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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission file number 000-33367

UNITED ONLINE, INC.
(Exact name of Registrant as specified in its charter)

(818) 287-3000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:

         Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

         Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

         Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

         Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2) of the Act). Yes o    No ý

         At June 30, 2009, the aggregate market value of voting stock held by non-affiliates of the Registrant, based on the last reported sales price of the Registrant's common stock on such date reported by The Nasdaq Global Select Market, was $531,095,194 (calculated by excluding shares directly or indirectly held by directors and officers).

         At February 12, 2010, there were 84,965,617 shares of the Registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

         The information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated herein by reference to the Registrant's definitive proxy statement relating to the 2010 annual meeting of stockholders to be filed with the Securities and Exchange Commission not later than 120 days after the end of the Registrant's fiscal year.

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UNITED ONLINE, INC.

INDEX TO FORM 10-K

For the Year Ended December 31, 2009

        In this document, "United Online," "UOL," the "Company," "we," "us" and "our" refer to United Online, Inc. and its subsidiaries.

        This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, results of operations, and liquidity. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "projections," "business outlook," "estimate," or similar expressions constitute forward-looking statements. These forward-looking statements include, but are not limited to, statements about future financial performance; advertising revenues; segment metrics; operating expenses; market trends, including those in the markets in which we compete; operating and marketing efficiencies; revenues; liquidity; cash flows and uses of cash; dividends; capital expenditures; depreciation and amortization; tax payments; foreign currency exchange rates; hedging arrangements; our ability to repay indebtedness, pay dividends and invest in initiatives; our products and

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PART I

ITEM 1.    BUSINESS

Overview

        United Online is a leading provider of consumer products and services over the Internet. Our offerings feature highly recognized brands including FTD, Interflora, Classmates, NetZero and MyPoints.

        We are a Delaware corporation, headquartered in Woodland Hills, California, that commenced operations in 2001 following the merger of dial-up Internet access providers NetZero, Inc. ("NetZero") and Juno Online Services, Inc. ("Juno"). In 2004, our Internet access revenues began to decline and we began diversifying our business to include other consumer Internet offerings in an effort to provide new growth opportunities for the Company. In November 2004, we acquired Classmates Online, Inc. (together with its subsidiaries, "Classmates Online"), a provider of online social networking services, and in April 2006, we acquired MyPoints.com, Inc. ("MyPoints"), a provider of online loyalty marketing services. In August 2008, we acquired FTD Group, Inc. (together with its subsidiaries, "FTD"), a provider of floral and related products and services to consumers and retail florists, as well as to other retail locations offering floral and related products and services under the FTD and Interflora brands.

        We report our businesses in three reportable operating segments:

        Our acquisition of FTD in August 2008, combined with revenues within our Classmates Media segment, has significantly reduced our exposure to the mature Communications segment that is experiencing declining revenues. In 2009, the Communications segment represented the smallest revenue contributor among our operating segments. In 2009, the FTD segment, the Classmates Media segment, and the Communications segment accounted for 55%, 24% and 21% of consolidated revenues, respectively. In 2008, the FTD segment, the Classmates Media segment, and the Communications segment accounted for 27%, 34% and 38% of consolidated revenues, respectively.

        We generate revenues from three primary sources:

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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 Classmates Media and Communications segments are derived from selling subscriptions to consumers who are typically billed in advance for the entire subscription term. This enhances our cash flows and the predictability of future revenues.



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Products revenues.  Products revenues in our FTD segment are derived primarily from selling floral and related products to consumers via our Internet Web sites and toll-free telephone numbers and, to a lesser extent, to our floral network members. We generally do not maintain physical inventory or bear the cost of warehousing our consumer product offerings, and we generally receive payment from consumers before paying florists or other third parties to fulfill

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product orders. Our Classmates Media and Communications segments do not generate products revenues.

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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 and Related Products and Services

Consumers

        Floral industry retail purchases, including flowers, potted plants and seeds, in the U.S. were approximately $21 billion in 2008, according to the U.S. Department of Commerce. Floral industry retail purchases in the United Kingdom, 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 retail marketplace has evolved considerably in recent years. The following sets forth some of the key market trends:

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The increasing role of nationwide floral marketers, particularly those marketing floral products over the Internet, has resulted in a growing percentage of floral orders being placed through nationwide floral marketers versus traditional retail florists;



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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;



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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



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Traditional retail florists and nationwide floral marketers have expanded their product offerings to include a larger selection of specialty gift items.

        Nationwide floral marketers, such as FTD and Interflora, attract floral orders from consumers via the Internet and telephone. Nationwide floral marketers typically partner with third parties to fulfill and deliver the marketers' floral product orders, including retail florists and direct ship merchants. The nationwide floral 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 exposure. Growing consumer interest in floral arrangements shipped directly to the consumer via common carrier has also benefited the nationwide floral marketers in recent years.

