Classmates.com 2007 Annual Report Download - page 12

Notes to the Consolidated Financial Statements, which appears in Part II, Item 8 of this Annual Report on Form 10
-K.
Internet Access Services
Our Internet access services consist of dial-up and, to a much lesser extent, DSL services. Our DSL services were launched during the
fourth quarter of 2006 and have not generated significant revenues. We conduct only limited marketing of our DSL services.
Our dial-up Internet access services are provided on both a free and pay basis, with the free services subject to hourly and other limitations.
Basic pay dial-up Internet access services include Internet access and an email account, although we also offer an enhanced email service as a
stand-alone pay service. In addition, we offer accelerated dial-
up Internet access services which can significantly reduce the time for certain Web
pages to download when compared to our basic dial-up Internet access services. Our accelerated dial-
up Internet access services are also bundled
with additional benefits including pop-up blocking, antivirus software and enhanced email storage. Our dial-up Internet access services are
available in more than 10,000 cities across the United States and Canada. In general, monthly pricing for our dial-up Internet access services
ranges from $6.95 for basic services to $14.95 for our bundled services, with $9.95 being our most prevalent price point.
Our DSL Internet access services are purchased from third-parties and, as of the end of 2007, were available only within a limited coverage
area. While we intend to expand our DSL coverage in the future, our ability to do so will be dependent on acquiring services from additional
third-parties. In general, monthly pricing for our DSL Internet access services ranges from $12.95 to $34.95, although we anticipate that our
pricing may change and fluctuate based on connection speed and geographic region.
Our primary strategy for the Communications segment is to manage our dial-up business for profitability and cash flows while extending
the business life cycle of our dial-up Internet access subscribers by offering them a DSL alternative to their dial-up service.
Sources of Revenue
We generate revenue from billable services and online advertising transactions.
Billable Services Revenues
Billable services revenues are comprised of amounts charged to pay accounts for our billable services. Classmates Media billable services
revenues consist of amounts charged to pay accounts for social networking services. Communications billable services revenues consist of
amounts charged to pay accounts for Internet access, Web hosting, email, Internet security, and other services, with substantially all of such
revenues generated from Internet access. Our billable services revenues are primarily dependent on two factors: the average number of pay
accounts for a period and the average monthly revenue per pay account, or ARPU. The average number of pay accounts is a simple average
calculated based on the number of pay accounts at the beginning and end of a period.
In general, we charge our pay accounts in advance of providing a service, which results in the deferral of billable services revenue to the
period in which the services are provided. We have experimented with a variety of pricing plans, both in connection with offers extended to
some of our existing accounts and through external marketing channels. We intend to continue testing a variety of pricing plans in the future to
determine their impact on profitability, pay account acquisition, conversion rates of free accounts to pay accounts, and retention rates. We
regularly evaluate the desirability and effectiveness of our pricing plans and may, in the future, make changes to these plans. We may also offer
additional fee-based products and services as well as a wide range of discounted metered plans and promotions, such as one or more free months
of service or discounted rates for an initial period or an extended commitment.
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