Classmates.com 2009 Annual Report Download - page 17

Table of Contents
Sales of Advertising Inventory
We have internal sales organizations dedicated to selling our Internet advertising products and services. One organization is dedicated to
our online 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 online 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 network services market, retail
florists and supermarkets are our principal 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 floral network, credit card processing services, e-commerce Web site
services, online advertising tools, and telephone answering, order-taking, transmission and clearing-house services.
The consumer market for flowers and specialty gifts is highly competitive as consumers can purchase the products we offer from numerous
sources, including traditional local retail florists, supermarkets, mass merchants, specialty gift retailers, and 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 and supermarkets 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, order volume, customer service, services offered, strength of brand, number
of members in the network, and fulfillment capabilities. In the U.S., our key competitors in the consumer market include 1-800-
FLOWERS.COM, Inc., Proflowers.com and Teleflora, and our key competitors in the floral network 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 (also known as eFlorist), and Flowers Direct. Although we believe that we compare favorably with respect to many competitive
factors, some of our competitors have an advantage over us with respect to certain factors.
We believe competition in the consumer market will likely intensify. Supermarkets, mass merchants and nationwide floral marketers have
been gaining market share over retail florists as consumers continue to shift more of their floral purchases to these channels. We expect the sales
volumes at supermarkets and other mass merchants to continue to increase, and other nationwide floral marketers will continue to increase their
competition with us. In particular, the nature of the Internet as a marketplace facilitates competitive entry and comparative shopping, and we
have experienced increased competition based on price. Some of our competitors may have significant competitive advantages over us, may
devote significantly greater resources to marketing campaigns or other aspects of their business or may respond more quickly and effectively
than we can to new or changing opportunities or customer requirements.
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