Traditional Retail Florists and Other Retailers

        There were approximately 19,600 retail florists in the U.S. in 2007, according to the U.S. Census Bureau. The total number of retail florists has declined in recent years, primarily because floral products have become increasingly available for purchase on the Internet and in other retail channels. Supermarkets, mass merchants and other retailers are becoming increasingly important distribution channels in the floral products retail market. During the past several years, these retail locations have increased their presence in the floral products retail market by adding a variety of floral and related products to their merchandise assortments. The emergence of supermarkets and mass merchants within the floral products retail market has led many traditional retail florists to expand their merchandise offerings to include giftware, indoor plants, outdoor nursery stock, and seasonal decorations, among other items.

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        Floral wire services, which we also refer to as floral network services, utilize proprietary network communications systems to facilitate the transmission and fulfillment of orders among their floral network members. Services provided by floral wire services typically include order transmission, clearing-house, marketing and other services in support of the floral network. Order clearing-house services play an important role by ensuring the flow of payment between a floral network member sending an order received from a consumer and the member receiving and fulfilling the order, thereby eliminating counterparty credit risk. The growth of nationwide floral marketers and the Internet channel has led traditional retail florists to increasingly rely on floral networks to augment their order volumes. Access to incremental consumer orders represents one of the principal benefits a member receives from membership in a floral network.

        Providers of floral network services typically offer a broad range of services that are designed to promote revenue growth and facilitate the efficient operation of a retail florist's business, including the ability to send, receive and deliver floral orders. Additional products and services offered by providers of floral network services include: point-of-sale technology systems and services, credit card processing services, e-commerce Web site services, and telephone answering, order-taking, transmission and clearing-house services. Certain providers of floral network services have recently broadened their focus and developed new product and service offerings, to appeal to supermarkets and mass merchants which have increased their presence within the retail floral market in recent years.

        Providers of floral network services that have a separate nationwide floral marketing business (such as FTD's consumer operations under the FTD and Interflora brands) which generates a significant flow of consumer floral orders can potentially increase the value of their services by providing a strong flow of consumer orders for fulfillment by network members.

Classmates Media Segment—Online Social Networking

        Online social networking is rapidly growing and evolving to include a broad spectrum of Web sites and online services that have attracted significant usage by nearly all demographics of Internet users. During December 2009, social networking Web sites attracted 830.9 million unique visitors worldwide, according to comScore MediaMetrix, an Internet industry research company. Widespread adoption of broadband Internet access, digital photography and online video has facilitated the sharing of content over the Internet, serving as a catalyst for industry growth.

        We believe people have a fundamental drive to connect with others, be part of a community, express themselves, and maintain personal relationships. Core, life-long relationships are often based on enduring affiliations related to shared experiences such as family, school, workplace, or military service. Affiliations based on schools attended encompass a particularly large population of individuals. According to the U.S. Census Bureau, as of 2008, there were approximately 193 million high school graduates living in the U.S. and approximately 123 million people living in the U.S. who had attended college. We believe that the occurrence of class reunions among this large population frequently strengthens an individual's curiosity and nostalgic feelings about school memories, friends and acquaintances.

        Over time, people frequently lose touch with each other for a variety of reasons, including geographic moves and job changes. According to the U.S. Census Bureau, in 2008 approximately 35 million people relocated and nearly one-third of America's workforce changed jobs that year. In addition, it is estimated by the U.S. Department of Labor that the average American worker will hold more than 10 jobs by age 40. There is a growing trend towards using new mediums of communication that facilitate social interaction in enabling individuals to find and reconnect with friends and former colleagues.

        Social networking Web sites fulfill a number of different needs, including allowing users to find, connect or reconnect with individuals and important memories from their past. These Web sites and

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services are used by individuals to, among other things, post content about themselves and to review or comment on the content posted by others. Many social networking services also provide users with tools that enable individuals to identify, build and maintain personal networks from their relevant affiliations. Numerous sources have reported that social networking users frequently choose to participate in, and develop affiliations through, several online social networking services—often to fulfill different purposes such as professional networking or various types of social interaction.

        Many advertisers view social networking Web sites as an attractive marketing medium for their products and services. Most social networking Web sites are free to the user and primarily generate revenues from a wide variety of sources that include online advertising and transactions related to Web site content such as online games, applications or virtual goods. Some social networking Web sites, including LinkedIn as well as our Classmates Web site and our international social networking Web sites, also generate revenues from paid subscriptions from members interested in premium services.

Classmates Media Segment—Online Loyalty Marketing

        The Internet has been a growing channel for advertising and for consumers to find and purchase goods and services. 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 update their personal interest profiles, which provide useful information that helps advertisers to 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. Nonetheless, we believe consumer adoption of online loyalty marketing programs has remained largely associated with a single type of activity, such as airline, hotel or credit card selection.

        Online loyalty marketing programs 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 maximize 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. consumer Internet access service market has evolved from one where the Internet was accessed primarily through dial-up access to one in which consumers can access the Internet through dial-up or a variety of high-speed, or broadband, connection methods.

