Classmates.com 2007 Annual Report Download - page 51

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We also use targeting technologies, Web site sponsorships and Web site integrations in order to provide effective solutions.
Our social networking services generate advertising revenues primarily from display advertisements and from post-transaction sales.
Advertising inventory on our social networking Web sites includes text and graphic placements on the user home page, profile page, class list
page, and most other pages on our Web sites. We are able to target the advertising delivered to most of our members based on a wide variety of
factors, including age, gender, demographic data, affiliations, profile data, and zip code. Post-transaction sales are generated when a Classmates
pay account is provided a third-party offer at the end of the pay account registration process. We also sell a portion of our advertising inventory
through third-party advertising resellers.
Our loyalty marketing service revenues are derived from advertising fees, consisting primarily of fees generated when emails are
transmitted to members, when members respond to emails and when members complete online transactions. We sell marketing solutions to
advertisers with both brand and direct response objectives through a full suite of display, email and other advertising opportunities. We also use
targeting technologies and Web site integrations in order to provide effective solutions for advertisers.
Our Communications services generate advertising revenues from our search agreement with Yahoo!, from display advertisements, from
referring members to third-party Web sites or services, and from online market research. Substantially all of our Communications advertising
revenues are generated from our Internet access services. We host and customize the initial Web site displayed to users of our Internet access
services. This Web site, or "start page," displays sponsored links to a variety of content, products and services, including Internet search. We also
display a toolbar on Internet access users' screens throughout their online access sessions that is generally visible regardless of the particular Web
site they visit. The toolbar contains Internet search functionality and a variety of buttons, icons and drop-down menus. A variety of advertising
opportunities also exist through our email platforms, including display advertising on the main pages and within emails.
Consolidated Advertising Revenues.
Consolidated advertising revenues increased by $34.9 million, or 35%, to $134.0 million for the year
ended December 31, 2007, compared to $99.1 million for the year ended December 31, 2006. The increase was primarily attributable to an
increase in advertising revenues in our Classmates Media segment and, to a lesser extent, also our Communications segment. Advertising
revenues related to our Classmates Media segment and our Communications segment constituted 64.9% and 35.1%, respectively, of our
consolidated advertising revenues for the year ended December 31, 2007, compared to 58.8% and 41.2%, respectively, for the year ended
December 31, 2006.
Classmates Media Advertising Revenues. Classmates Media advertising revenues increased by $28.6 million, or 49%, to $86.9 million
for the year ended December 31, 2007, compared to $58.3 million for the year ended December 31, 2006. The increase was primarily related to
revenues from our loyalty marketing service, which we acquired in April 2006 and which was included in our results of operations for the year
ended December 31, 2007 compared to only 266 days for the year ended December 31, 2006. Revenues from our loyalty marketing service
increased by $25.7 million in the year ended December 31, 2007, compared to the year ended December 31, 2006, primarily due to the fact that
no such revenues were included in our consolidated financial statements in the first three months and nine days of 2006 (the period prior to our
acquisition of MyPoints) and an increase in the number of loyalty marketing active accounts in the year ended December 31, 2007 compared to
the year ended December 31, 2006. Our Classmates Media advertising revenues for the year ended December 31, 2007 also increased as a result
of a $3.0 million increase in advertising revenues, compared to the year ended December 31, 2007, generated from our social networking
services. The increase in advertising revenues generated from our social networking services was primarily related to
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