Classmates.com 2008 Annual Report Download - page 18

Table of Contents
Communications
Our Communications segment's marketing efforts are focused primarily on attracting pay accounts, primarily dial-up Internet access
accounts, building our NetZero brand, and cross-selling existing and new services to existing accounts. These marketing efforts include
distribution arrangements with retailers and personal computer manufacturers; advertising on the Internet, television and radio; direct marketing
campaigns; and sponsorships. These activities are designed to drive prospective accounts to call our toll-free telephone numbers to purchase our
services, or to visit our main Web sites and download our software. In most distribution arrangements, we pay a per-pay account acquisition fee.
Sales of Advertising Inventory
We have internal sales organizations dedicated to selling our Internet advertising products and services. One organization is dedicated to
our loyalty marketing service, and the other organization is dedicated to our Communications and Classmates Online properties. These groups
work with internal media operations personnel dedicated to serving and monitoring the performance of our advertising initiatives. While we
derive a significant portion of our advertising revenues from transactions entered into directly with advertisers and their agencies, particularly
within our loyalty marketing service, we also sell a portion of our advertising inventory through third-party advertising resellers.
Competition
The industries in which we offer products and services are highly competitive. A summary of competitive factors is set forth below and in
"Risk Factors," which appears in Item 1A of this Annual Report on Form 10-K.
Floral and Related Products and Services
We compete in the market for flowers and, to a lesser degree, specialty gifts. In the consumer market, consumers are our customers for
direct sales of floral and specialty gifts through our Web sites and toll-
free telephone numbers. In the floral services market, retail florists are our
customers for memberships and subscriptions to our various floral network services, including access to the FTD and Interflora brands and the
Mercury Man logo, access to the florist network, credit card processing services, e-commerce Web sites, online advertising tools, and telephone
answering and order-taking services.
The consumer market for flowers and specialty gifts is highly competitive, and consumers can purchase the products we offer from
numerous sources, including traditional retail florists, supermarkets, specialty gift retailers and large nationwide floral marketers, such as those
that use Web sites, toll-free telephone numbers and catalogs. We believe the primary competitive factors in the consumer market are price,
quality of products, selection, customer service, ordering convenience, and strength of brand. The floral network services market is highly
competitive as well, and retail florists may choose from a few floral service providers that offer similar products and services. We believe the
primary competitive factors in this market are price, customer service, services offered, strength of brand, order volume, number of florists in the
network, and fulfillment capabilities. In the U.S., our key competitors in the consumer market include 1-800-FLOWERS.COM, Inc. and
Proflowers.com, and our key competitors in the floral services market include Teleflora and BloomNet Wire Service, a subsidiary of 1-800-
FLOWERS.COM. International key competitors include Marks & Spencer, NEXT, John Lewis, Teleflorist, and Flowers Direct. Although we
believe that we compete favorably with respect to many competitive factors, certain of our competitors have an advantage over us with respect to
certain factors.
We believe competition in the consumer market will likely intensify. Supermarkets and nationwide floral marketers have been gaining
market share over retail florists as consumers continue to shift more
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