Classmates.com 2010 Annual Report Download - page 17

Table of Contents
Sales of Advertising Inventory
We have an internal sales organization dedicated to selling our Internet advertising products and services. This group works with internal
media operations personnel dedicated to serving and monitoring the performance of our advertising initiatives. While we derive a 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 significant 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, gifts. In the consumer market, consumers are our customers for direct sales of
floral products and gifts through our websites and 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 networks, credit card processing services, e-
commerce website services, online advertising
tools, telephone answering, order taking, order transmission, and clearing-house services.
The consumer market for flowers and gifts is highly competitive as consumers can purchase the products we offer from numerous sources,
including traditional local retail florists, supermarkets, mass merchants, gift retailers, and floral mass marketers, such as those that use websites,
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, Inc. International key competitors include Marks & Spencer, NEXT, John Lewis, Teleflorist (also known
as eFlorist), Flowers Direct, and Flying Flowers. 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 continue to intensify. Supermarkets, mass merchants and floral mass 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 mass merchants to continue to increase, and other floral mass 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
engage in more significant discounting, 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.
We expect competition in the floral network services market to continue to increase as well. We believe we will continue to experience
increasing competition from the other floral network services
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