Classmates.com 2007 Annual Report Download - page 6

online audience. Our advertising revenues have increased from $59.1 million, or 11.3% of total revenues, in 2005 to $134.0 million, or 26.1% of
total revenues, in 2007.
Industry Background
Classmates Media Segment—Online Social Networking
Online social networking is rapidly growing and evolving to include a broad spectrum of Web sites and online services. From a category
that attracted a relatively small number of users a few years ago, during December 2007, social networking Web sites attracted approximately
516.3 million unique visitors worldwide and an average of 169.8 million daily visitors according to comScore MediaMetrix, an Internet industry
research company.
We believe people have a fundamental drive to connect with others, be part of a community, express themselves and maintain personal
relationships. Core, life-long relationships are often based on enduring affiliations related to shared experiences such as family, school,
workplace or military service. People seek to foster these relationships as well as other meaningful affiliations, such as those based on common
interests, hobbies and trends.
Some affiliations, such as those based on school, workplace and the military, encompass large numbers of individuals. According to the
U.S. Census Bureau, as of 2006, there were approximately 186.2 million high school graduates living in the United States, and approximately
116.7 million people in the United States who had attended college. As of 2006, the U.S. military and armed forces included more than
24.7 million active members and veterans. As of 2004, there were 73.2 million employees of companies with 100 or more employees in the
United States.
Over time, people frequently lose touch with each other for a variety of reasons, including geographic moves and job changes. According to
the U.S. Census Bureau, approximately 39.9 million people relocate, and nearly one-third of America's workforce changes jobs, each year. In
addition, it is estimated by the U.S. Department of Labor that the average American worker will hold more than 10 jobs by age 40. We believe
there is a growing trend towards using new mediums of communication that facilitate social interaction and enable individuals to find and
connect with friends, family and colleagues.
Social networking Web sites fulfill a number of different needs, including allowing users to find, connect or reconnect with individuals
from their past and interact with new people based on shared interests, experiences, goals or other criteria. Widespread adoption of broadband
Internet access, digital photography and online video has also served as a catalyst for growth in online social networking, facilitating the sharing
of content over the Internet. We believe that social networking users frequently choose to participate in, and develop affiliations through, more
than one online social networking service. These Web sites and services are used by individuals to, among other things, post content about
themselves and to review or comment on the content posted by others. Users of social networking services may interact and communicate
through email as well as through a variety of other online forums, including instant messaging, blogging, the posting of pictures and videos,
voice chat, and discussion groups. Many social networking services provide users with tools that enable individuals to identify, build and
maintain personal networks from their relevant affiliations.
Many advertisers, recognizing that consumers spend an increasing amount of time online, view social networking Web sites as an attractive
marketing medium for their products and services. According to eMarketer, an independent Internet industry research firm, advertising spending
on social networking Web sites in the United States is expected to increase more than 600%, from $350 million in 2006 to $2.7 billion in 2011.
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