        Broadband Internet access services, once characterized by high prices and a limited coverage area, 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. However, broadband continues to have a lower penetration in rural areas when compared to urban and suburban areas, and numerous sources suggest that broadband access may not be as available or affordable in rural areas. Many broadband providers, including cable companies such as Comcast and local exchange carriers such as AT&T, bundle their offerings with phone, entertainment or other services, which may

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result in lower prices than stand-alone services. As a result of these factors, it is anticipated that the number of dial-up pay accounts will continue to decrease.

        There are numerous dial-up Internet access providers in the U.S. although a small number of national providers account for a significant majority of the U.S. dial-up market. AOL, EarthLink and our Internet access subsidiaries, NetZero and Juno, on a combined basis reported approximately 7.2 million dial-up pay accounts at December 31, 2009. Some dial-up pay accounts also have a separate broadband connection, but choose to maintain their dial-up pay account as a secondary, or back up, means of connecting to the Internet for use when traveling or if their broadband connection should fail for any reason. The maturity of the dial-up Internet access market has led the largest service providers in the U.S., including AOL, EarthLink, NetZero, and Juno, to reduce marketing and investment spending and operate their dial-up Internet access businesses primarily for profitability and cash flow contributions. As the industry has matured, the average tenure of dial-up Internet access pay accounts has increased significantly which has generally resulted in a reduction in subscriber churn since longer tenured pay accounts, on average, exhibit greater retention characteristics than new pay accounts.

Segment Services

FTD

        FTD is a leading provider of floral and related products and services to consumers and retail florists, as well as to other retail locations offering floral and related products and services, in the U.S., Canada, the U.K., and the Republic of Ireland. The business uses the highly recognized FTD and Interflora brands, both supported by the Mercury Man logo. FTD is a nationwide floral marketer, which we refer to as FTD's consumer business, and a provider of floral network services, which we refer to as FTD's floral network business. These businesses are complementary, as the majority of floral orders generated by the consumer business are fulfilled and hand-delivered by the members of the FTD network. FTD does not own or operate any retail locations. For additional information regarding our FTD segment, see Note 2—"Segment Information" of the Notes to the Consolidated Financial Statements, which appears in Part II, Item 8 of this Annual Report on Form 10-K.

        Consumer Business.    FTD is a leading marketer of flowers and specialty gift items to consumers. FTD operates in the U.S. and Canada, primarily through the www.ftd.com Web site and 1-800-SEND-FTD toll-free telephone number, and in the U.K. and the Republic of Ireland through the www.interflora.co.uk and www.interflora.ie Web sites and various toll-free telephone numbers. FTD also operates mobile Web sites that are optimized for mobile phones with Internet connections. While floral arrangements and plants are FTD's primary offerings, FTD also markets and sells other specialty gift items including: gourmet food, special occasion gifts, bath and beauty products, jewelry, wine and gift baskets, chocolates, and stuffed animals.

        Consumers place orders at FTD's Web sites or, to a much lesser extent, over the telephone. Internet orders represented 85.9% of consumer order volume during the year ended December 31, 2009. Orders are transmitted to floral network members or third-party suppliers for processing and delivery. The majority of consumer orders are hand-delivered by FTD's floral network members, offering same-day delivery (subject to certain limitations) of bouquets. A smaller percentage of consumer orders are fulfilled and shipped by third parties direct to the consumer in an elegant gift box, principally offering next-day delivery. Consumer orders are backed by a seven day satisfaction guarantee.

        Consumers typically pay for floral and specialty gift orders before FTD pays its floral network members or third-party suppliers to fulfill and deliver them. In general, FTD does not maintain physical inventory or bear the cost of warehousing and distribution facilities because its floral network members and third-party suppliers maintain substantially all floral and specialty gift physical inventory and facilities, and therefore bear the cost of warehousing and distribution. FTD's distribution networks

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also allow its consumer businesses to process peak order flow substantially above that of its average daily order flow.

        Floral Network Business.    FTD provides a comprehensive suite of products and services that promote revenue growth and enhance the operating efficiencies of its floral network members, including services that enable such members to receive, send and deliver floral orders. Floral network members include traditional retail florists, as well as other retailers offering floral and related products and services, that are located primarily in the U.S., Canada, the U.K., and the Republic of Ireland. The large network of affiliated floral network members provides an order fulfillment vehicle for our consumer business and allows FTD to offer same-day delivery capability (subject to certain limitations) to nearly 100% of U.S., Canadian, U.K., and Irish populations. Additionally, FTD is part of a large international network of floral retailers that enables FTD to market consumer products for delivery in more than 150 countries.

        FTD products and services available to floral network members include: access to the FTD and Interflora brands and the Mercury Man logo, supported by various marketing and advertising campaigns; access to the floral network; credit card processing services; e-commerce Web site services; online advertising tools; and telephone answering, order-taking, transmission and clearing-house services. FTD also provides point-of-sale and related technology services and systems that enable its floral network members to transmit and receive orders and manage several back office functions of a floral retailer's business, including accounting, customer relationship management, direct marketing campaigns, and delivery route management. FTD also acts as a national wholesaler to its floral network members, providing branded and non-branded hard goods and cut flowers as well as packaging, promotional products and a wide variety of other floral-related supplies.

