Classmates.com 2010 Annual Report Download - page 35

Table of Contents
ability to compete with traditional retailers and reduce our sales, which could have a material adverse effect on our business, financial condition,
results of operations, and cash flow.
We utilize outsourced staff and temporary employees, who may not be as well trained or committed to our customers as our permanent
employees, and their failure to provide our customers with high-
quality customer service may cause our customers not to return, which could
have a material adverse effect on our business, financial condition, results of operations, and cash flows.
We utilize and rely on a significant number of outsourced staff and temporary employees in addition to our permanent employees, to take
orders and respond to customer inquiries. These outsourced staff and temporary employees may not have the same level of commitment to our
customers or be as well trained as our permanent employees. In addition, we may not hire enough outsourced staff or temporary employees to
adequately handle the increased volume of telephone calls we receive during peak periods. If our customers are dissatisfied with the quality of
the customer service they receive, they may not place orders with us again, which could have a material adverse effect on our business, financial
condition, results of operations, and cash flows.
ADDITIONAL RISKS RELATING TO OUR CONTENT & MEDIA SEGMENT
The transition of our historical Classmates business to the new Memory Lane business may not be successful.
In 2010, we made the strategic decision to expand upon the historical value proposition of our Classmates service and transition the website
to be the premier U.S. website to access, acquire, interact with, and share nostalgic content under the new Memory Lane brand. There are many
risks associated with such transition. We plan to market the new website and brand through a significant marketing campaign, and our efforts
may not be successful. In addition, we plan to charge for certain premium content and other products, and there are no assurances that consumers
will find such content and products to be compelling and be willing to pay for them, which could result in our having to reduce our standard
pricing or change our pricing structure or business model. We also have altered, and will continue to evaluate and evolve, the ways in which we
bring Internet traffic to the website and in which visitors navigate the website. Such changes may not be successful and could adversely affect
Internet traffic to the website, the visitor's experience, as well as our key metrics, including the number of free accounts, pay accounts, active
accounts, and visitors to the website generally. We intend to add new forms of content and social interaction features to the website, but we may
experience delays or technical issues in connection with the implementation of such new content and features. Technology is also constantly
evolving and the website may not be compatible with the latest mobile and other devices used by consumers. There are no assurances that the
Memory Lane initiative will be successful. If this initiative is not successful, our business, key metrics and financial results will be adversely
affected.
We face intense competition that could result in the failure of our online nostalgia services to be commercially successful.
As consumers continue to spend more time and money online, the competition for their time and engagement has continued to intensify.
Consumers have a great number of options for online content and entertainment, including, by way of example, websites offering news and
current events, movies, television shows, videos, information about any and virtually every topic, and the opportunity to communicate, socialize
and interact with acquaintances and others. The historical value proposition of our Classmates service competes with major social networking
websites such as Facebook as well as Internet search engines such as Google. Our expanded online nostalgia service continues to compete with
these types of websites, as well as other websites that offer online content and entertainment, such as, by way of example, YouTube with respect
to videos, Hulu with respect to television shows, websites
33