Classmates.com 2010 Annual Report Download - page 76

Table of Contents
Communications Segment Results
The following table presents the Communications segment's operating expenses and income from operations as a percentage of
Communications revenues for the years ended December 31, 2009 and 2008.
Communications Revenues. Communications revenues decreased by $46.2 million, or 18%, to $211.2 million for the year ended
December 31, 2009, compared to $257.4 million for the year ended December 31, 2008. The decrease in Communications revenues was
primarily due to a $43.2 million decrease in services revenues as a result of a 24% decrease in our average number of dial-up Internet access pay
accounts from 1.6 million for the year ended December 31, 2008 to 1.2 million for the year ended December 31, 2009, partially offset by an
increase in ARPU. The decrease in Communications revenues was also due to a $3.0 million decrease in advertising revenues resulting from a
decrease in pay accounts.
Communications Cost of Revenues. Communications cost of revenues decreased by $9.2 million, or 16%, to $48.7 million for the year
ended December 31, 2009, compared to $57.9 million for the year ended December 31, 2008. Communications cost of revenues as a percentage
of Communications revenues increased to 23.0% for the year ended December 31, 2009, compared to 22.5% for the prior-year period. The
decrease of $9.2 million was largely due to a $6.0 million decrease in telecommunications costs associated with our dial-up Internet access
services primarily due to a decrease in the number of pay accounts, a decrease in hourly usage per pay account and lower average hourly
telecommunications costs. In addition, Communications cost of revenues decreased as a result of a $2.8 million decrease in customer support-
and billing-related costs due to a decrease in the number of dial-up Internet access pay accounts, a $0.7 million decrease in costs associated with
our web hosting business primarily as a result of the closure of our Orem, Utah facility in 2008, a $0.6 million decrease in personnel-related
costs as a result of reduced headcount and a $0.4 million decrease in costs associated with our VoIP service as a result of our previous decision
to exit this business. These decreases were partially offset by a $1.4 million increase in costs associated with our broadband services due to the
increase in the number of subscribers to our services.
Communications Sales and Marketing Expenses. Communications sales and marketing expenses decreased by $19.6 million, or 33%, to
$39.8 million for the year ended December 31, 2009, compared to $59.4 million for the year ended December 31, 2008. Communications sales
and marketing expenses as a percentage of Communications revenues decreased to 18.8% for the year ended December 31, 2009, compared to
23.1% for the prior-year period. The decrease in expenses reflected the continued decline in dial-up Internet access pay accounts and revenues.
The decrease of $19.6 million was
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Year Ended
December 31,
2009
2008
Revenues
100.0
%
100.0
%
Operating expenses:
Cost of revenues
23.0
22.5
Sales and marketing
18.8
23.1
Technology and development
8.7
9.3
General and administrative
15.6
13.6
Restructuring charges
0.6
0.6
Impairment of goodwill, intangible assets and
long lived assets
—
0.1
Total operating expenses
66.9
69.2
Segment income from operations
33.1
%
30.8
%