United Online Revamps ClassMates.com

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United Online Inc. reported lower, but better-than-expected net income for the fourth quarter and unveiled a long-awaited remodel of its struggling ClassMates.com social networking site.

After the Wednesday markets closed, the Woodland Hills Internet service provider, which also owns the FTD.com floral site, reported net income of $15.5 million (18 cents per share) compared with 16.5 million (19 cents) a year earlier.

Revenue fell 6.7 percent to less than $232 million, with Classmates.com revenue down 12 percent and Internet provider revenue down 18 percent. FTD, its biggest moneymaker, saw revenue drop only 1 percent to $140 million.

Net income adjusted for one-time items was 30 cents per share. Analysts surveyed by Thomson Reuters on average expected adjusted per-share profit of 26 cents on revenue of less than $227 million.

Growth at ClassMates, which enables people to connect with school classmates, has faltered in recent quarters as both the recession and competition from free social networking sites made potential customers less inclined to pay for premium services.

In response, the company re-launched its Seattle-based ClassMates Online Inc. subsidiary as Memory Lane Inc. This month, United Online hired as its president, Harold Zeitz, an executive at a gaming-machine equipment maker.

MemoryLane.com will offer ClassMates subscribers expanded nostalgia content, such as vintage magazines, classic sports highlights and cover art from memorable albums, in addition to digitized high school yearbooks. Premium members will have greater access to content than free subscription members.

ClassMates members paid $42 for one-year premium membership, with three-month and two-year options. MemoryLane.com adds a $6.95 month-to-month membership as well as one-time pass and pay-per-view options.

United Online Chief Executive Mark Goldston said the company invested roughly $8 million to acquire content created between 1940 and 1999.

Classmates had roughly 57 million people registered with the site, but only a few million were premium members. Goldston said the company is banking that the additional content will attract more to paid members.

Free members will still have access to a lot of content until they hit a pay wall, he said, noting that the site also will receive revenue from advertising and sales of classic film DVDs and other items.

“People joined ClassMates because they wanted to connect to their past through the people they went to school with, and we we believe there is a big market for nostalgia,” he said. “We wanted to make this the Internet version of a time machine.”

Shares, which earlier closed down 1 percent to $6.76 on the Nasdaq, were down 4 percent in after-market trading.

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