Juno 2012 Annual Report Download - page 41

Table of Contents
and growing member base has been adversely affected by such competition. In particular, Facebook's membership base currently far exceeds that of any
of its competitors, and Google+ has been growing its membership base at a rapid pace. We rely on some of our competitors to promote our services and
for new member acquisitions, such as Facebook in connection with our Facebook high school fan pages and our schoolFeed Facebook app. Any
changes to Facebook's rules or policies or any other changes implemented by Facebook could adversely affect our business or our strategies. If our
competitors provide services similar to our online nostalgia services for free, we may not be able to charge for our online nostalgia services.
Competition has adversely affected our subscription revenues from online nostalgia services, as well as our advertising revenues from our online
nostalgia services and online loyalty marketing service. More intense competition could also require us to increase our marketing or other expenditures.
As a result of competition, our key business metrics, revenues, cash flows, and profitability have been adversely affected.
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Pay accounts are critical to our business model. Only a small percentage of users visiting our websites or initially registering for our online
nostalgia services sign up for a paid subscription at the time of registration. As a result, our ability to generate subscription revenues is highly dependent
on our ability to attract visitors to our websites, register them as free members, encourage them to return to our websites, and convince them to become
pay accounts in order to access the pay features of our websites. We believe the integration of the schoolFeed app will increase the number of visitors to
our Classmates.com website. However, our experience with the schoolFeed app and its users is limited, and there are no assurances that we will be able
to convince these users to become pay accounts.
A number of our pay account subscriptions each month are not renewed or are canceled, which, for the Content & Media segment, we refer to as
"churn." The level of churn we experience fluctuates from quarter to quarter due to a variety of factors, including our mix of subscription terms, which
affects the timing of subscription expirations, as well as the degree of credit card failures. To maintain or reduce the level of churn, we must continually
add new pay accounts both to replace pay accounts who churn and to grow our business beyond our current pay account base. We expect that our churn
rate will continue to fluctuate from period to period. A significant majority of our pay accounts are on plans that automatically renew at the end of their
subscription period and we have received complaints with respect to our renewal policies and practices. As discussed in the risk factors related to
changes in laws and regulations and to legal actions and investigations, the laws being considered or recently enacted by certain states regarding
automatic-renewal practices will, and enforcement action or changes in enforcement policies and procedures could, impact certain of our business
practices. We also experience an increase in the percentage of credit card failures from time to time. Any change in our renewal policies or practices, or
in the degree of credit card failures, could have a material impact on our churn rate. If we experience a higher than expected level of churn, it will make it
more difficult for us to increase or maintain the number of pay accounts, which could reduce our revenues and adversely affect our financial results.
Pay accounts and free active accounts have been decreasing, and we believe such trend will continue. If we are not able to attract visitors to our
websites and convert a significant portion to pay accounts, the number of pay accounts for our online nostalgia services and related advertising revenues
will continue to decline and the financial results of the Content & Media segment will be adversely affected.
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