Classmates.com 2008 Annual Report Download - page 24

Table of Contents
performance. As a result, you should not rely on period-to-period comparisons as an indication of our future or long-term performance. In
addition, these factors and the continuing decline in economic conditions create difficulties with respect to our ability to forecast our financial
performance and business metrics accurately. We believe that these difficulties in forecasting present even greater challenges for financial
analysts who publish their own estimates of our future financial results and business metrics. We cannot assure you that we will achieve the
expectations or projections made by our management or by the financial analysts. In the event we do not achieve such expectations or
projections, our financial results and the price of our common stock could be adversely affected.
Changes in exchange rates could adversely affect our operating results.
We transact business in different foreign currencies and may be exposed to financial market risk resulting from fluctuations in foreign
currency exchange rates, particularly the British Pound, the Euro, and the Indian Rupee. Revenues and expenses in foreign currencies translate
into higher or lower revenues and expenses in U.S. Dollars as the U.S. Dollar weakens or strengthens against such other currencies. Substantially
all of the revenues of our foreign subsidiaries are received, and substantially all expenses are incurred, in currencies other than the U.S. Dollar,
which increases or decreases the related U.S. Dollar reported revenues and expenses depending on the trend in currency. Certain of our key
business metrics, such as the FTD segment's average order value, are similarly affected by such currency fluctuations. Changes in global
economic conditions, market factors, and governmental actions, among other factors, can affect the value of these currencies in relation to the
U.S. Dollar, and we do not currently hedge foreign currency translation risk. Recently, the U.S. Dollar increased in value compared to the British
Pound, which has had an adverse effect on the FTD segment's operating results for the period from August 26, 2008 (date of acquisition) through
December 31, 2008, and will continue to adversely affect the FTD segment's operating results, at least in the near term. We cannot accurately
predict the impact of future exchange rate fluctuations on our operating results, and such fluctuations could adversely affect our operating
results.
We may be unable to maintain or grow our advertising revenues. Reduced advertising revenues may reduce our profits.
Advertising revenues are a key component of our revenues and profitability. In particular, we derive significant profits from post-
transaction sales and search, and any termination, change or decrease in revenues from these sources could have a material impact on our
profitability. Our revenues from advertising have in the past fluctuated, and may in the future fluctuate, due to a variety of factors including,
without limitation, changes in the economy, advertisers' budgeting and buying patterns, the effect of key advertising relationships, competition,
changes in our business models, changes in the online advertising market, changes in our advertising inventory, and changes in usage. Post-
transaction sales are also dependent on the number of consumers purchasing our products and services. We expect our advertising revenues in
our Communications segment to continue to decline as a result of the decrease in our dial-up Internet access accounts. Decreases in advertising
revenues are likely to adversely impact our profitability.
Our marketing efforts may not be successful, which could increase our costs and adversely impact our key metrics.
We spend significant resources marketing our brands, products and services. We rely on relationships with a wide variety of third-parties,
including Internet search providers, Internet advertising networks, co-
registration partners, retailers, distributers and direct marketers, to promote
or distribute our products and services. In addition, one of our strategies is to cross market our various products and services to our existing
customer base. If our marketing, including cross marketing, activities are inefficient or unsuccessful, or if important third-party relationships
become more
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