Classmates.com 2010 Annual Report Download - page 37

Table of Contents
Failure to increase or maintain the number of visitors to our websites and members for our online nostalgia and online loyalty marketing
services or the activity level of these visitors and members could cause our business and financial results to suffer.
The success of our online nostalgia and online loyalty marketing services depends upon our ability to increase or maintain the number of
visitors to our websites, our base of free members and the level of activity of those visitors and members. A decline in the number of visitors,
registered or active free online nostalgia members, or a decline in the activity of those members, could result in decreased pay accounts,
decreased content on our websites and decreased advertising revenues. A decline in the number of registered or active online loyalty marketing
service members could result in decreased advertising revenues. We have been experiencing a decline in the number of active members, and
there are no assurances that this trend will not continue. The failure to increase or maintain the number of visitors to our websites, our base of
free members, or the failure to convince our free members to actively participate in our websites or services, could have a material adverse effect
on our business and our financial results.
Failure to maintain our standard pricing could have adverse effects on our financial results.
Due to economic conditions and for competitive and other reasons, from time to time, we have offered a greater percentage of discounted
pricing plans on a promotional basis than we typically have offered. In general, these discounted pricing plans offer a subscription term at a
significant discount compared to the standard pricing for such subscription term. Any such increases in the percentage of pay accounts under a
discounted pricing plan and any increases in the level of the discounts will likely result in a decrease in subscription revenues and ARPU, at least
in the near term. Although these discounted pricing plans, by their terms, renew at the then-current standard pricing for such subscription term
upon the expiration of the initial term, there are no assurances as to the number of pay accounts that will renew at the standard pricing. We
intend to continue offering discounted pricing plans in the future, and there are no assurances that the volume or level of the discounts offered
during a period will not be higher than anticipated. Our continued use of discounted pricing plans may result in our becoming dependent on
offering such plans in order to obtain new pay accounts and retain existing pay accounts and may result in our having to reduce our standard
pricing, which would adversely impact our financial results.
ADDITIONAL RISKS RELATING TO OUR COMMUNICATIONS SEGMENT
Our business will suffer if we are unable to compete successfully.
We compete with numerous other dial-up Internet access providers as well as providers of broadband services. Our principal dial-up
Internet access competitors include established online service and content providers, such as AOL and MSN, and independent national Internet
service providers, such as EarthLink and its PeoplePC subsidiary. Dial-up Internet access services do not compete favorably with broadband
services with respect to connection speed and do not have a significant, if any, price advantage over certain broadband services. Many broadband
providers, including cable companies and local exchange carriers, bundle their offerings with telephone, entertainment or other services, which
may result in lower prices than standalone services. Certain portions of the U.S., primarily rural areas, currently have limited or no access to
broadband services. However, the U.S. government has indicated its intention to provide broadband services to such rural areas. Such expansion
of the availability of broadband services will increase the competition for Internet access subscribers in such areas and will likely adversely
affect our business. In addition to competition from broadband providers, competition among dial-up Internet access service providers is intense
and neither our pricing nor our features provides us with a significant competitive advantage, if any, over certain of our dial-up Internet access
competitors. We expect that competition, particularly with respect to price, both for broadband as well as dial-up Internet access services, will
continue. We also expect that our
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