Classmates.com 2004 Annual Report Download - page 48

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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 from one online or offline provider to another. Competitors may be able
to launch new businesses serving various communities at relatively low cost. Competitors may be able to hold themselves out as specialists in
single communities, making them more appealing to consumers or giving them a perceived competitive advantage. In addition, many social
networking services are free or only require payment if certain additional functionality is desired by the user. The continued prevalence of free
services could adversely impact our ability to market both our free and pay services.
Many competitors in this market have longer operating histories, larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than we do. In addition, Classmates has relied extensively on Internet advertising through portals and
other Internet service providers, including AOL, MSN and Yahoo!, to grow its base of free and pay accounts. A number of these companies are
competitors of United Online with respect to Internet access and other services, and they may not be willing to retain the same advertising
relationship going forward. To the extent we are not able to maintain advertising relationships with these companies, our ability to obtain new
Classmates' pay and free accounts would be adversely impacted.
Competition in Additional Service Markets
One element of our strategy is to offer a variety of subscription services in addition to Internet access and community-based networking
services. We currently offer Web-hosting and domain registration services, as well as standalone premium email services, a broadband
accelerator product and prepackaged premium content offering. While these services do not generate a significant portion of our revenues, we
are actively investing substantial resources in certain of these services. Competition for users of premium email services is intense. The
companies we compete with for Internet access subscribers also compete with us for subscribers to email services. In addition, a number of
companies, including Yahoo!, MSN and Google, offer premium email services, in certain cases, for free. The market for premium email services
is evolving at a rapid pace and we cannot assure you that our offerings will be competitive or commercially viable. While the personal Web-
hosting business is fragmented, a number of significant companies, including Yahoo!, currently compete actively for these users. In addition, the
personal Web-hosting industry is very application specific, with many of the competitors focusing on specific applications, such as photo
sharing, to generate additional users. We cannot assure you that our premium email offerings or our Web-hosting offerings will be competitive
or will generate growth in pay accounts.
In addition, we have evaluated, and expect to continue to evaluate, the development or acquisition of new subscription services. New
services may subject us to competition from companies that have
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