Classmates.com 2004 Annual Report Download - page 55

Download and view the complete annual report

Please find page 55 of the 2004 Classmates.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 134

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134

If we fail to manage our telecommunications or our internal network capacities, our access service levels may suffer or we may
experience increased per-account costs.
We will have to accurately anticipate our future telecommunications capacity needs within lead-time requirements. If we fail to procure
sufficient quantities of telecommunications services, we may be unable to provide our users with acceptable service levels. Conversely, if we
purchase excessive amounts of telecommunications services we will have increased costs, which could decrease our profitability. We have
experienced such overcapacity in the past, and we may experience overcapacity in the future. Our failure to effectively manage
telecommunications costs could adversely affect our reputation as a quality provider of Internet services or could adversely affect our
profitability.
In addition, we may from time to time experience increases in our telecommunications usage that exceed our then-available
telecommunications capacity and the capacity of our internal servers. As a result, users may be unable to register or log on to our services, may
experience a general slow-down in their Internet access or may be disconnected from their sessions. Excessive user demand could also result in
system failures of our internal server networks, which would prevent us from generating advertising revenues. Inaccessibility, interruptions or
other limitations on the ability to access our services due to excessive user demand, or any failure of our servers to handle user traffic, could
adversely effect our reputation, lead to subscriber cancellations and could adversely affect our revenues.
Our business will suffer if the scope or quality of service from our telecommunications carriers is inadequate.
If our telecommunications service providers deliver unacceptable service, the quality of our Internet access service would suffer. In this
event, we would likely lose users who are dissatisfied with our service. Since we do not have direct control over our telecommunications carriers'
network reliability and the quality of their service, we cannot assure you that we will be able to provide consistently reliable Internet access for
our users.
Our business is highly dependent on our billing and customer support systems, which are based on a combination of third-party
software and internally developed software.
The software that operates most of our billing and customer support systems for our access service is licensed from Portal Software, Inc.
and Remedy, a BMC Software Company, and we use a combination of Portal, Remedy and other third-party and internally developed software
applications for such customer billing and support. The billing system for Classmates relies on a combination of software licensed from Art
Technology Group Inc. ("ATG"), other third-party software applications as well as internally developed software applications. Customer billing
and support is a highly complex process, and our systems must efficiently interface with other third parties' systems such as the systems of credit
card processing companies and other companies to whom we outsource billing and support functions. Our ability to accurately and efficiently
bill and support our users is dependent on the successful operation of our billing and support systems and third parties' systems upon which we
rely. In addition, our ability to offer new pay services or alternative payment plans is dependent on our ability to customize our billing and
support systems. Issues associated with these systems could cause a variety of problems including the failure to bill and collect from users on a
timely basis, over-charging or under-
charging users, inaccurate financial and customer data, excessive credit card chargebacks or refunds, delays
in new product or payment plan introductions and other billing-related errors. Such problems could lead to inaccurate reporting from time to
time, which could adversely affect our business, financial position, results of operations and cash flows. We have experienced billing and
support problems from time to time and may experience additional problems in the future. The failure of our software vendors to provide
software upgrades and technical support, the failure of the Portal, Remedy, ATG or internally developed software to operate accurately,
problems with our credit card processor or other billing and support vendors and any other failures or errors in our billing and
53