        Our strategy for the FTD segment includes the following key elements: attract and retain consumer customers and generate additional order volume through innovative marketing initiatives; further expand FTD's consumer product offerings; increase the number of florists in the floral network and expand the penetration of our floral network products and services with existing floral network members; increase FTD's presence in alternative retail channels such as supermarkets and mass merchants; and expand FTD's range of marketing and distribution partnerships.

Classmates Media

        Our Classmates Media services include online social networking under the Classmates brand and online loyalty marketing under the MyPoints brand. Our Classmates Media services also include international online social networking under the StayFriends and Trombi brands. For additional information regarding our Classmates Media segment, see Note 2—"Segment Information" of the Notes to the Consolidated Financial Statements, which appears in Part II, Item 8 of this Annual Report on Form 10-K.

Online Social Networking

        Our social networking Web sites enable users to locate and interact with acquaintances from their past, with school affiliations as the primary focus. Led by our flagship Classmates Web site (www.classmates.com) that serves the U.S. and Canada, our social networking properties comprise a large and diverse population of users, with over 60 million registered accounts at December 31, 2009.

        Using our interactive tools and features, our members have contributed to our social networking Web sites a substantial amount of distinct, relevant pieces of content, such as names, high school affiliations, profiles, biographies, interests, and photos. Our large membership base and the extensive user-generated content posted on our Web sites assist us in acquiring new members, and we receive tens of thousands of new free account registrations each day. We believe this valuable content also

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brings existing members back to our Web sites, with a significant number of our members visiting our Web sites on a recurring basis over many years.

        Our social networking members can choose between free membership and a paid subscription offering additional features. Free accounts constitute the vast majority of our social networking accounts. Revenues from our social networking services are derived from subscription fees and advertising fees. We had approximately 4.9 million social networking pay accounts at December 31, 2009. During the quarter ended December 31, 2009, our average monthly revenue per social networking pay account was $2.53 per month.

        Basic Membership.    Basic membership on our Classmates Web site is free and provides members with access to a number of interactive features. Visitors to our Classmates Web site can become free members by completing the registration process and providing their name, year of birth, graduation year (or, in the case of workplace or military affiliations, years at such affiliation), and an email address. Free members are required to affiliate with at least one high school, college, work, or military community. In addition, free members can elect to provide information about their personal interests and post photos.

        Free members have free access to the following primary features:

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Search.  Free members can use our search feature to locate individuals within communities of interest and to browse our member database which is currently differentiated by high school, college, workplace, or military unit.



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Post and view member content.  Free members can post information about themselves and view information about other members, including personal profiles, biography information, photos, affiliations, timelines, bulletin board messages, and answers to our multiple choice questions about life, love, family, and hobbies.



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Reunion Radio and Games Features.  Free members can listen to popular tracks from their high school years on the Classmates Reunion Radio feature, or play a variety of classic online games at the Classmates Games section of the Web site.



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Reunions.  Reunions and events can be organized and invitations can be sent through the Classmates Web site. Free members can create events and track RSVPs to reunions, build surveys, exchange party ideas on private message boards, and share pictures in photo albums devoted to the reunion event.



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Email.  Free members have the ability to send double-blind emails (where email addresses are not visible to the email sender or recipient) through our Classmates Web site to other Classmates members and respond to email messages received from our paying members. However, free members are not able to read and respond to emails from other free members.



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Read and post to message boards.  Free members have access to messages posted on our interest group message boards encompassing a wide range of topics. Free members are also able to directly post content on the message boards and post pictures in the photo albums devoted to their affiliated communities.



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Newsletter.  Free members can subscribe to our weekly "Connections" newsletter that contains information on the various features available on our Classmates Web site, a listing of new members who joined their communities and links to new content posted by members within their communities.

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        Gold Membership.    Gold membership on our Classmates Web site is a paid subscription service that provides members with access to all of the features of a free membership as well as the following additional features:

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Digital guestbook.  Our digital guestbook feature alerts a Classmates member when another member visits his or her profile, unless the visiting member chooses not to leave his or her name. However, only a paying member is able to see the name of the member who visited his or her profile.



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Email.  Paying members have the ability to send double-blind emails through our Classmates Web site to other Classmates members and respond to email messages from any other Classmates member, regardless of whether the sender is a free member or a paying member.



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Classmates maps.  Paying members have access to our Classmates maps feature which can generate a map, satellite or hybrid view, showing the geographic locations, based on zip codes, of the members in a paying member's affiliated communities.



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Newsletter.  In addition to receiving our Connections newsletter, paying members also receive our monthly "Gold Standard" newsletter, which highlights ways for our paying members to get the most out of the subscription features accessible on our Classmates Web site.

        We continue to develop a number of new features on our Classmates Web site that we believe will enhance the member experience while providing an additional incentive for our free members to upgrade to a pay account. We expect the features available to free members and paying members to continue to change from time to time.

