Classmates.com 2009 Annual Report Download - page 23

Table of Contents
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. Factors that have caused, or may cause in the future, our
advertising revenues to fluctuate include, without limitation, the effect of, changes to, or terminations of key advertising relationships, changes in
applicable laws, regulations or business practices, changes in the online advertising market, changes in the economy, advertisers' budgeting and
buying patterns, competition, changes in the number of consumers purchasing our products and services, changes in our business models,
changes in our advertising inventory, and changes in usage of our services. Decreases in our advertising revenues are likely to adversely impact
our profitability.
Our advertising revenues have in the past declined, and may in the future decline, when compared to prior periods. For 2010, we expect that
our advertising revenues will decrease as compared to 2009. We anticipate advertising revenues generated by our Communications segment to
continue to decline primarily as a result of the decrease in our dial-up Internet access pay accounts. In addition, our Communications segment
has derived significant advertising revenues from search, and we are in the process of changing Internet search providers. Changes to the terms
of our search agreement or difficulties or delays with the transition of our new search provider's service onto our Web sites, or the inability of the
new search provider's service to monetize as well as the prior service, could have a material adverse effect on our Communications segment's
advertising revenues. Also, all of our revenues from our online loyalty marketing service are derived from advertising, and we have experienced
from time to time, and may continue to experience, significant declines in revenues from this service. In addition, prior to 2010, our Classmates
Media and FTD segments have collectively derived significant advertising revenues from domestic post-transaction sales agreements. Post-
transaction sales involve the online presentation of a third-party offer following the point where a consumer has purchased our subscription
services or floral products, as applicable. In January 2010, we terminated our domestic post-
transaction sales agreements. As discussed in greater
detail in the risk factor related to changes in laws and regulations, certain governmental agencies have been investigating post-transaction sales
practices and the companies that have engaged in such practices, including us. Although we expect to continue to offer our members and
customers complementary services or products at the end of our registration or sale processes, including third-party offers as well as our own
offers, there are no assurances that we will enter into any such third-party arrangements or that such offers will be well received by our members
or customers. Even if we do enter into third-party arrangements, we anticipate that the revenues generated from such arrangements will be
significantly less than the post-
transaction sales revenues generated in 2009. Any or all of the above factors could cause our advertising revenues
and profits to significantly decline in the future.
Changes in exchange rates could adversely affect comparisons of 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, including the British Pound, the Euro, the Indian Rupee, and the Canadian Dollar. 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 exchange rates. 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. A strengthening of the U.S. Dollar compared to these currencies and, in particular, to the
British Pound, has had, and in future periods could have, an adverse effect on the
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