Classmates.com 2006 Annual Report Download - page 7

exchange carriers such as AT&T, bundle their offerings with phone, entertainment or other services, which may result in lower prices than
standalone services. Pricing in the broadband market varies based on the geographic region and speed of the service, with introductory pricing
for slower speed services as low as $10 per month.
Content & Media
Our primary Content & Media services are social networking under the Classmates brand and online loyalty marketing under the MyPoints
brand. Our Content & Media services also include international social-networking, Web-hosting and photo-sharing services, though these
services do not generate material revenues. For additional information regarding our Content & Media segment, see Note 10—“Segment
Information” of the Notes to the Consolidated Financial Statements, which appears in Part II, Item 8 of this Annual Report on Form 10-K.
Social-Networking Services
Our social-networking services connect millions of users primarily across the United States and, to a lesser extent, Canada, Germany,
France, Sweden, India and Great Britain, among others. The primary focus of these services has been to enable members to locate and reconnect
with past acquaintances from school, work or military affiliations. Basic membership in our social-networking services is free and the vast
majority of our social-networking accounts are free accounts. A free account allows a user to engage in a variety of activities on our Web sites
including posting a personal profile and searching our database for other registered members. We also offer pay services which, in general, allow
the member to engage in a variety of additional activities, including communicating with other registered members. The majority of our social-
networking revenues are derived from our pay services. Our social-networking services also contain advertising initiatives throughout their Web
sites. In general, pricing for our social-networking services varies by service and term of membership, with an average price of approximately
$3.25 per month.
Our strategy for our social-networking services is to continue to enhance our members’ experience in finding and interacting with past
acquaintances from school, work and the military, and to encourage our members to contribute user-generated content. Our strategy is to also
expand the scope of our services to provide members with a platform to not only connect with past acquaintances, but also to meet and interact
with new people based on shared interests and communities.
Social Networking Industry Background
The online social-networking market is a growing and rapidly changing market. Online social networking tends to be characterized by Web
sites or online services which enable users to display content and interact based on shared interests, objectives or communities. Examples of
social-networking sites include community-based networks such as MySpace, Yahoo! 360 and Facebook, as well as personals and dating
services such as Yahoo! Personals and Match.com. A number of general services, as well as services dedicated to specific interests such as cars,
music and business, continue to be developed.
Many social-networking services are free and dependent on advertising revenues. Other social interaction services, such as dating, are
dependent upon subscription revenues. A common element to the success of both free and pay services is the ability to attract a significant
number of users to the service and having those users generate content for the service by posting information, such as a personal profile or
photograph, which is generally referred to as user-generated content. Consumer interest in user-generated content can result in the volume of
page views necessary to generate advertising revenues and provides a fundamental element of the value proposition necessary to induce users to
pay for subscription services.
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