        Standard pricing for a Classmates social networking pay account varies significantly by term of membership. Standard pricing for pay accounts currently consists of a three-month subscription for $15.00, or $5.00 per month, a 12-month subscription for $39.00, or $3.25 per month, or a 24-month subscription for $59.00, or $2.46 per month. In addition, discounted pricing plans are offered to certain free members at various times on a promotional basis. Discounted promotions often feature an introductory 12-month subscription for $9.95 that, if not cancelled by the customer, will renew at the then-current full price after the introductory 12-month period. We expect that the pricing and terms of membership we offer will change periodically due to discounting and other factors.

        International.    In addition to our flagship Classmates Web site, we operate five international social networking services. We operate StayFriends in Sweden, Germany, Austria, and Switzerland (www.stayfriends.se, www.stayfriends.de, www.stayfriends.at and www.stayfriends.ch, respectively) and Trombi in France (www.trombi.com). Each service is similar to our Classmates service, although their affiliations are focused primarily on schools. We offer free and pay memberships on all of our international Web sites, although certain features of our international social networking pay services differ from those of our Classmates pay services and pricing for our international social networking services is generally lower than the standard pricing for Classmates.

        Our strategy for our online social networking services includes the following key elements: continue to enhance member experience and engagement by promoting user-generated and third-party content focused on connecting members with the people, places, events, and experiences associated with their high school years; expand the free and pay member bases by marketing on, or in conjunction with, complementary Web sites and services; increase monetization by incorporating loyalty programs into our services, by offering additional pay services to our members and by developing new sources of revenue consistent with our value proposition of connecting members with their high school years; and evaluate further opportunities to expand internationally or through the development and acquisition of complementary services.

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Online Loyalty Marketing

        Our online loyalty marketing service, MyPoints, connects advertisers with its members by allowing members to earn rewards points for engaging in online activities. MyPoints is a free service for consumers who need only provide their name, zip code, gender, date of birth, and an email address to register. Members register to receive direct email marketing and other online loyalty promotions, and earn points for responding to email offers, taking market research companies' surveys, shopping online at the MyPoints Web site which serves as a shopping portal, searching the Internet through a MyPoints branded toolbar, playing MyPoints branded online games, and engaging in other online activities. Rewards points are redeemable primarily in the form of third-party gift cards from over 75 merchants, including, among others, retailers, theaters, restaurants, airlines, and hotels. Participating merchants include, among others, Amazon.com, iTunes, Marriott, Macy's, and Target.

        MyPoints provides advertisers with an effective means to reach a large online audience. MyPoints uses a variety of criteria, including personal interests, purchasing behavior and demographic profiles, to create targeted promotions for advertisers. These marketing campaigns are tailored to meet the needs of the specific advertiser, which may include generating sales leads, soliciting information, registrations or the purchase of an advertiser's products or services, or increasing customer traffic on an advertiser's Web site. In many cases, MyPoints sends personalized email marketing messages, called Bonusmail, that are directed specifically to individual MyPoints members to showcase a single advertiser or offer. Generally, MyPoints members receive points for clicking through the media links in Bonusmail as well as for purchases or other actions taken within a limited time period.

        All of our online loyalty marketing service revenues are classified as advertising revenues. Advertisers pay us primarily based on performance measures that include when our MyPoints emails are transmitted to members, when members respond to emails and when members complete online transactions.

        Our strategy for our online loyalty marketing service includes the following key elements: enhance member experience and engagement by broadening the range of available advertiser offers, including expanding offers for offline activities and for recurring purchases such as gasoline and consumer packaged goods; reward our most active members by providing them additional opportunities to earn improved rewards; increase our member base through increased acquisition spend and exploration of new marketing channels; increase the types of awards available to our members; and increase automation of our service and offers to decrease costs and increase our ability to personalize offers to our members.

Communications

        Our principal Communications pay service is dial-up Internet access, offered under the NetZero and Juno brands. We also offer broadband services, email, Internet security services, and Web hosting services. In total, we had 1.4 million Communications pay accounts at December 31, 2009, of which 1.0 million were dial-up Internet access accounts. Most of our Communications revenues are derived from dial-up Internet access pay accounts. For additional information regarding our Communications segment, see Note 2—"Segment Information" of the Notes to the Consolidated Financial Statements, which appears in Part II, Item 8 of this Annual Report on Form 10-K.

Internet Access Services

        Our dial-up Internet access services are provided on both a free and pay basis, with the free services subject to hourly and other limitations. Basic pay dial-up Internet access services include Internet access and an email account, although we also offer an enhanced email service as a stand-alone pay service. In addition, we offer accelerated dial-up Internet access services which can significantly reduce the time for certain Web pages to download when compared to our basic dial-up

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Internet access services. Our accelerated dial-up Internet access services are also bundled with additional benefits including pop-up blocking, antivirus software and enhanced email storage. Our dial-up Internet access services are available in more than 11,000 cities across the U.S. and Canada. The current standard monthly pricing for our dial-up Internet access services generally ranges from $9.95 for basic services to $14.95 for our bundled services. We also offer promotional, discounted pricing plans at various times.

