Classmates.com 2006 Annual Report Download - page 9

from our Web pages and the access services’ toolbar by displaying, or users clicking on, banner, text-link and other advertisements that are
linked to advertisers’ and sponsors’ Web sites, or by users utilizing functionality offerings such as Internet search services. A variety of
advertising opportunities also exist through our email platforms, including display advertising on the main pages and within emails.
Our social-networking services generate advertising revenues by selling links and advertisements on the Web pages for our services. We
also generate revenues from referral fees as a result of advertising on our Web pages and placing partners in our registration process.
Our loyalty marketing service generates revenues by selling direct marketing solutions to advertisers. Advertisers pay us for sending
targeted emails to users based on self-reported behavioral data as well as users engaging in certain activities such as completing online surveys
that pre-qualify such members for targeted offers, clicking or shopping through emails, or shopping through the MyPoints Web site.
MARKETING AND NEW ACCOUNT ACQUISITION
Our marketing efforts are focused primarily on attracting free and pay accounts, building our brands and cross-selling existing and new
services to existing accounts. These efforts include television, Internet, co-registration with third parties, sponsorships, radio and print as well as
a variety of distribution initiatives. We intend to continue to evaluate and engage in a variety of distribution and marketing channels to enable us
to make our services better known and available to a large population of potential users. We also devote a significant portion of our own
advertising inventory to up-sell our pay services and cross-sell our other services. Our internal marketing resources consist of marketing
management, media, creative services, Web development, strategic alliance and business development personnel. We produce a significant
amount of our marketing materials in-house, using state-of-the-art design computers and graphics program techniques.
We view our free services as a key component of our pay account acquisition strategy, primarily for our social-
networking services and to a
lesser degree for our access services. We seek to up-sell the free account bases of these services to pay versions of each service. Our marketing
efforts to date for social networking have been comprised almost entirely of Internet advertising designed to increase our free member base, with
most payments to the advertiser made on per free member acquisition basis. Our marketing efforts to obtain members to our loyalty marketing
services are primarily based on co-registration with other third party services.
Our traditional marketing activities for our access services are designed to drive prospective accounts to visit our main Web sites and
download our software, or to call our toll free numbers to purchase our services. We have also entered into a variety of distribution relationships
for our access services including the distribution of our Internet access software on CDs at retail locations, the preloading of our access software
on personal computers and partner CDs, and links to our services on partner Web sites. In most cases, we pay a per pay account acquisition fee
to these distributors.
SALES OF ADVERTISING INVENTORY
We have internal media groups dedicated to selling our Internet advertising products and services, with one group dedicated to selling
advertising across our Communications and Content & Media properties, except for our loyalty marketing services, which has its own dedicated
sales force. These groups work with internal operations personnel dedicated to serving and monitoring the performance of our advertising
initiatives. While we derive a significant portion of our advertising revenues from transactions directly with advertisers and their agencies, we
also sell a portion of our advertising inventory through third party advertising resellers. We have an agreement with Yahoo! Search to place
search boxes and links to their search services on certain of our Web properties, and substantially all of our search revenues are derived from this
agreement.
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