisition. As of December 31, 2013, none of the targets had been met and no amounts have been paid. The decrease in the fair value of the liability resulted from reductions to the SinglePlatform revenue forecast scenarios. These forecast scenarios were decreased based on SinglePlatform’s actual operating results and lower than forecasted productivity of its sales organization.

Acquisition costs and other related charges for 2011 related to our acquisition of Bantam Networks, LLC, or Bantam Networks, in 2011.

Interest Income and Other Income (expense), net

Interest income and other income (expense), net increased by $141,000 from 2013 to 2014 due primarily to a one-time refund from a vendor of $399,000 and an increase in interest earned on our investment portfolio as a result of higher average balances, partially offset by foreign currency transaction losses.

Interest income and other income (expense), net decreased by $56,000 from 2012 to 2013 due primarily to a decrease in interest earned on our investment portfolio as a result of lower average balances partially offset by an increase in foreign currency transaction gains.

Interest and otherIncome Tax Expense

We recorded an income (expense), net decreased by $31,000 from 2011 to 2012 due primarily to a decreasetax expense of $5.8 million in interest earned2014 based on our investment portfolio asnet income multiplied by our effective tax rate. Our effective tax rate varies from the statutory tax rate primarily due to the book expense related to incentive stock options, which is non-deductible for tax purposes, offset by federal and state research and development credits, which reduced our tax expense. The Tax Increase Prevention Act of 2014 was enacted in December of 2014 which reinstated the federal research and development credit retroactively to January 1, 2014. As a result of lower balances and lower interest rates.the change in tax law, we recorded a benefit of $1.9 million in the fourth quarter of 2014, the quarter in which the law was enacted for expenses incurred during 2014.

Income Tax (Expense) Benefit

We recorded an income tax expense of $1.3 million in 2013 based on our net income multiplied by our effective tax rate. Our effective tax rate varies from the statutory tax rate primarily due to the book expense related to incentive stock options, which is non-deductible for tax purposes, offset by federal and state research and development credits, which reduced our tax expense. The American Taxpayer Relief Act of 2012 was enacted on January 2, 2013 to reinstate the federal research and development credit from January 1, 2012, through December 31, 2013. As a result of the change in the tax law, we recognizedrecorded a benefit of $1.3 million to income tax expense in the first quarter of 2013, the quarter in which the law was enacted for certain expenses we incurred in 2012.

We recorded an income tax expense of $3.2 million in 2012 based on our net income multiplied by our effective tax rate. Our effective tax rate varied from the statutory tax rate primarily due to the book expense related to incentive stock options, which is non-deductible for tax purposes, offset by the change in fair value of contingent consideration liability and state research and development credits, both of which reduced our tax expense.

We recorded an income tax benefit of $13.2 million in 2011, primarily relatedintend to the release of our valuation allowance partially offset by state income tax expense. As of December 31, 2010, we provided a full valuation allowance related to our net deferred tax assets as we believed the objective and verifiable evidence of our historical pre-tax net losses outweighed the existing positive evidence regarding our ability to realize our deferred tax assets. During 2011, we reassessed the need for a valuation allowance against our net deferred tax assets and concluded that it was more likely than not that we would be able to realize our deferred tax assets primarily as a result of continued profitability and forecasted future results. Accordingly, in the fourth quarter of 2011, we released our valuation allowance related to our net deferred tax assets.

Income tax (expense) benefit for the years ended December 31, 2012 and 2011 have been revised to correct prior period errors in our accounting for deferred income taxes associated with certain stock-based compensation awards. These revisions are described in detail in Note 2,Summary of Significant Accounting Policies,of the Notes to Consolidated Financial Statements, included elsewhere in this Annual Report on Form 10-K.

We expect our tax rate will increase in the future. However, we intendcontinue to use our net operating loss carry-forwards and tax credits, to the extent available, to reduce the corporate income tax liability associated with our operating results. To the extent that we cannot offset our income tax liability, our cash taxes paid will increase.

