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Item 1. Business
j2 Global Communications, Inc. (“j2 Global”, “our”, “us” or “we”) is a Delaware corporation founded in 1995. We provide cloud-based, value-added communication, messaging and data backup services to businesses of all sizes, from individuals to enterprises. Our hosted solutions deliver our customers greater efficiency, flexibility, mobility, business continuity and security. We offer online fax, virtual phone systems, hosted email, email marketing, online backup and bundled suites of these services. We market our services principally under the brand names eFax®, eVoice®, Electric Mail®, Campaigner®, KeepItSafeTM and Onebox®.
We deliver many of our services in more than 4,300 cities in 49 countries across six continents. We provide these services through equipment we co-locate at various locations worldwide, telephone numbers (referred to herein as Direct Inward-Dial numbers or “DIDs”) obtained from third-party telecommunications providers and Internet bandwidth typically obtained from third-party co-location providers. Most of the DIDs we obtain for our services are “local” (as opposed to toll-free), which enables us to provide our paying subscribers DIDs with a geographic identity.
Our services make our customers more efficient, more mobile, more cost-effective and more secure than traditional alternatives. We generate substantially all of our revenues from subscribers that pay subscription and usage fees. Subscription fees are referred to as “fixed” revenues, while usage fees are referred to as “variable” revenues. We also generate revenues from patent licensing and sales, advertising and revenue share from our customers’ use of premium rate DIDs. Of the 13.1 million DIDs deployed as of December 31, 2010, approximately 1.9 million were serving paying subscribers, with the balance deployed to free subscribers, including those with premium rate DIDs. We operate in one reportable segment: cloud-based, value-added communication, messaging and data backup services.
During the past three years, we have derived a substantial portion of our revenues from our DID-based services, including eFax®, eVoice® and Onebox®. As a result, we believe that paying DIDs and the revenues associated therewith are an important metric for understanding our business. It has been and continues to be our objective to increase the number of paying DIDs through a variety of distribution channels and marketing arrangements
and by enhancing our brand awareness. In addition, we seek to increase revenues through a combination of stimulating use by our customers of usage-based services and introducing new services.
We market our services to a broad spectrum of prospective business customers including individuals, small to medium-sized businesses and large enterprises and government organizations. Our marketing efforts include enhancing brand awareness; utilizing online advertising, search engines and affiliate programs; and selling through both a telesales and direct sales force. We continuously seek to extend the number of distribution channels through which we acquire paying customers and improve the cost and volume of customers obtained through our current channels.
In addition to growing our business organically, we have used acquisitions to grow our customer base, enhance our technology, expand service offerings and acquire skilled personnel. Since fiscal year 2000, we have completed 31 acquisitions in the cloud-based, value-added communication, messaging and data backup services segment.
Through a combination of internal technology development and acquisitions, we have built a portfolio of numerous U.S. and foreign patents and multiple pending U.S. and foreign patent applications. We generate licensing revenues from some of these patents. We intend to continue to invest in patents, to aggressively protect our patent assets from unauthorized use and to continue to generate patent licensing revenues from authorized users. For more information on our patents and other intellectual property, please refer to the section entitled Patents and Proprietary Rights contained in Item 1 of this Annual Report on Form 10-K.
Our Solutions
We believe that businesses of all sizes are increasingly outsourcing their communication, messaging and data backup needs. Their goal is to reduce or eliminate costs while also enhancing productivity, mobility, business continuity and security. Our core eFax® and MyFax® solution enable users to receive faxes into their email inboxes and to send faxes via the Internet. Our core eVoice&#
174; and Onebox® solutions provide customers a virtual phone system with various available enhancements. These services represent more efficient and less expensive solutions than many existing alternatives, and provide for increased security, privacy and message handling flexibility (e.g., the ability to store messages electronically and forward them by simply forwarding an email).
We currently offer integrated solutions designed to replace or augment individual and corporate communication, messaging and data backup functions. We tailor our solutions to satisfy the differing needs of our customers. Our paid DID-based services allow a subscriber to select a local DID from among more than 4,300 cities around the world. Toll-free U.S. and Canadian DIDs are also available, as are premium rate numbers in various countries. In addition, our services enhance the ability of businesses to provide communication and messaging services to their remote workforces, increase their level of information security and control and allocate costs more effectively.
We offer the following services and solutions:
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We market a variety of brands in the global online fax space. The online fax space has three basic components: desktop, production and broadcast. These brands have various tiers of services and features catering to differing components of the fax space. Our leading fax brands are eFax® and MyFax®.
