Classmates.com 2004 Annual Report Download - page 16

Competition for Advertising Customers
We are dependent upon advertising revenues for a significant portion of our revenues and profits. We compete for advertising revenues with
major ISPs, content providers, large Web publishers, Web search engine and portal companies, Internet advertising providers, content
aggregation companies, social networking Web sites, and various other companies that facilitate Internet advertising. Many of our competitors
have longer operating histories, greater name recognition, larger user bases and significantly greater financial, technical and sales and marketing
resources than we do. This may allow them to devote greater resources to the development, promotion and sale of their products and services.
These competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns and adopt
more aggressive pricing policies. We also compete with television, radio, cable and print media for a share of advertisers' total advertising
budgets. In certain instances, we generate advertising revenues from companies who are also our competitors. In particular, we generate
significant advertising revenues from Overture. Overture is a subsidiary of Yahoo! and we compete directly with Yahoo! for Internet access,
email and Web-hosting subscribers and indirectly for subscribers to our social networking services. To the extent competitors who are also
sources of significant advertising revenue cease to do business with us, our revenues and profits could suffer.
We believe that the primary competitive factors determining success in the market for advertising revenues include the size and
demographics of the user base, the ability to efficiently service a large number of advertisers; price and scope of advertising products, the ability
to demographically or geographically target users and the reputation and reliability of the underlying service. While we compete favorably with
respect to many of these factors, certain of our competitors have an advantage over us with respect to specific factors, particularly the size of
user base and ability to efficiently service a large number of advertisers.
PRIVACY POLICY
We believe that issues relating to the privacy of Internet users and the use of personal information about these users are critically important
as commercial uses of the Internet grow. We have adopted and disclosed to our accounts detailed policies outlining the permissible uses of
information about users and the extent to which such information may be shared with others. Our users must acknowledge and agree to these
policies when registering to use our services. We do not sell or license to third parties any personally identifiable information of users unless
they specifically authorize us to do so. However, we use information about our users to improve the quality of our services and the effectiveness
of advertising by our advertising customers.
SEASONALITY
We have experienced seasonal trends in connection with our access services. In general, we have experienced increased Internet usage and
increased pay access account subscriptions in the fall and winter when compared to the summer. These trends have had some impact on our
advertising revenues, with lower revenues in periods of lower usage, and on our cost of billable services, with telecommunications cost per user
lower in periods of lower usage. We do not know if these seasonal trends will continue.
INTERNATIONAL OPERATIONS
We have foreign operations in India, Sweden and Germany. We have a significant number of employees located in our India office. Our
operations in India primarily handle email customer support, product development and quality assurance. A portion of our outsourced customer
support is also based in India. Our operations in Sweden and Germany provide community-based networking
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