Classmates.com 2007 Annual Report Download - page 39

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We made the decision during 2007 to exit our photo sharing business and we have entered into a commercial arrangement with a third-
party
in connection therewith.
Key Business Metrics
We review a number of key business metrics to help us monitor our performance and trends affecting our businesses, and to develop
forecasts and budgets. These measures include:
Pay Accounts. Our pay accounts generate a significant portion of our revenues and represent one of the most important drivers of our
business model. A pay account is defined as a member who has subscribed to, and paid for, our billable services, and whose subscription has not
expired. In general, the key metrics that drive revenues from our pay accounts base include the number of pay accounts and the average monthly
revenue per pay account. In general, a pay account becomes a free account following the expiration or termination of the related subscription.
ARPU. We monitor the average monthly revenue per pay account, or ARPU. ARPU is calculated by dividing billable services revenues
for a period by the average number of pay accounts for that period, divided by the number of months in that period. The average number of pay
accounts is the simple average of the number of pay accounts at the beginning and end of a period. ARPU may fluctuate from period to period as
a result of a variety of factors, including, but not limited to: changes in the mix of pay services and the related pricing plans; the use of
promotional or retention pricing to attract new, or retain existing, paying subscribers; increases or decreases in the price of our services; and the
timing of pay accounts being added or removed during a period.
Churn. To evaluate the retention characteristics of our membership base, we also monitor the percentage of pay accounts that terminate
or expire, which we refer to as our average monthly churn rate. Our average monthly churn rate is calculated as the total number of pay accounts
that terminated or expired in a period divided by the average number of pay accounts for the same period, divided by the number of months in
that period. Our average monthly churn percentage may fluctuate from period to period due to our mix of subscription terms, which affects the
timing of subscription expirations, and other factors. We make certain normalizing adjustments to the calculation of our churn percentage for
periods in which we add a significant number of pay accounts due to acquisitions. Except with respect to our social networking pay accounts, we
do not include in our churn calculation those accounts cancelled during the first 30 days of service unless the accounts have upgraded from free
accounts, although a number of such accounts will be included in our account totals at any given measurement date. Subscribers who cancel one
pay service but subscribe to another pay service are not necessarily considered to have cancelled a pay account depending on the services and, as
such, our overall churn rate is not necessarily indicative of the percentage of subscribers cancelling any particular service.
Active Accounts. We monitor the number of active accounts among our membership base. Active Classmates Media segment accounts
are defined as: all segment pay accounts as of the date presented; the monthly average for the reporting period of all free social networking
accounts who have visited the Company's domestic or international social networking Web sites (excluding The Names Database) at least once
during the reporting period; and the monthly average for the reporting period of all loyalty marketing members who have earned or redeemed
points during such period. Active Communications segment accounts include all segment pay accounts as of the date presented and the number
of free Internet access and email accounts that logged on to the Company's services at least once during the preceding 31 days.
In general, we count and track pay accounts and free accounts by unique member identifiers. Users have the ability to register for separate
services under separate brands and member identifiers independently. We do not track whether a pay account has purchased more than one of
our services
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