Classmates.com 2004 Annual Report Download - page 14

particular, Netscape recently began including accelerator functionality in their standard $9.95 offering and PeoplePC has offered their accelerator
service combined with their standard value-priced offering at $7.97 per month for introductory periods of up to six months. Increased
competition for subscribers to accelerated services could adversely impact our ability to grow or maintain our accelerator subscription base, or
could cause us to lower or eliminate our pricing for these services, which would adversely impact our revenues and profits. The growth in the
number of subscriptions to this service has been decreasing and is likely to continue to decrease. We cannot assure you that we will be able to
continue to maintain or grow our accelerator subscription base at current price levels, or at all.
Premium-priced Internet access services, in general, include a much wider variety of features than are included in value-
priced services, and
providers of premium-priced services continue to enhance the features of their offerings in response to competition from broadband and value-
priced providers. In particular, many premium-services include at no additional charge telephone technical support, proprietary content, parental
controls, multiple accounts and email addresses, increased email storage, virus protection, firewalls, spyware protection and accelerated dial-up
functionality. Some providers of value-priced offerings are also incorporating certain of these features into their offerings either at no charge or
for an incremental fee. While we offer some additional features to users at no charge or for an incremental fee, we do not offer the range of
features included in premium-priced services and, in some cases, included in value-priced services. In particular, we do not offer our own
proprietary content. In addition, the incremental fees that we charge for certain features are, in some cases, higher than the incremental fee, if
any, charged by other value-priced providers for comparable features. Our decision not to offer a broader variety of features and our charges for
additional services or features, particularly accelerated functionality and telephone technical support, may adversely impact our ability to
compete and undermine our position as a value-priced provider.
Many of our competitors have significantly greater brand recognition than we do and spend significantly more on marketing their services
than we spend. As a result, we have not participated as extensively as our major competitors in a variety of large distribution channels, such as
being pre-bundled on branded computers or being offered at retail outlets of many different major franchises. To the extent our competitors
spend significantly more than we do in these and other channels, we may be at a competitive disadvantage. We cannot assure you that our
marketing resources will be sufficient for us to continue to compete effectively with our major competitors.
We expect competition for pay access accounts to continue to intensify and cannot assure you that we will be able to compete successfully.
Our inability to compete effectively could require us to make significant revisions to our services and pricing strategies, which could result in
increased costs, decreased revenues and the loss of pay access accounts, all of which could materially and adversely impact our financial
condition, results of operations and cash flows.
Classmates Competition
Competition for subscribers in the online relationships market is intense and rapidly evolving. Classmates competes directly against a small
number of companies, including Reunion.com and Monster.com's Military.com service, offering similar online social networking services based
on work, school and military communities. Classmates also competes directly with many schools, employers, websites, and associations that
maintain their own Internet-based alumni information services. In addition to this direct competition, Classmates competes for subscribers with
companies offering a wide variety of social networking services including Web portals such as Yahoo! and MSN that maintain chat rooms and
other community-
based Web sites and personal networking communities such as Friendster and Myspace. Many of these companies offer a wide
variety of services in addition to their social networking services, which may provide them with a competitive advantage in obtaining and
retaining subscribers. Many consumers maintain simultaneous relationships with multiple communities, including Internet alumni networks and
offline associations, and can easily shift their interest or their spending
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