Classmates.com 2005 Annual Report Download - page 17

there is no assurance our services will be able to compete effectively. We cannot assure you that any of these subscription services will be
competitive or will generate growth in pay accounts, subscriptions or revenues.
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 more experience with such services, more established brands, and greater
financial, marketing and other resources to devote to such services. We cannot assure you that our new services, if any, will be competitive or
will generate growth in pay accounts, subscriptions or revenues.
Competition for Advertising Customers
We are dependent upon advertising revenues for a significant portion of our revenues and profits. We compete for advertising revenues
with major ISPs, content providers, large Web publishers, Web search engine and portal companies, Internet advertising providers, content
aggregation companies, social-networking Web sites, and various other companies that facilitate Internet advertising. Many of our competitors
have longer operating histories, greater name recognition, larger user bases and significantly greater financial, technical and sales and marketing
resources than we do. This may allow them to devote greater resources to the development, promotion and sale of their products and services.
These competitors may also engage in more extensive research and development, offer more sophisticated products and services, undertake more
far-reaching marketing campaigns and adopt more aggressive pricing policies. We also compete with television, radio, cable and print media for
a share of advertisers’ total advertising budgets. In certain instances, we generate advertising revenues from companies who are also our
competitors. In particular, we generate significant advertising revenues from Yahoo! Search. We compete directly with Yahoo! for Internet
access, email, Web-hosting and online photo-sharing subscribers and indirectly for subscribers to our social-networking services. To the extent
competitors who are also sources of significant advertising revenue cease to do business with us, our revenues and profits could suffer.
PRIVACY POLICY
We believe that issues relating to the privacy of Internet users and the use of personal information about these users are critically important
as commercial uses of the Internet grow. We have adopted and disclosed to our accounts detailed policies outlining the permissible uses of
information about users and the extent to which such information may be shared with others. Our users must acknowledge and agree to these
policies when registering to use our services. We do not sell or license to unaffiliated third parties any personally identifiable information of
users unless they specifically authorize us to do so. However, we use information about our users to improve the quality of our services and the
effectiveness of advertising by our advertising customers.
SEASONALITY
We have experienced seasonal trends in connection with our access services. In general, we have experienced increased Internet usage and
increased pay access account subscriptions in the fall and winter when compared to the summer. These trends have had some impact on our
advertising revenues, with lower revenues in periods of lower usage, and on our cost of billable services, with telecommunications cost per user
lower in periods of lower usage. We do not know if these seasonal trends will continue.
INTERNATIONAL OPERATIONS
We have foreign operations in India and Germany. We have a significant number of employees located in our India office. Our operations
in India primarily handle email customer support, product development and quality assurance. A portion of our outsourced customer support is
also based in India. Our operation in Germany provides community-based networking services similar to those provided by
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