Chitika Reporting System and Monthly Audits Update

We are working on upgrading our back-end filtering and fraud detection systems to dynamically detect and prevent fraud, improve the quality of the overall network and help minimize the difference between the daily raw click reports and the final monthly post-audit earned revenue reports. Earlier this month, we released a couple of enhancements to our reporting systems. At the same time we also started expanding the service to several European countries introducing international merchant listings into the program. However, we are currently running into unexpected delays in our monthly audits for November. We are aggressively working on completing the audit process as soon as possible. We apologize for the delay and we are hoping that we will be able to complete and finalize the November audits over the next two weeks. In fact, we are trying to complete both November and December audits by January 15th.

While we are working on ironing out the kinks in our beta program, we thank all our clients for the continued support. We do not expect the delay in audits to become a recurring issue going forward, because we are focusing on putting in place robust systems that will help streamline the reporting and auditing processes. Unlike traditional pay-per-click advertising programs, our eMiniMalls service is based on the novel impulse-merchandising model that is new to all parties. We are confident that our eMiniMalls program will continue to evolve and offer a significant incremental revenue stream that will complement, not cannibalize, web publishers’ existing revenue from traditional branding-based advertising programs. Although eMiniMalls is based on the CPC model, the program is able to command relatively higher CPC bid amounts from merchants, because it is predicated by the implicit assumption that leads from our interactive units tend to be highly pre-qualified and hence will result in higher click to sales conversions. Initial feedback from our merchant partners is very positive.

We are continuing to introduce several enhancements to maintain and grow a very high quality network that will continue to evolve into a valuable sales/marketing channel for our merchant partners. We are also working on better understanding the overall performance of our eMiniMalls service, across a variety of content destinations, so that we can identify areas where the program is able to deliver the value to our publisher clients without cannibalizing existing revenue from traditional advertising programs. We apologize for the current delay and we want to assure you that we are making all efforts to help speed up the reporting and auditing processes. Again, we thank you for your patience and support.

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