        Our broadband Internet access services consist of digital subscriber lines (also known as "DSL") services that we purchase from third parties and resell under our own brands. These services are primarily used as a means to retain users who are leaving our dial-up services and we have conducted very limited marketing of our broadband services to the general public. As a result, we have experienced limited adoption of our broadband services. The current monthly pricing for our broadband Internet access services ranges from $9.95 to $43.95, which includes certain new customer promotions that feature discounted fees for a limited number of months and revert to a standard rate at the end of the discount period. Pricing also varies due to connection speed and geographic region.

        Our primary strategy for the Communications segment is to manage our dial-up Internet access business for profitability and cash flows. In certain instances, we seek to extend the business life cycle and cash flows generated by our dial-up Internet access subscribers by offering them a broadband alternative to their dial-up service.

Sources of Revenue

        We generate revenue from the sale of services, products and online advertising.

Services Revenues

FTD

        FTD services revenues consist of fees charged to floral network members for access to the FTD and Interflora brands and the Mercury Man logo, access to the floral network, credit card processing services, e-commerce Web site services, online advertising tools, telephone answering, order-taking, transmission and clearing-house services.

Classmates Media and Communications

        Classmates Media services revenues consist of amounts charged to pay accounts for social networking services. Communications services revenues consist of amounts charged to pay accounts for Internet access, email, Web hosting, Internet security, and other services, with substantially all of such revenues associated with Internet access. Our Classmates Media and Communications services revenues are primarily dependent on two factors: the average number of pay accounts for a period and the average monthly revenue per pay account ("ARPU"). The average number of pay accounts is a simple average calculated based on the number of pay accounts at the beginning and end of a period.

        In general, we charge our pay accounts in advance of providing a service, which results in the deferral of services revenue to the period in which the services are provided. We have offered, and may offer in the future, a variety of price points, subscription periods, discounts, and promotions, both in connection with offers extended to some of our existing accounts and through external marketing channels. Changes in our offers, the extent to which we make such offers and the percentage of such offers that are accepted, can have a significant impact on ARPU, profitability, pay account acquisition metrics, conversion rates of free accounts to pay accounts, and retention rates.

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Products Revenues

        Products revenues consist of the FTD segment's merchandise revenue and related shipping and service fees for consumer orders, as well as revenues generated from the sale of containers, point-of-sale systems, cut flowers, packaging and promotional products, and a wide variety of other floral-related supplies to floral network members. We do not generate products revenues from our Classmates Media segment or our Communications segment.

Advertising Revenues

        We provide advertising solutions to marketers with both brand and direct response objectives through a full suite of display, search, email, and text-link opportunities across our various properties. We also use targeting technologies, Web site sponsorships and Web site integrations in order to provide effective solutions.

FTD

        FTD advertising revenues consist primarily of revenues that are generated when FTD and Interflora consumers are provided third-party offers after completing a purchase on the www.ftd.com, www.interflora.co.uk and www.interflora.ie Web sites.

Classmates Media

        Our social networking services have historically generated advertising revenues primarily from providing third-party offers to Classmates paying members after they have completed the pay account registration process and, to a lesser extent, from display advertisements. Advertising inventory on our social networking Web sites includes text and graphic placements on the user home page, profile page, class list page, and most other pages on our Web sites. We are able to target the advertising delivered to most of our members based on a wide variety of factors, including age, gender, demographic data, affiliations, profile data, and zip code. We also sell a portion of our advertising inventory through third-party advertising resellers.

        Our online loyalty marketing services revenues are derived from advertising fees, consisting primarily of fees based on performance measures, that are generated when emails are transmitted to members, when members respond to emails, when members complete online transactions, and when members engage in a variety of other activities including games, Internet searches and market research surveys. We sell marketing solutions to advertisers with both brand and direct response objectives through a full suite of display, email and other advertising opportunities. We also use targeting technologies and Web site integrations in order to provide effective solutions for advertisers.

Communications

        Our Communications services generate advertising revenues from search placements, display advertisements and online market research. Substantially all of our Communications advertising revenues are generated from our Internet access services. We host and customize the initial Web site displayed to users of our Internet access services. This Web site, or "start page," displays sponsored links to a variety of content, products and services, including Internet search. We also display a toolbar on Internet access users' screens throughout their online access sessions that is generally visible regardless of the particular Web site they visit. The toolbar contains Internet search functionality and a variety of buttons, icons and drop-down menus. A variety of advertising opportunities also exist through our email platforms, including display advertising on the main pages and within emails.

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Sales and Marketing

FTD

        Our marketing efforts within the FTD segment are primarily focused on attracting orders from new and existing consumer customers; marketing our services to our floral network members; attracting new members to our floral network; and marketing our services to alternative channels such as supermarkets and mass merchants. We also engage in a variety of activities to build and enhance the FTD and Interflora brands.

