Classmates.com 2007 Annual Report Download - page 22

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Our international operations and plans for international expansion may not be successful.
We have invested significantly in expanding our social networking services into several international markets, primarily Sweden, Germany,
France, and Austria, and international pay accounts now constitute a significant portion of our pay account growth. One of our strategies is to
continue the expansion of our social networking services into additional international markets. Our international operations, in total, are not
currently profitable. We intend to continue to invest in our international operations, including through the expansion of our services into new
markets. However, the investment of additional resources may not produce desired levels of revenue or profitability, and we may not be
successful in expanding into new markets. Managing a global organization can be difficult, time consuming and expensive. We have limited
experience operating in foreign jurisdictions which may increase the risk that any international expansion efforts we undertake will not be
successful. In addition, conducting international operations involves additional risks and uncertainties, including:
•
disruption of our ongoing business and significant diversion of management attention from day
-
-
day responsibilities;
• localization of our services, including translation into foreign languages and adaptation for local practices and regulatory
requirements;
•
lack of familiarity with, and unexpected changes in, foreign regulatory requirements, including in particular those applicable to
online commerce;
•
longer accounts receivable payment cycles, and difficulties in collecting accounts receivable for advertising fees;
•
difficulties in managing and staffing international operations;
• fluctuations in currency exchange rates;
• potentially adverse tax consequences, including the complexities of foreign value-added taxes and restrictions on the repatriation
of earnings;
•
the burdens of complying with a wide variety of foreign laws and legal standards;
• increased financial accounting, tax and reporting burdens and complexities;
•
political, social and economic instability abroad, terrorist attacks and security concerns in general; and
•
reduced or varied protection for intellectual property rights.
The occurrence of any one of these risks could negatively affect our international operations, our number of pay accounts and our financial
results.
RISKS RELATING TO OUR COMMUNICATIONS SEGMENT
Our business will suffer if we are unable to compete successfully.
Our principal Communications services, our Internet access services, compete with many emerging and seasoned competitors, including the
following:
• established online service and content providers such as AOL, AOL's Netscape subsidiary and MSN;
• independent national Internet service providers ("ISPs") such as EarthLink and its PeoplePC subsidiary;
•
companies combining their resources to offer Internet access services in conjunction with other services such as Yahoo! and
AT&T Internet Services, and Yahoo! and Verizon;
20