Classmates.com 2010 Annual Report Download - page 74

Table of Contents
Content & Media Segment Results
The following table presents the Content & Media segment's operating expenses and income from operations as a percentage of Content &
Media revenues for the years ended December 31, 2009 and 2008.
Content & Media Revenues. Content & Media revenues increased by $5.8 million, or 3%, to $236.0 million for the year ended
December 31, 2009, compared to $230.2 million for the year ended December 31, 2008. The increase in Content & Media revenues was
primarily due to a $12.5 million increase in services revenues as a result of a 22% increase in our average number of pay accounts from
3.8 million for the year ended December 31, 2008 to 4.6 million for the year ended December 31, 2009, partially offset by an 11% decrease in
ARPU from $3.09 for the year ended December 31, 2008 to $2.75 for the year ended December 31, 2009. The decrease in ARPU was primarily
attributable to the increased use of discounted pricing plans offered to certain U.S. pay accounts on a promotional basis and, to a lesser extent, a
greater percentage of total pay accounts being represented by international pay accounts which have, on average, lower-
priced subscription plans
compared to U.S. pay accounts. Although we experienced a net increase in Content & Media pay accounts in the year ended December 31, 2009,
this increase was largely due to an increase in our offerings of discounted pricing plans, with a significant number of the new pay accounts
generated during the period under this promotional pricing, resulting in a decrease in the churn rate. The increase in Content & Media services
revenues was partially offset by a $6.7 million decrease in advertising revenues due to a decrease in revenues generated by our online loyalty
marketing service, partially offset by an increase in advertising revenues generated by our online nostalgia services, primarily from post-
transaction sales. Due to economic and other factors, we engaged in significant discounting of our pricing plans during the latter half of 2009
which adversely impacted ARPU and resulted in declining services revenues at the end of 2009.
Content & Media Cost of Revenues. Content & Media cost of revenues decreased by $6.1 million, or 15%, to $35.0 million for the year
ended December 31, 2009, compared to $41.1 million for the year ended December 31, 2008. Content & Media cost of revenues as a percentage
of Content & Media revenues decreased to 14.8% for the year ended December 31, 2009, compared to 17.9% for the prior-year period. The
decrease of $6.1 million was largely related to a $3.8 million decrease in the cost of points earned by members of our online loyalty marketing
service as a result of a decrease in revenues generated by our online loyalty marketing service. The decrease was also due to a $1.4 million
decrease in personnel-related expenses associated with our online nostalgia services and a $0.7 million decrease in overhead-related costs. The
decrease in cost of revenues as a percentage of Content & Media revenues was mainly due to a greater percentage of revenues having been
generated from higher-margin online nostalgia services.
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Year Ended December 31,
2009
2008
Revenues
100.0
%
100.0
%
Operating expenses:
Cost of revenues
14.8
17.9
Sales and marketing
31.7
35.5
Technology and development
10.8
9.5
General and administrative
16.8
16.5
Restructuring charges
0.9
—
Total operating expenses
75.1
79.5
Segment income from operations
24.9
%
20.5
%