Classmates.com 2004 Annual Report Download - page 51

We cannot assure you that we will be able to successfully manage, integrate or grow our Web-hosting business and the Classmates
business.
In April 2004, we acquired the assets of About, Inc.'s Web-hosting business and in November 2004, we acquired Classmates. We do not
have prior experience in either of these lines of business and may not be able to compete successfully in them. It is our intention to integrate
certain operational aspects of each of these businesses with our Internet access business, although we do not currently intend to integrate all
operations. To the extent we attempt to integrate various aspects of these businesses, we may not be successful. There may be unanticipated
risks, liabilities and costs associated with these businesses, and we cannot assure you that these businesses will have a positive impact on our
results of operations. In addition, we cannot assure you that we will be successful in maintaining or growing their pay or free accounts.
Even if we are successful at acquiring additional businesses, product lines or technologies, acquisitions may not improve our results of
operations and may adversely impact our business and financial condition.
We have evaluated, and expect to continue to evaluate, a wide variety of potential strategic transactions that we believe may complement
our current or future business activities. We routinely engage in discussions regarding potential acquisitions and any of these transactions could
be material to our financial condition and results of operations. Acquiring a business, product line or technology involves many risks, including:
• disruption of our ongoing business and diversion of resources and management time;
• unforeseen obligations or liabilities;
•
difficulty assimilating the acquired customer bases, technologies and operations;
•
difficulty assimilating and retaining employees from the acquired business;
• risks of entering markets in which we have little or no direct prior experience;
•
lack of controls, policies and procedures appropriate for a public company, and the time and cost related to the remediation of
such controls, policies and procedures;
• potential impairment of relationships with employees, users, or vendors as a result of changes in management; and
• potential dilutive issuances of equity, large write-offs either at the time of the acquisition or in the future, the incurrence of
restructuring charges, the incurrence of debt, and amortization of identifiable intangible assets.
Classmates has subsidiaries operating in Germany and Sweden and we may seek to expand our international business through acquisitions.
Acquisitions of foreign businesses involve risks in addition to those mentioned above, including risks associated with potentially unfamiliar
regulatory environments and integration difficulties due to cultural and geographic differences. We cannot assure you that any further
acquisitions we make will be successful.
Our marketing activities may not be successful in growing our business or maintaining our brands.
The success of our business model is predicated upon maintaining a marketing budget that is sufficient to grow our revenues while
continuing to increase profitability. Our marketing activities may not be effective in maintaining or increasing brand awareness or the size of our
pay accounts base. We will be required to incur significant marketing expenses to maintain our brands and we may not be successful in
increasing pay accounts, subscriptions or revenues. This could result in increased costs without a commensurate increase in revenues, which
could adversely affect our profitability. We have
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