Classmates.com 2004 Annual Report Download - page 23

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community-based networking or email services during the preceding 31 days. Active accounts also include those free hosted Web sites that have
received at least one visit during the preceding 90 days.
The following table sets forth (in thousands, except percentages), for the periods presented, an analysis of our pay accounts and
subscriptions. A pay account represents a unique billing relationship with a customer who subscribes to one or more of our services. A
subscription represents a unique subscription to any individual pay service offered by us including Internet access, community-based
networking, accelerator services, premium email, Web-hosting and domain name registration, and premium content subscriptions. Internet
access and accelerator are counted as two subscriptions, although most subscribers to the accelerated service currently purchase it bundled with
our standard Internet access. Accelerator penetration percentage is calculated by dividing accelerator subscriptions by Internet access
subscriptions.
In general we count and track pay accounts and free accounts by unique member identification. Users have the ability to register for
separate services under separate brands and member identifications independently. We do not track whether a pay account has purchased more
than one of our services unless the account uses the same member identification. As a result, unique pay accounts may not represent unique
subscribers and, similarly, total active free accounts may not represent unique free users. In addition, a free Web hosting account is determined
to be active if there was a visit to the site during the preceding 90 days, and it may be that the creator of the site no longer maintains or updates
the site. As such, a free Web hosting account may not represent an ongoing relationship with the person who set up the account. At any point in
time, our pay account base includes a number of accounts receiving a free period of service as either a promotion or retention tool, a number of
pay accounts that have notified us that they are terminating their service but whose service is still in effect and may also include a few thousand
internal test accounts.
As indicated in the chart, following the March 2004 quarter, we experienced limited growth in our pay access accounts. Growth in
subscriptions to our accelerator access services has also decreased. The dial-up Internet access market as a whole is decreasing, and the value-
priced segment is becoming increasingly competitive. We, as well as our competitors, have become more aggressive in offering discounts and
free months of service to obtain and retain subscribers. While we intend to continue to devote significant resources to enhancing and marketing
our Internet access services, part of our strategy is to diversify by offering additional non-access Internet subscription services. Major initiatives
we have undertaken to implement this strategy include our acquisition of a Web hosting business in April 2004, our acquisition of Classmates in
November 2004, and our introduction of non
-access services, including premium email and premium content. We intend to continue to either
develop or acquire new services and have announced our intention to develop and market a consumer VoIP telephony service. We cannot assure
you, however, that we will be successful in either growing our pay access revenues or in successfully commercializing or growing new pay
services.
United Online is a Delaware corporation that commenced operations in 2001 following the merger of Internet access providers
NetZero, Inc. and Juno Online Services, Inc. During 2004, we completed the acquisitions of Classmates, a leading provider of community
-based
networking services, and the
21
December 31,
2004
September 30,
2004
June 30,
2004
March 31,
2004
December 31,
2003
Internet access
3,100
3,111
3,102
3,083
2,890
Other Web services
2,886
1,239
1,125
924
645
Total subscriptions
5,986
4,350
4,227
4,007
3,535
Total pay accounts
4,826
3,232
3,189
3,095
2,892
Accelerator penetration
36
%
35
%
32
%
29
%
22
%