Classmates.com 2010 Annual Report Download - page 22

Table of Contents
ITEM 1A. RISK FACTORS
RISKS RELATING TO OUR BUSINESS GENERALLY
Current or future economic conditions may have a material and adverse impact on our business, financial condition, results of operations,
and cash flows.
Economic conditions in the U.S. and the European Union have been depressed and may remain challenging for the foreseeable future. Our
products and services are discretionary and dependent upon levels of consumer spending. Consumer spending patterns are difficult to predict and
are sensitive to, among other factors, the general economic climate, the consumers' level of disposable income, consumer debt, and overall
consumer confidence. The continuing economic conditions have adversely impacted certain aspects of our businesses in a number of ways
including reduced demand, more aggressive pricing for similar products and services by our competitors, decreased spending by advertisers,
increased credit risks, increased credit card failures, a loss of customers, and increased use of discounted pricing plans for certain of our products
and services. It is likely that these and other factors will continue to adversely impact our businesses, at least in the near term. The continuing
economic conditions may adversely impact our key vendors. Such economic conditions and decreased consumer spending have, in certain cases,
resulted in, and may in the future result in, a variety of negative effects such as a reduction in revenues, increased costs, lower gross margin and
operating margin percentages, increased allowances for doubtful accounts and write-offs of accounts receivable, and recognition of impairments
of assets, including goodwill and other intangible and long-lived assets. Any of the above factors could have a material adverse effect on our
business, financial condition, results of operations, and cash flows.
Our business is subject to fluctuations.
Our results of operations and changes in our key business metrics from period to period have varied in the past and may fluctuate
significantly in the future due to a variety of factors, many of which are outside of our control and difficult to predict. Each of the risk factors
discussed in this Item 1A and the other factors described elsewhere in this Annual Report on Form 10-K and in our other filings with the SEC
may affect us from period to period and may affect our long-term performance. As a result, you should not rely on period-to-period comparisons
as an indication of our future performance. In addition, these factors and the challenging economic conditions create difficulties with respect to
our ability to forecast our financial performance and business metrics accurately. We believe that these difficulties in forecasting present even
greater challenges for financial analysts who publish their own estimates of our future financial results and business metrics. We cannot assure
you that we will achieve the expectations of, or projections made by, our management or the financial analysts. In the event we do not achieve
such expectations or projections, our financial results and the price of our common stock could be adversely affected.
New business initiatives, products, services, or features may not be successful, which could adversely impact our key metrics and financial
results.
We have expended, and will continue to expend, significant resources in developing and implementing new business initiatives, products,
services, and features, such as those related to our ongoing transition of Classmates, now Memory Lane, to become the premier U.S. website for
nostalgic content. Such development and implementation involves a number of uncertainties, including unanticipated delays and expenses and
technological problems. New business initiatives, products, services, or features also may not be accepted by consumers or commercially
successful. We cannot assure you that we will be successful in such development and implementation efforts, including the transition of the
Classmates business, or that any new business initiatives, products, services, or features will be accepted by consumers or commercially
successful. If our development and implementation
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