        Our marketing efforts for our consumer business include: online advertising, primarily related to search engine marketing and optimization; co-marketing and affiliate partnerships with retailers and loyalty programs such as airlines, credit card companies and hotel chains; database marketing to existing consumer customers featuring timely email promotions; direct mail and other forms of print advertising; an email-based reminder service that provides consumers with personalized reminders of occasions such as birthdays, anniversaries and key gift-giving holidays; television and radio advertising; and cross-marketing to the large base of consumers registered to United Online services, including Classmates, MyPoints, NetZero, and Juno.

        Our marketing efforts for our floral network business include: member appreciation and training events for our floral network members; sponsoring and participating in floral and retail industry trade shows; and offline media campaigns. In addition, many of our marketing efforts for our consumer business are also designed to enhance the businesses of our floral network members. By enhancing the FTD and Interflora brands, we increase the possibility that a consumer will place an order directly with one of our floral network members since floral retailers frequently highlight their association with our floral network in their marketing efforts. FTD also employs a dedicated sales force to market our products and services to our floral network members and to encourage other floral retailers to become members of our floral network.

Classmates Media

        Our marketing efforts for social networking have been comprised almost entirely of Internet advertising designed to increase our free member base, with most payments to third parties determined based on fees per free member acquired through the campaign. After we acquire a free member, we seek to upsell our pay services to the free member. We have also increased the number of social networking members who have signed up for our free services organically (without incurring online advertising expenditures to attract them) in recent years, primarily through enhancements to our Web sites to improve search engine optimization and, to a lesser extent, through an increasing base of referrals from existing social networking members. Our marketing efforts to obtain members for our online loyalty marketing service are primarily based on co-registration with third-party services.

Communications

        Our Communications segment's marketing efforts are focused primarily on attracting pay accounts, primarily dial-up Internet access accounts; building our NetZero brand; and cross-selling our other services to existing accounts. These marketing efforts include distribution arrangements with retailers and personal computer manufacturers; advertising on the Internet and television; and direct marketing campaigns. These activities are designed to drive prospective accounts to call our toll-free telephone numbers to purchase our services, or to visit our Web sites and download our software. In most distribution arrangements, we pay a fee for each new pay account referred to us by the retailer or personal computer manufacturer.

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Sales of Advertising Inventory

        We have internal sales organizations dedicated to selling our Internet advertising products and services. One organization is dedicated to our online loyalty marketing service, and the other organization is dedicated to our Communications and Classmates Online properties. These groups work with internal media operations personnel dedicated to serving and monitoring the performance of our advertising initiatives. While we derive a significant portion of our advertising revenues from transactions entered into directly with advertisers and their agencies, particularly within our online loyalty marketing service, we also sell a portion of our advertising inventory through third-party advertising resellers.

Competition

        The industries in which we offer products and services are highly competitive. A summary of competitive factors is set forth below and in "Risk Factors," which appears in Item 1A of this Annual Report on Form 10-K.

Floral and Related Products and Services

        We compete in the market for flowers and, to a lesser degree, specialty gifts. In the consumer market, consumers are our customers for direct sales of floral and specialty gifts through our Web sites and toll-free telephone numbers. In the floral network services market, retail florists and supermarkets are our principal customers for memberships and subscriptions to our various floral network services, including access to the FTD and Interflora brands and the Mercury Man logo, access to the floral network, credit card processing services, e-commerce Web site services, online advertising tools, and telephone answering, order-taking, transmission and clearing-house services.

        The consumer market for flowers and specialty gifts is highly competitive as consumers can purchase the products we offer from numerous sources, including traditional local retail florists, supermarkets, mass merchants, specialty gift retailers, and nationwide floral marketers, such as those that use Web sites, toll-free telephone numbers and catalogs. We believe the primary competitive factors in the consumer market are price, quality of products, selection, customer service, ordering convenience, and strength of brand. The floral network services market is highly competitive as well, and retail florists and supermarkets may choose from a few floral service providers that offer similar products and services. We believe the primary competitive factors in this market are price, order volume, customer service, services offered, strength of brand, number of members in the network, and fulfillment capabilities. In the U.S., our key competitors in the consumer market include 1-800-FLOWERS.COM, Inc., Proflowers.com and Teleflora, and our key competitors in the floral network services market include Teleflora and BloomNet Wire Service, a subsidiary of 1-800-FLOWERS.COM. International key competitors include Marks & Spencer, NEXT, John Lewis, Teleflorist (also known as eFlorist), and Flowers Direct. Although we believe that we compare favorably with respect to many competitive factors, some of our competitors have an advantage over us with respect to certain factors.

        We believe competition in the consumer market will likely intensify. Supermarkets, mass merchants and nationwide floral marketers have been gaining market share over retail florists as consumers continue to shift more of their floral purchases to these channels. We expect the sales volumes at supermarkets and other mass merchants to continue to increase, and other nationwide floral marketers will continue to increase their competition with us. In particular, the nature of the Internet as a marketplace facilitates competitive entry and comparative shopping, and we have experienced increased competition based on price. Some of our competitors may have significant competitive advantages over us, may devote significantly greater resources to marketing campaigns or other aspects of their business or may respond more quickly and effectively than we can to new or changing opportunities or customer requirements.