Liquidity and Capital Resources

During 2014, 2013 2012 and 2011,2012, we funded our operations with cash flows generated from operations. At December 31, 2013,2014, our principal sources of liquidity were cash and cash equivalents and marketable securities of $123$163 million.

The following table shows a summary of our cash flows for each of the years ended December 31, 2014, 2013 2012 and 2011.2012.

Net cash provided by operating activities

During the year ended December 31, 2014, operating activities provided $57.4 million of cash. The cash flow provided by operating activities primarily resulted from our net income of $14.3 million, from net non-cash charges of $44.4 million and from cash provided by changes in our operating assets and liabilities of $1.7 million. These amounts were partially offset by cash used to pay taxes for net settlement of equity awards of $3.0 million. Our net non-cash charges in 2014 primarily consisted of $24.2 million of depreciation and amortization of our long-lived assets, $16.7 million of stock-based compensation expense and a $4.1 million decrease in deferred tax assets. Net cash provided by changes in our operating assets and liabilities during the year ended December 31, 2014 consisted primarily of a $2.6 million increase in deferred revenue and a $1.5 million increase in other long-term liabilities, partially offset by a decrease in accounts payable and accrued expenses of $2.7 million.

During the year ended December 31, 2013, operating activities provided $43.1 million of cash. The cash flow provided by operating activities primarily resulted from our net income of $7.2 million, as well as from net non-cash charges of $37.9 million. These amounts were partially offset by cash used to pay taxes for net settlement of equity awards of $1.6 million and cash used by changes in our operating assets and liabilities of $472,000. Our net non-cash charges in 2013 primarily consisted of $22.2 million of depreciation and amortization of our long-lived assets, $14.7 million of stock-based compensation expense and an $885,000 decrease in deferred tax assets. Net uses of cash from changes in our operating assets and liabilities during the year ended December 31, 2013

consisted primarily of a $2.5 million increase in prepaid expenses and other current assets and a $1.4 million decrease in accounts payable, partially offset by a $2.6 million increase in deferred revenue and a $762,000 decrease in other assets. Our cash provided by operating activities is generally affected by the amount of net income, growth in prepaid subscriptions, changes in working capital accounts and the timing of rent payments and add-backs of non-cash expense items such as depreciation and amortization of long-lived assets, stock-based compensation expense and the change in deferred tax assets. Changes in our working capital accounts are generally driven by the timing of payments to our vendors.

During the year ended December 31, 2012, operating activities provided $38.7 million of cash. The cash flow provided by operating activities primarily resulted from our net income of $12.6 million, as well as from net non-cash charges of $24.3 million and from cash provided by changes in our operating assets and liabilities of $2.4 million. Our net non-cash charges in 2012 primarily consisted of $19.0 million of depreciation and amortization of our long-lived assets, $14.3 million of stock-based compensation expense and a $2.7 million decrease in deferred tax assets, partially offset by the decrease in the contingent consideration liability, which generated non-cash income of $12.2 million. Cash provided by changes in our operating assets and liabilities during the year ended December 31, 2012 consisted primarily of a $2.2 million decrease in prepaid expenses and other current assets and a $3.1 million increase in deferred revenue, partially offset by a $2.2 million decrease in accounts payable and accrued expenses and a $653,000 increase in other assets.

During the year ended December 31, 2011, operating activities provided $41.7 million of cash. TheOur cash flow provided by operating activities primarily resulted from ouris generally affected by the amount of net income, of $23.5 million, as well as from net non-cash charges of $13.2 million and cash provided bygrowth in prepaid subscriptions, changes in our operating assetsworking capital accounts and liabilitiesthe timing of $5.3 million. Our netrent payments and add-backs of non-cash charges in 2011 primarily consisted of $14.4 million ofexpense items such as depreciation and amortization of our long-lived assets, and $11.7 million of stock-based compensation expense partially offset by a $13.4 million increaseand the change in deferred tax assets, which generated non-cash income due toassets. Changes in our working capital accounts are generally driven by the releasetiming of the valuation allowance relatedpayments to our deferred tax assets. Cash provided by changes in our operating assets and liabilities during the year ended December 31, 2011 consisted primarily of a $5.3 million increase in accounts payable and accrued expenses and a $3.9 million increase in deferred revenue, partially offset by a $2.5 million increase in prepaid expenses and other current assets and a $1.1 million increase in other assets.vendors.

