Classmates.com 2007 Annual Report Download - page 19

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ITEM 1A. RISK FACTORS
RISKS RELATING TO OUR CLASSMATES MEDIA SEGMENT
We expect to face increasing competition that could result in a loss of users and reduced revenues and decreased profitability.
The market for our services is competitive, and we expect competition to significantly increase in the future. Our social networking services
compete with a wide variety of social networking Web sites, including broad social networking Web sites such as MySpace and Facebook; a
number of specialty Web sites, including LinkedIn, Reunion.com and Monster.com's Military.com service, that offer online social networking
services based on school, work or military communities; and an increasing number of schools, employers and associations that maintain their
own Internet-based alumni information services. We also compete with a wide variety of Web sites that provide users with alternative networks
and ways of locating and interacting with acquaintances from various affiliations, including Web portals such as Yahoo!, MSN and AOL, and
online services designed to locate individuals such as White Pages and US Search. As Internet search engines continue to improve their
technology and their ability to locate individuals, including by finding individuals through their profiles on social networking Web sites, these
services will increasingly compete with our services. As a result of the growth of the social networking market and minimal barriers to entry, a
number of companies are attempting to enter our market, either directly or indirectly, some of which may become significant competitors in the
future. In addition, many existing social networking services are broadening their service offerings to compete with our services. As we broaden
our services and also evolve into a service used for meeting new people with similar interests or affiliations, we may compete with the increasing
number of social networking Web sites for special niches and areas of interest.
The market for loyalty marketing services is highly competitive, and we expect competition to significantly increase in the future as loyalty
marketing programs grow in popularity. Our MyPoints loyalty marketing business faces competition for members from several other online
loyalty marketing programs, including Ebates, Upromise and FatWallet. We also face competition from offline loyalty marketing programs that
have a significant online presence, such as those operated by credit card, airline and hotel companies.
Some of our competitors have longer operating histories, greater name and brand recognition, larger user bases, significantly greater
financial, technical, sales, and marketing resources, and engage in more extensive research and development than we do. Some of our
competitors also have lower customer acquisition costs than we do and offer a wider variety of services. If our competitors are more successful
than we are in attracting users, our ability to maintain a large and growing user base will be adversely affected. Some of our social networking
competitors have more compelling Web sites with more extensive user-generated content and offer their services free to their users. If our social
networking services are not as compelling and we do not stay current with evolving consumer trends, we may not succeed in maintaining or
increasing our membership base. If our competitors provide similar services for free, we may not be able to charge for any of our services.
Competition could have a material adverse affect on our subscription revenues from social networking services, as well as on advertising
revenues from our social networking and loyalty marketing services. More intense competition could also require us to increase our marketing
expenditures. As a result of competition, our revenues and profitability could be adversely affected.
Failure to increase or maintain the number of pay accounts for our social networking services could cause our business and financial
results to suffer.
We may not be successful in increasing or maintaining the number of pay accounts for our social networking services. Only a small
percentage of members initially registering for our social networking services sign up for a paid subscription at the time of registration. As a
result, our ability to generate
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