NetZero 2011 Annual Report Download - page 7

Table of Contents
• Services revenues. Services revenues in our FTD segment are derived from membership fees, order-related fees and services,
and subscription and other fees generated from independent members of the FTD and Interflora networks, which we also refer to
as our floral network members. Our floral network members include independent traditional retail florists and other retailers.
Services revenues in our Content & Media and Communications segments are derived from selling subscriptions to consumers
who are typically billed in advance for the entire subscription term.
• Advertising revenues. Advertising revenues are derived from a wide variety of advertising, marketing and media-related
initiatives in each of our operating segments.
Industry Background
FTD Segment—Floral, Gift and Related Products and Services
Consumers
Floral industry retail purchases in the United States ("U.S."), including flowers, potted plants and seeds were approximately $32.2 billion in
2011, according to the U.S. Department of Commerce. Floral industry retail purchases in the United Kingdom ("U.K."), including fresh cut
flowers and indoor plants, were approximately 2.2 billion in 2008, according to Mintel, a market research company. Both the U.S. and U.K.
markets are highly fragmented, with thousands of floral industry participants. The floral retail marketplace has evolved considerably in recent
years. The following sets forth some of the key market trends:
•
The increasing role of floral mass marketers, particularly those marketing floral products over the Internet and servicing a national
or international consumer base, has resulted in a growing percentage of floral orders being placed through floral mass marketers
versus traditional retail florists;
• Consumer purchases of "cash and carry" flowers for every-day occasions have continued to shift away from traditional retail
florists and increasingly occur at supermarket and mass merchant retail locations;
•
Traditional retail florists have become increasingly dependent on floral network services to provide incoming order volume to
offset business lost to the Internet, supermarket and mass merchant channels; and
•
Traditional retail florists and floral mass marketers have expanded their product offerings to include a larger selection of gift
items.
Floral mass marketers, such as FTD and Interflora British Unit ("Interflora"), generate floral orders from consumers via the Internet and
telephone. Floral mass marketers typically partner with third parties, including retail florists and direct ship merchants, to fulfill and deliver the
marketers' floral product orders. The floral mass marketers' share of retail floral purchases has expanded due to shifting consumer preferences
towards purchasing floral products online and the emergence of prominent brands with national or international exposure. Growing consumer
interest in floral arrangements shipped directly to the consumer via common carrier has also benefited floral mass marketers in recent years.
Traditional Retail Florists and Other Retailers
There were approximately 18,500 retail florists in the U.S. in 2008, according to the U.S. Census Bureau. The total number of retail florists
has declined over the past decade, primarily due to floral products becoming increasingly available for purchase on the Internet and in other
retail channels as well as recent economic challenges, among other factors. Supermarkets, mass merchants and other
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