Classmates.com 2009 Annual Report Download - page 8

Table of Contents
services are used by individuals to, among other things, post content about themselves and to review or comment on the content posted by
others. Many social networking services also provide users with tools that enable individuals to identify, build and maintain personal networks
from their relevant affiliations. Numerous sources have reported that social networking users frequently choose to participate in, and develop
affiliations through, several online social networking services—often to fulfill different purposes such as professional networking or various
types of social interaction.
Many advertisers view social networking Web sites as an attractive marketing medium for their products and services. Most social
networking Web sites are free to the user and primarily generate revenues from a wide variety of sources that include online advertising and
transactions related to Web site content such as online games, applications or virtual goods. Some social networking Web sites, including
LinkedIn as well as our Classmates Web site and our international social networking Web sites, also generate revenues from paid subscriptions
from members interested in premium services.
Classmates Media Segment—Online Loyalty Marketing
The Internet has been a growing channel for advertising and for consumers to find and purchase goods and services. As a result of both
existing activity and expected growth, advertisers continue to seek effective ways to target and reach online consumers.
Online loyalty marketing programs are generally designed to reward consumers with points that accumulate based on their activities and
which may be redeemed for products and services from participating vendors. Some online loyalty marketing programs use points as an
incentive for members to update their personal interest profiles, which provide useful information that helps advertisers to target consumer
segments interested in purchasing the advertisers' products and services. While these programs have long been popular with airlines, credit card
vendors, hotels, and retailers, in recent years online loyalty marketing programs have expanded into a comprehensive direct marketing and
targeted advertising strategy. Nonetheless, we believe consumer adoption of online loyalty marketing programs has remained largely associated
with a single type of activity, such as airline, hotel or credit card selection.
Online loyalty marketing programs enable advertisers to target consumers in ways that are generally impractical with traditional offline
direct marketing channels. Online loyalty marketing programs can also easily measure click-through rates on display advertising and response
rates to email campaigns, providing rapid feedback for advertisers that can be used to identify potential customers and create new targeted offers.
In addition, an online loyalty marketing program that has attracted a large, responsive and loyal member base helps to maximize returns on the
advertisers' marketing investments. Furthermore, advertisers may prefer to work with online loyalty marketing programs that offer performance-
based pricing, which helps the advertisers achieve their specific performance objectives within budget.
Communications Segment
The U.S. consumer Internet access service market has evolved from one where the Internet was accessed primarily through dial-up access
to one in which consumers can access the Internet through dial-up or a variety of high-speed, or broadband, connection methods.
Broadband Internet access services, once characterized by high prices and a limited coverage area, are now available to most of the U.S.
population at competitive prices, although market pricing varies based on the geographic region and speed of the broadband service, among
other factors. However, broadband continues to have a lower penetration in rural areas when compared to urban and suburban areas, and
numerous sources suggest that broadband access may not be as available or affordable in rural areas. Many broadband providers, including cable
companies such as Comcast and local exchange carriers such as AT&T, bundle their offerings with phone, entertainment or other services, which
may
7