Classmates.com 2008 Annual Report Download - page 6

Table of Contents
PART I
ITEM 1. BUSINESS
Overview
United Online, Inc. is a leading provider of consumer products and services over the Internet through a number of brands including FTD,
Interflora, Classmates, MyPoints, NetZero, and Juno. We are a Delaware corporation, headquartered in Woodland Hills, California, that
commenced operations in 2001 following the merger of Internet access providers NetZero, Inc. ("NetZero") and Juno Online Services, Inc.
("Juno"). Historically, our operations were focused on providing value-priced dial-up Internet access services in the U.S. and Canada. In 2004,
our dial-up Internet access revenues began to decline and we began diversifying our business to include other consumer Internet offerings in an
effort to provide new growth opportunities for the Company. In November 2004, we acquired Classmates Online, Inc. (together with its
subsidiaries, "Classmates Online"), a provider of online social networking services, and in April 2006, we acquired MyPoints.com, Inc.
("MyPoints"), a provider of online loyalty marketing services. In August 2008, we acquired FTD Group, Inc. (together with its subsidiaries,
"FTD"), a provider of floral and related products and services to consumers and retail florists, as well as to other retail locations offering floral
and related products and services.
We report our businesses in three reportable operating segments:
Revenue growth within our Classmates Media segment in recent years, combined with our acquisition of FTD in August 2008, has
significantly reduced our exposure to the mature Communications segment that is experiencing declining revenues. Classmates Media segment
revenues increased from $139.4 million in 2006 to $193.4 million in 2007 and $230.2 million in 2008, and surpassed Communications segment
revenues in the fourth quarter of 2008 for the first time. By comparison, Communications segment revenues declined from $383.2 million in
2006 to $320.1 million in 2007 and $257.4 million in 2008. Expressed as a percentage of consolidated revenues, in the fourth quarter of 2008,
the FTD segment, the Classmates Media segment, and the Communications segment accounted for 52.2%, 24.4% and 23.5% of consolidated
revenues, respectively.
We generate revenues from three primary sources:
•
Segment Products and Services
FTD
Floral and related products and services for consumers, retail florists and
other retail locations
Classmates Media
Online social networking and online loyalty marketing
Communications
Internet access, email, Internet security, and Web hosting
Services revenues. Services revenues within our FTD segment are derived from membership fees, order-related fees and service
and subscription fees generated from our florist members. Within our Classmates Media and Communications segments, services
revenues are derived from selling subscriptions to consumers who are typically billed in advance on a monthly basis or for the
entire subscription term. This enhances our cash flows and the predictability of future revenues.
•
Products revenues.
Products revenues in our FTD segment are derived primarily from selling floral and related products to
consumers via our Internet Web sites and toll-free telephone numbers and, to a lesser extent, to independent members of the FTD
and Interflora florist networks. We generally do not maintain physical inventory or bear the cost of warehousing our consumer
products, and we generally receive payment from consumers before paying florists or other third-parties to fulfill product orders.
• Advertising revenues. Advertising revenues are derived from a wide variety of advertising, marketing and media-related
initiatives.
4