FTD.com 2011 Annual Report Download - page 39

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Revenues and profitability of our Communications segment are expected to decrease.
Most of our Communications revenues and profits come from our dial-up Internet access services. Our dial-up Internet access pay accounts
and revenues have been declining and are expected to continue to decline due to the continued maturation of the market for dial-up Internet
access. Consumers continue to migrate to broadband access, primarily due to the faster connection and download speeds provided by broadband
access. Advanced applications such as online gaming, music downloads and videos require greater bandwidth for optimal performance, which
adds to the demand for broadband access. The pricing for basic broadband services has been declining as well, making it a more viable option
for consumers. In addition, the popularity of accessing the Internet through tablets and mobile devices has been growing and may accelerate the
migration of consumers away from dial-up Internet access. The number of dial-up Internet access pay accounts has been adversely impacted by
both a decrease in the number of new pay accounts signing up for our services as well as the impact of subscribers canceling their accounts,
which we refer to as "churn." Churn has increased from time to time and may increase in the future.
We expect our dial-up Internet access pay accounts to continue to decline. As a result of expected continuing decreases in our dial-up
Internet access pay accounts and, potentially, the average monthly revenue per pay account, we expect that our Communications services
revenues, advertising revenues and the profitability of this segment will continue to decline over time. The rate of decline in Communications
services revenues has accelerated in some periods and may continue to accelerate. Although we have been reducing our expenses in order to
manage the profitability of our Communications segment, we will not be able to continue making the same level of expense reductions in the
future. In addition, we anticipate increasing our marketing expenses in 2012 in connection with the launch of the planned NetZero 4G mobile
broadband service, which is subject to a number of risks.
Continued declines in Communications revenues, particularly if such declines accelerate, will materially and adversely impact the
profitability of this segment. In addition, even if the financial results of our FTD segment were to increase, and there are no assurances that they
will, we do not believe that any such increases will be sufficient to fully offset the anticipated declines in our other segments, including the
Communications segment, and as a result, we expect that our consolidated financial results, including cash flows, will be adversely affected by
such anticipated declines.
Our planned NetZero 4G mobile broadband service may not launch as contemplated or may not be commercially successful.
We recently announced our plans to offer a mobile broadband service under the NetZero brand in the first quarter of 2012. However, the
planned launch of the new service is subject to a number of uncertainties, including unanticipated delays and expenses and technological or other
problems on our part as well as the third-
party suppliers whose products and services are integral to the service. The new service also may not be
accepted by consumers or commercially successful. Some of our prospective competitors have longer operating histories, greater name and
brand recognition, larger user bases, wider coverage areas, and significantly greater financial, technical, sales, and marketing resources than we
do. We cannot assure you that we will be successful in the development and implementation of the planned NetZero 4G mobile broadband
service, or that the service will be commercially successful. Delays, additional expenses, the failure to develop and implement the service as
planned, or the service's failure to be commercially successful, could materially and adversely impact our business, financial condition, results of
operations, and cash flows.
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