Classmates.com 2010 Annual Report Download - page 24

Table of Contents
advertising networks, co-registration partners, retailers, distributers and direct marketers, to promote or distribute our products and services. In
addition, in connection with the launch of Memory Lane, we expect to spend a significant amount on its marketing, including through television
advertising. If our marketing activities are inefficient or unsuccessful, or if important third-party relationships become more expensive or
unavailable, our key metrics and financial results could be materially and adversely impacted.
Significant problems with our key systems or those of our third
-party vendors could have a material adverse effect on our business, financial
condition, results of operations, and cash flows.
The systems underlying the operations of each of our business segments are complex and diverse, and must efficiently integrate with third-
party systems, such as credit card processors. Key systems include, without limitation, order transmission, fulfillment and processing including
the system for transmitting orders through the floral network; billing; website and database management; customer support; telecommunications
network management; advertisement serving and management systems; and internal financial systems. Some of these systems, such as customer
support, are outsourced to third parties, and other systems, such as FTD's order transmission and fulfillment system and the platform for our
international online nostalgia websites, are not redundant. We have experienced systems problems in the past, and we or these third parties may
experience problems in the future. In addition, if these third parties face financial or other difficulties, our business could be adversely impacted.
Any significant errors, failures, interruptions, delays, or other problems with our systems or our third-
party vendors or their systems could have a
material adverse effect on our business, financial condition, results of operations, and cash flows.
In addition, our Content & Media and Communications businesses outsource a majority of their live technical and billing support functions.
These businesses rely on one customer support vendor, and we maintain only a small number of internal customer support personnel for these
businesses. Our internal customer support personnel are not equipped to provide the necessary range of customer support functions in the event
that this vendor unexpectedly becomes unable or unwilling to provide these services to us.
Legal actions or investigations could subject us to substantial liability, require us to change our business practices, and adversely affect our
business, financial condition, results of operations, and cash flows.
We are currently, and have been in the past, party to various legal actions and investigations. These actions may include, without limitation,
claims by private parties in connection with consumer protection and other laws, claims that we infringe third-party patents, securities laws
claims, claims involving unfair competition, claims in connection with employment practices, breach of contract claims, and other business-
related claims. The nature of our business could subject us to additional claims for similar matters, as well as a wide variety of other claims
including, without limitation, claims for defamation, right of publicity, negligence, trademark and copyright infringement, misappropriation of
intellectual property or proprietary rights, and privacy and security matters. The failure to successfully defend against these and other types of
claims, including claims relating to our business practices or alleging infringement of intellectual property or proprietary rights, could result in
our incurring significant liabilities related to judgments or settlements or require us to change our business practices. Infringement claims may
also result in our being required to obtain licenses from third parties, which licenses may not be available on acceptable terms, if at all. Both the
cost of defending claims, as well as the effect of settlements and judgments, could cause our results of operations to fluctuate significantly from
period to period and could materially and adversely affect our business, financial condition, results of operations, and cash flows.
Various governmental agencies have in the past, and may in the future, assert claims, institute legal actions, inquiries or investigations, or
impose obligations relating to our business practices, such as our
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