Classmates.com 2005 Annual Report Download - page 6

Other Services
The Family Pack of premium content bundles together leading family-orientated subscription services and is offered to subscribers through
our NetZero and Juno brands for $4.95 per month. Our accelerated access services include Norton’s antivirus service free of charge and
members can upgrade to a more complete Norton Internet Security package that includes antispyware, parental controls and other features for an
additional $1.95 per month.
Advertising Services
The United Online Media Group connects advertisers to consumers through a variety of online marketing properties and channels integrated
throughout our services. Our advertising and e-commerce products include a broad range of targeting techniques for online advertising, email
campaigns, start-page and user registration placements and channel sponsorship opportunities, and the ability to deliver video commercials
online. We also provide consumers convenient access to third party Internet search services from many of our Web properties and services, and
we generate a significant portion of our advertising and commerce revenues from such search services. In addition, we offer advertisers
sophisticated market research capabilities through our CyberTarget division, which can design and execute customized, real-time market
research in an Internet environment and help advertisers better understand their target audience.
INDUSTRY BACKGROUND
Internet Access
The number of households in the U.S. using broadband has grown significantly over the last few years, while the number using dial-up has
declined. Analysts’ estimates indicate that, as of the end of 2005, approximately 74 million U.S. households had some form of Internet access,
up from approximately 59 million U.S. households in 2000. Of these “Internet households,” analysts’ estimates indicate that approximately 54%
used broadband as of the end of 2005. They predict that by 2009, there will be approximately 84 million Internet households, and approximately
80% of them will use broadband. The decline in the dial-up market has resulted primarily from users of premium dial-up access migrating to
broadband services.
There are many dial-up access providers in the U.S., with a small number of nationwide providers dominating the competitive landscape.
The top four providers, including United Online, currently account for a significant majority of the U.S. dial-up market. All of these providers,
except United Online, offer premium-priced services as their primary offering, and two of them, America Online (“AOL”) and EarthLink,
market value-priced dial-up access services through alternative brands. Providers of broadband access, which include cable, digital subscriber
lines (“DSL”), satellite and wireless, generally offer users faster connections and download speeds than dial-up for higher prices. DSL
broadband prices range from approximately $13 to $60 per month while cable modem broadband runs from approximately $35 to $55 per
month. In general, broadband pricing has been declining and a number of providers offer aggressive pricing and discounted packages,
particularly when their access offerings are combined with other services including telephone and television. As the Internet evolves, many
analysts believe that the convergence of data, voice, video and wireless services, among others, will increasingly differentiate broadband from
dial-
up beyond just faster connection speeds. These trends, along with changes in broadband pricing, will have a significant impact on the rate of
broadband adoption in the future and the rate of decline of the dial-up market.
Monthly standard pricing for unlimited dial-up Internet access generally ranges from approximately $7 to $26 per month. Providers
distinguish their offerings through a variety of factors. The major premium-priced offerings generally provide, among other features, some or all
of the following at no additional cost: telephone technical support, proprietary content, parental controls, spam controls, pop-up
5