Net cash used in investing activities

Net cash used in investing activities was $42.2 million, $34.6 million $26.0 million and $34.0$26.0 million for the years ended December 31, 2014, 2013 and 2012, and 2011, respectively. Net cashIn 2014, we used in investing activities consisted primarily of net cash paid$24.3 million to purchaseacquire property and equipment, as well as cash paidwhich included the capitalization of $7.9 million of software development costs. In 2014, we also used $36.6 million to acquire businesses and intangible assets. Net cash used in investing activities is also affected by net settlements of marketable securities. In 2013, we used cash of $15.2 million as a result of the purchases ofpurchase marketable securities, partially offset by the$18.7 million of proceeds from the sales and maturities of marketable securities. In 2013, we used $18.9 million to acquire property and equipment, which included the capitalization of $7.4 million of software development costs. In 2013, we also used $30.7 million to purchase marketable securities, partially offset by $11.5 million of proceeds from the sales and maturities of marketable securities. We also increased restricted cash by $550,000 in 2013 related to a lease amendment for our corporate headquarters. In 2012, we used $21.9 million to acquire property and 2011,equipment, which included the capitalization of $6.7 million of software development costs. Additionally, in 2012, we made two acquisitions. We acquired CardStar, Inc. in January 2012 for a cash purchase price of $5.8 million and SinglePlatform, Corp. in June 2012 for a cash payment of $62.5 million, net of cash acquired. In 2012, we generated net proceeds of $64.2 million and $338,000, respectively,from the settlement of marketable securities as a result of the proceeds from sales and maturities of marketable securities being greater than cash used to purchase marketable securities. In 2012, we made two acquisitions. We acquired CardStar in January 2012 for a cash purchase price of $5.8 million and SinglePlatform in June 2012 for a cash payment of $62.5 million, net of cash acquired. In 2011, we completed the acquisition of substantially all of the assets of Bantam Networks for a cash payment of $15 million. We also used cash to purchase a small business and certain intangible assets. Acquisition

Acquisitions of property and equipment of $18.9 million, $21.9 million and $18.1 million in 2013, 2012 and 2011, respectively, consisted ofgenerally include the purchase of computer equipment for our operations and employees, equipment, furniture and leasehold improvements and the capitalization of certain software development costs. In 2011, we transitioned to a new third-party hosting facility in California. We have also made capital expenditures in 2011 and 2012 for equipment to be used in the new facility. We continue to increase the amount of space we lease for our corporate headquarters. We increased the amount of space we occupied in 2013 and 2012 and acquired property and equipment to outfit the additional space. We also increased restricted cash by $550,000 in 2013 related to a lease amendment for our corporate headquarters. We made additional capital expenditures in 2013, 2012 and 2011 for equipment to increase capacity of our hosting infrastructure and to accommodate growth in our business. During 2013, 2012We continue to increase the amount of space we lease for our corporate headquarters and 2011, we capitalized $7.4 million, $6.7 millionto acquire property and $4.8 million, respectively, of costs associated withequipment to outfit the development of internal use software.additional space.

Net cash provided by financing activities

Net cash provided by financing activities was $6.6 million, $6.3 million $5.5 million and $9.0$5.5 million for the years ended December 31, 2014, 2013 2012 and 2011,2012, respectively. Net cash provided by financing activities for all three years consisted primarily of proceeds from stock issued pursuant to the exercise of stock options, proceeds received in connection with our employee stock purchase plan and to a lesser extent from the income tax benefit related to the exercise of stock options. In the second quarter of2014 and 2013, we initiated astock repurchase program of up to $20 million of our common stock through December 31, 2013.programs. We used cash of $16.4 million and $5.4 million in 2014 and 2013, respectively, to repurchase our common stock under this program.these programs.

