Classmates.com 2008 Annual Report Download - page 45

Table of Contents
ARPU. We monitor the average monthly revenue per pay account ("ARPU"). ARPU is calculated by dividing Classmates Media and
Communications services revenues for a period (after translation into U.S. Dollars) by the average number of pay accounts for that period,
divided by the number of months in that period. The average number of pay accounts is the simple average of the number of pay accounts at the
beginning and end of a period. ARPU may fluctuate from period to period as a result of a variety of factors, including, but not limited to:
changes in the mix of pay services and the related pricing plans, the use of promotional or retention pricing to attract new, or retain existing,
paying subscribers, increases or decreases in the price of our services, the timing of pay accounts being added or removed during a period, and
the foreign currency exchange rates between the U.S. Dollar and the Euro and between the U.S. Dollar and the Swedish Krona.
Churn. To evaluate the retention characteristics of our membership base, we also monitor the percentage of pay accounts that terminate
or expire, which we refer to as our average monthly churn rate. Our average monthly churn rate is calculated as the total number of pay accounts
that terminated or expired in a period divided by the average number of pay accounts for the same period, divided by the number of months in
that period. Our average monthly churn percentage may fluctuate from period to period due to our mix of subscription terms, which affects the
timing of subscription expirations, and other factors. We make certain normalizing adjustments to the calculation of our churn percentage for
periods in which we add a significant number of pay accounts due to acquisitions. For our Communications segment pay accounts, we do not
include in our churn calculation those accounts canceled during the first 30 days of service unless the accounts have upgraded from free
accounts, although a number of such accounts will be included in our account totals at any given measurement date. Subscribers who cancel one
pay service but subscribe to another pay service are not necessarily considered to have canceled a pay account depending on the services and, as
such, our overall churn rate is not necessarily indicative of the percentage of subscribers canceling any particular service.
Active Accounts.
We monitor the number of active accounts among our membership base. Classmates Media segment active accounts are
defined as the sum of the following: all segment pay accounts as of the date presented; the monthly average for the reporting period of all free
social networking accounts who have visited our domestic or international social networking Web sites (excluding The Names Database) at least
once during the reporting period; and the monthly average for the reporting period of all loyalty marketing members who have earned or
redeemed points during such period. Communications segment active accounts include all segment pay accounts as of the date presented and the
number of free Internet access and email accounts that logged on to our services at least once during the preceding 31 days.
In general, we count and track pay accounts and free accounts by unique member identifiers. Users have the ability to register for separate
services under separate brands and member identifiers independently. We do not track whether a pay account has purchased more than one of
our services unless the account uses the same member identifier. As a result, total active accounts may not represent total unique users. At any
point in time, our pay account base includes a number of accounts receiving a free period of service as either a promotion or retention tool and a
number of accounts that have notified us that they are terminating their service but whose service remains in effect.
The following table sets forth, for the dates or three-month periods presented, as applicable, our consolidated revenues, pay accounts (at the
end of the period), segment revenues, consumer orders, average order value, churn (monthly average for the period), ARPU (monthly average
for the period) and active accounts (monthly average for the period).
Revenues and operating results from our FTD segment are impacted by seasonal variations and fluctuations in foreign currency exchange
rates. 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
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