Classmates.com 2008 Annual Report Download - page 20

Table of Contents
Online Loyalty Marketing
The market for loyalty marketing services is highly competitive, and we expect competition to significantly increase in the future as loyalty
marketing programs grow in popularity. Our MyPoints loyalty marketing business faces competition for members from several other online
loyalty marketing programs. We also face competition from offline loyalty marketing programs that have a significant online presence, such as
those operated by credit card, airline and hotel companies. We believe the primary competitive factors in the online loyalty marketing industry
are the number, type and popularity of the participating merchants, the attractiveness of the rewards offered, the number of points awarded for
various actions, the ease and speed of earning rewards, and the ability to offer members a robust, user-friendly shopping experience. We believe
that we compete favorably in each of these areas, although certain of our competitors have an advantage over us in some or all of these areas,
and that the time, effort and expenses required to successfully develop certain of these areas serve as effective barriers to entry.
Internet Access Services
We compete with numerous other dial-up Internet access providers as well as providers of broadband services. Our key dial-up Internet
access competitors include established online service and content providers, such as AOL and MSN, and independent national Internet service
providers, such as EarthLink and its PeoplePC subsidiary. We believe the primary competitive factors in the Internet access industry are price,
speed, features, coverage area, scope of services, and quality of service. While we believe our dial-up Internet access services compete favorably
based on these factors when compared to many dial-up Internet access services, we are at a competitive disadvantage relative to some or all of
these factors with respect to the services of some of our competitors. Our dial-up Internet access services do not compete favorably with
broadband services with respect to speed.
Seasonality and Cyclicality
Revenues and operating results from our FTD segment typically exhibit seasonality. Revenue and operating results tend to be lower for the
quarter ending September 30 because none of the most popular floral and gift holidays, which include Valentine's Day, Mother's Day, Christmas,
Easter, and Thanksgiving, fall within that quarter. In addition, depending on the year, Easter and the U.K. Mother's Day sometimes fall within
the quarter ending March 31 and sometimes fall within the quarter ending June 30. As a result of these seasonal variations, we believe that
comparisons of the FTD segment's revenues and operating results for any period with those of the immediately preceding period, or in some
instances, the same period of the preceding fiscal year, may be of limited relevance in evaluating its historical performance and predicting its
future financial performance. Our working capital, cash and short-term borrowings may also fluctuate during the year as a result of the factors
described above.
Loyalty marketing advertising revenues tend to be higher in the quarter ending December 31 when compared to other quarters. Our Internet
access services have typically experienced a lower rate of new registrations during the quarter ending June 30 when compared to other quarters.
Seasonality does not have a material impact on our social networking. There can be no assurance that these seasonal trends will continue in the
future.
Billing
Orders placed through FTD's consumer Web sites or toll free telephone numbers typically are paid for using a credit card or a debit card;
therefore, consumers generally pay for floral and specialty gift orders before FTD pays florists and specialty gift providers to deliver them.
FTD's florist members are
18