As of December 31, 2013,2014, we had federal and state net operating loss carry-forwards of $33.5$8.6 million and $849,000,$377,000, respectively, which we intend to use to the extent available to offset payments of future federal and state income tax liabilities. If unused, our net operating loss carry-forwards expire at various dates through 20332034 for federal and 20182026 for state income tax purposes. As of December 31, 2014, we also had federal and state research and development credit carry-forwards of $9.4 million and $6.8 million, respectively, which we intend to use to the extent available to offset payments of future federal and state income tax liabilities. If unused, our research and development credit carry-forwards will expire at various dates through 2034 for federal and 2029 for state income tax purposes. In addition, we have $1.4 million of state investment tax credits, of which $600,000 can be carried forward indefinitely while the remainder, if unused, will expire at various dates through 2016.

In 2014,2015, we anticipate capital expenditures of approximately 8%seven to eight percent of revenue to support our future growth, which will consist primarily of hardware and software purchases, capitalization of internal usecertain software development costs and furniture and leasehold improvements related to additional office space.

Our future capital requirements may vary materially from those now planned and will depend on many factors, including, but not limited to, development of new products, market acceptance of our products, the levels of advertising and promotion required to launch additional products and improve our competitive position in the marketplace, the expansion of our sales, support and marketing organizations, the establishment of additional offices in the United States and worldwide and the building of infrastructure necessary to support our anticipated growth, the response of competitors to our products and our relationships with suppliers and clients.suppliers. Since the introduction of our on-demand email marketing product in 2000, we have experienced increases in our expenditures consistent with the growth in our operations and personnel, and we anticipate that our expenditures will continue to increase on an absolute dollar basis in the future.

We believe that our current cash, cash equivalents and marketable securities and operating cash flows will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months. Thereafter, we may need to raise additional funds through public or private financings or borrowings to fund our operations, develop or enhance products, to fund expansion, to respond to competitive pressures or to acquire complementary products, businesses or technologies. If required, additional financing may not be available on terms that are favorable to us, or at all. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders will be reduced and these securities might have rights, preferences and privileges senior to those of our current stockholders or we may be subject to covenants that restrict how we conduct our business. No assurance can be given that additional financing will be available or that, if available, such financing can be obtained on terms favorable to our stockholders and us.

During the last three years, inflation and changing prices have not had a material effect on our business. We are unable to predict whether inflation or changing prices will materially affect our business in the foreseeable future.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financing activities. We do not have any interest in entities referred to as variable interest entities, which include special purpose entities and other structured finance entities.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or FASB, issued new guidance,Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The new guidance is effective for us commencing January 1, 2017. Early application is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that this guidance will have on our consolidated financial statements.

In August 2014, FASB issued new guidance,Presentation of Financial Statements—Going Concern. The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The standard will be effective for the first interim period within annual reporting periods beginning after December 15, 2016. Early adoption is permitted. We are evaluating the effect that this guidance will have on our consolidated financial statements.

Contractual Obligations

We lease our headquarters in Waltham, Massachusetts under an operating lease that is effective through September 2022 with one ten-year extension option. The lease includes the space we are occupying currently as well as additional space that will be made available to us through the term of the lease. We lease office space in Colorado for a sales and support office under an operating lease that expires in April 2019 with three three-year extension options. We also lease small amounts of general office space in Florida, New York, California and the United Kingdom under lease agreements that expire at various dates through 2018.

We have agreements with various vendors to provide specialized space and equipment and related services from which we host our software application. The agreements include payment commitments that expire at various dates through early 2017.

As of December 31, 2013,2014, we had issued both cancellable and non-cancellable purchase orders and entered into contractual commitments with various vendors totaling $16.5 million. This amount relates primarily$24.1 million relating to marketing programs and other non-marketing related goods and services to be delivered over the next twelve months.services.

The following table summarizes our contractual obligations at December 31, 2013,2014, and the effect such obligations are expected to have on our liquidity and cash flow in future periods.