Classmates.com 2010 Annual Report Download - page 9

Table of Contents
We are not aware of another major website that has established, as a primary operating objective, providing consumers with access to a
wide range of online nostalgic content—an objective that has become the primary operating focus of our Memory Lane website. As a result, we
believe an opportunity exists for a website to establish a leadership position as a premier U.S. online resource for nostalgic content.
Content & Media Segment—Online Loyalty Marketing
The Internet has been a growing channel for advertising and for consumers to find and purchase goods and services. According to
eMarketer, total advertising spending on the Internet in the U.S. is expected to grow from $22.7 billion in 2009 to $40.5 billion in 2014 and the
number of online shoppers in the U.S. using the Internet to purchase goods or services is expected to grow from 153.3 million to 190.3 million
during the same period. As a result of both existing activity and expected growth, advertisers continue to seek effective ways to target and reach
online consumers.
Online loyalty marketing programs are generally designed to reward consumers with points that accumulate based on their activities and
which may be redeemed for products and services from participating vendors. Some online loyalty marketing programs use points as an
incentive for members to opt in to receiving certain email offers or to update their personal interest profiles, which provide useful information
that helps advertisers target consumer segments interested in purchasing the advertisers' products and services. While these programs have long
been popular with airlines, credit card vendors, hotels, and retailers, in recent years, online loyalty marketing programs have expanded into a
comprehensive direct marketing and targeted advertising strategy for companies in a wide range of industries.
Online loyalty marketing programs and similar services that rely primarily on email marketing enable advertisers to target consumers in
ways that are generally impractical with traditional offline direct marketing channels. Online loyalty marketing programs can also easily measure
click-through rates on display advertising and response rates to email campaigns, providing rapid feedback for advertisers that can be used to
identify potential customers and create new targeted offers. In addition, an online loyalty marketing program that has attracted a large,
responsive and loyal member base helps to improve returns on the advertisers' marketing investments. Furthermore, advertisers may prefer to
work with online loyalty marketing programs that offer performance-based pricing, which helps the advertisers achieve their specific
performance objectives within budget.
Communications Segment
The U.S. market for consumer Internet access services has evolved significantly, primarily due to increased availability and consumer
adoption of high-speed, or broadband, connections. As a result, the percentage of Americans who access the Internet via dial-up has declined
each year since 2002, according to Pew Internet & American Life Project. We anticipate that such percentage will continue to decline.
Broadband Internet access services are now available to most of the U.S. population at competitive prices, although market pricing varies
based on the geographic region and speed of the broadband service, among other factors. Broadband continues to have a much lower penetration
in rural areas when compared to urban and suburban areas and according to a July 2010 estimate from the Federal Communications
Commission, 14 million to 24 million Americans lacked access to broadband in 2010. Many broadband providers, including cable companies
such as Comcast and local exchange carriers such as AT&T, market broadband Internet access offerings that are "bundled" with telephone,
entertainment or other services, which generally results in lower prices than stand-alone services. At the same time, the maturity of the dial-up
Internet access market has led the largest dial-up service providers in the U.S., including AOL, EarthLink, NetZero, and Juno, to significantly
reduce marketing
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