Classmates.com 2005 Annual Report Download - page 16

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impact our ability to market both our free and pay services, maintain our current price levels, or maintain or grow our pay account base at current
price levels, or at all.
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 the Telephony Market
We recently launched our new consumer VoIP telephony services. The market for consumer telephone services is extremely competitive
and competitors include established local and long distance telephone companies, cellular companies and providers of VoIP services. VoIP
services are a new and emerging application and it is uncertain whether VoIP services will receive wide-spread consumer adoption. Competitors
for our VoIP services include established telecommunications and cable companies, certain of our current competitors for Internet access
services including AOL, MSN and EarthLink, leading Internet companies including Yahoo!, Google and eBay through its recently acquired
Skype subsidiary, and a number of other companies that offer VoIP-based services as their primary business such as Vonage. Most of our major
competitors in the VoIP market have longer operating histories, larger customer bases, greater brand recognition and significantly greater
financial, marketing and other resources than we do. Some of our competitors, such as Vonage, spend a significant amount of resources on
marketing their services and participate in large, retail distribution channels such as Best Buy. We currently do not intend to expend the
marketing resources necessary to compete in large, retail distribution channels or to extensively advertise our VoIP services on television. We
have expended resources on producing television commercials and other marketing materials, and we may not realize a return on these
investments. If we do choose to expend significant marketing resources on our VoIP services, there is no assurance that such efforts will be
commercially successful. We cannot assure you that our marketing efforts will be effective, that our VoIP services will achieve significant
consumer adoption or, even if such services do achieve consumer adoption, that our VoIP services will generate growth in pay accounts,
subscriptions, revenues or profitability.
Competition in Additional Service Markets
One element of our strategy is to offer a variety of non-access subscription services. In addition to social-networking and VoIP services, we
currently offer Web-hosting and domain registration services, standalone premium email services, a broadband accelerator product, a
prepackaged premium content offering, and digital photo-sharing services. While these services do not generate a significant portion of our
revenues, we are actively investing 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, AOL 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 have not expended significant resources to marketing our digital photo sharing services, although
we may allocate additional resources to improving and promoting these services going forward. Digital photo sharing is an extremely
competitive market and
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