Desktop fax
eFax® is the leading brand in the global online fax market. Various tiers of service provide increasing levels of features and functionality to individuals, small and medium-sized businesses, and enterprises around the world.
eFax Plus® and eFax ProTM serve individuals and small work groups. Subscribers choose either a toll-free fax number that covers both the U.S. and Canada or a local fax number from among more than 4,300 cities worldwide. Users can receive inbound fax messages in their email inboxes, access these messages via a full-featured online Message Center and send digital documents to any fax number in the world directly from their computer or smartphone. This service is localized in many international currencies and languages including Dutch, French, German,
Italian, Japanese, Polish, Portuguese and Spanish.
eFax CorporateTM offers capabilities similar to eFax Plus® and eFax Pro™, but with added features geared to the broader needs of enterprises and their users. These include online account administration tools which enable customers to manually or automatically self-provision fax numbers to employees as needed. eFax Corporate also offers the option of enhanced security features, which are particularly attractive to law firms and com
panies in regulated industries such as banking, brokerage and healthcare.
MyFax® is our number two online fax brand. The service supports individuals and small business customers that value core features and price over breadth and depth of functionality. MyFax focuses on the North American market with a selection of fax numbers across the United States and Canada. The service has won a number of awards for its comprehensive customer support program.
In addition to eFax® and MyFax®, we offer desktop online fax services under a variety of alternative brands. We acquired these brands in business purchases and, rather than being merged into existing brands, continue to offer them on a standalone basis to serve legacy customer bases, target specific market segments or address unique price points. These brands include Fax.com™ and SmartFax™, among others.
Production fax
eFax DeveloperTM offers high-volume production fax solutions. Designed for easy integration with application environments through simple software development kits or universal web protocols, eFax Developer provides inbound and outbound faxing through a secure XML interface. Enhanced features include bar-code recognition, dynamic retries and high speed processing.
Broadcast fax
eFax BroadcastTM and jBlast® offer cost-effective solutions for high-volume outbound broadcast faxing. These services enable users to send important documents simultaneously to hundreds or thousands of recipients anywhere in the world, accurately monitor the status of their faxes and update their database of “Do Not Fax” names and undeliverable fax numbers.
eVoice® is a virtual phone system that provides small and medium-sized businesses on-demand voice communications services, featuring a toll-free or local company DID, a professionally-produced auto-attendant and menu tree. With these services, a subscriber can assign departmental and individual extensions that can connect to multiple U.S. or Canadian DIDs, including traditional land-line telephones as well as mobile and IP networks, and can enhance reachability through “find me/follow me” capabilities. These services also include advanced integrated voicemail for each extension, effectively unifying mobile, office and other sepa
rate voicemail services and improving efficiency by delivering voicemails in both native audio format and as transcribed text.
Hosted Email
Electric Mail® and FuseMail® offer hosted email, email hygiene and email archival services to businesses. These solutions are hosted offsite and seamlessly integrated into a customer’s existing email system. The services include Electric WebMailTM and FuseMail® hosted email, VirusSMARTTM virus scanning, CypherSMARTTM encryption services, SpamSMARTTM SPAM filtering and VaultSMARTTM / PolicySMARTTM archiving which delivers a secure, scalable email archiving and customizable compliance tool to correspond with a company’s retention policy.
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Email Marketing
Campaigner® is an email marketing service that enables businesses to easily create and send highly personalized one-to-one email communications to subscribers and customers to build better relationships. Campaigner® also helps businesses increase the size of their mailing lists, comply with email regulations like CAN-SPAM and get more emails to more inboxes.
Online Backup
KeepItSafe™ provides fully managed and monitored online backup solutions for businesses, using its ISO-certified platform. By securing critical digital assets via the Internet to highly secure data vaults, customers enjoy peace of mind knowing they have reliable and cost effective backups, and equally importantly rapid restores of the data that keeps their business operating. The software installs simply and provides full server imaging and proven off-site data recovery capabilities without costly investments. Company data is protected from human error, file corruption and other harmful factors.
Unified Communications
Onebox® is a full-featured unified communications suite. It combines the features of many of our other branded services, as well as additional features to provide full virtual office functionality. Onebox includes a virtual phone system, hosted email, online fax, audio conferencing and web conferencing.
Global Network and Operations
We have multiple physical Points of Presence (“POPs”) worldwide, a central data center in Los Angeles and a remote disaster recovery facility. We connect our POPs to our central data centers via redundant, and often times diverse, Virtual Private Networks (“VPNs”) using the Internet. Our network is designed to deliver value-added user applications, customer support, billing and a local presence for our customers from among more than 4,300 cities in 49 countries on six continents. Our network covers all major metropolitan areas in the U.S., U.K. and Canada, and such other major cities as Berlin, Hong Kong, Madrid, Manila, Mexico City, Milan, Paris, Rome, Singapore, Sydney, Taipei, Tokyo and Zurich. For financial information about geographic areas, see Note 14 of the Notes to Consolidated Financial Statements inc
luded elsewhere in this Annual Report on Form 10-K.