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        We expect competition in the floral network services market to continue to increase as well. We believe we will continue to experience increasing competition from the other floral network services providers. In addition, we expect retail florists likely will continue to lose sales to supermarkets and nationwide floral marketers, which likely will result in a continuing decrease in their revenues and in the number of retail florists. As the number of retail florists and their revenues decrease, competition for the business of the remaining retail florists will intensify.

Online Social Networking

        The social networking market is highly competitive and is characterized by numerous companies offering varying online services. This market has been rapidly evolving to respond to growing consumer demand for compelling social networking services and functionality. As this market continues to evolve, we believe that demand will be met by a number of social networking companies. In addition, we believe a large number of social networking users generally will continue to register with and frequent more than one social networking service. We believe the factors that drive long-term success are the ability to build a large and active user base and the ability to monetize that user base through subscriptions and advertising. We believe the principal competitive factors in this market are the size of the user base, volume and quality of user-generated content, price of the service, and the scope and quality of features. We believe that we compete favorably in certain of these areas, although certain of our competitors have an advantage over us in some or all of these areas.

        Our social networking services compete with a wide variety of social networking Web sites, including broad social networking Web sites such as Facebook; a number of specialty niche Web sites, including LinkedIn and MyLife.com, that offer online social networking services focused on particular affiliations such as school or work communities; and schools, employers and associations that maintain their own Internet-based alumni information services. We also compete with a wide variety of Web sites that provide users with alternative networks and ways of locating and interacting with acquaintances from various affiliations, including online services designed to locate individuals such as White Pages and US Search, Internet search engines that have the ability to locate individuals, including by finding individuals through their profiles on social networking Web sites, and Web portals such as Yahoo!, MSN and AOL. We believe that there are currently only a small number of competitive online social networking services that are focused specifically on our niche of the market, which is to help people find and reconnect with enduring relationships and important memories from school. However, as the membership bases of social networking Web sites continue to grow, users may be able to locate individuals from their past, free of charge in certain cases, without having to use a niche Web site or other online search service. As a result of the growth of the social networking market and minimal barriers to entry, a number of companies have entered or are attempting to enter our market, either directly or indirectly, some of which may become significant competitors in the future. In addition, many existing social networking services are broadening their service offerings to compete with our services.

Internet Access Services

        We compete with numerous other dial-up Internet access providers as well as providers of broadband services. Our key dial-up Internet access competitors include established online service and content providers, such as AOL and MSN, and independent national Internet service providers, such as EarthLink and its PeoplePC subsidiary. We believe the primary competitive factors in the dial-up Internet access industry are price, features, coverage area, scope of services, speed, and quality of service. While we believe our dial-up Internet access services compete favorably based on these factors when compared to many other dial-up Internet access services, we are at a competitive disadvantage relative to some or all of these factors with respect to the services of certain of our competitors. Our

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dial-up Internet access services do not compete favorably with broadband services with respect to certain of these factors, including, but not limited to, speed and, in certain cases, price.

Online Loyalty Marketing

        The market for online loyalty marketing services is highly competitive, and we expect competition to significantly increase in the future as online loyalty marketing programs grow in popularity. Our MyPoints online loyalty marketing business faces competition for members from several other online loyalty marketing programs as well as offline loyalty marketing programs that have a significant online presence, such as those operated by credit card, airline and hotel companies. We believe the primary competitive factors in the online loyalty marketing industry are the number, type and popularity of the participating merchants, the attractiveness of the rewards offered, the number of points awarded for various actions, the ease and speed of earning rewards, and the ability to offer members a robust, user-friendly shopping experience. We believe that we compete favorably in certain of these areas, although some of our competitors have an advantage over us in some or all of these areas. We also believe that the time, effort and expenses required to successfully develop certain of these areas serve as effective barriers to entry.

Seasonality and Cyclicality

        Revenues and operating results from our FTD segment typically exhibit seasonality. Revenue and operating results tend to be lower for the quarter ending September 30 because none of the most popular floral and gift-giving holidays, which include Mother's Day in the U.S. and U.K., Valentine's Day, Christmas, Easter, and Thanksgiving, fall within that quarter. In addition, depending on the year, Easter and the U.K. Mother's Day sometimes fall within the quarter ending March 31 and sometimes fall within the quarter ending June 30. As a result of these seasonal variations, we believe that comparisons of the FTD segment's revenues and operating results for any period with those of the immediately preceding period, or in some instances, the same period of the preceding fiscal year, may be of limited relevance in evaluating its historical performance and predicting its future financial performance. Our working capital, cash and any short-term borrowings may also fluctuate during the year as a result of the factors described above.

        Online loyalty marketing advertising revenues tend to be higher in the quarter ending December 31 when compared to other quarters. Our Internet access services have typically experienced a lower rate of new registrations during the quarter ending June 30 when compared to other quarters. Seasonality has not had a material impact on our online social networking services revenues. There can be no assurance that these seasonal trends will continue in the future.

Billing

        Orders placed through FTD's consumer Web sites or toll-free telephone numbers typically are paid for using a credit card or a debit card; therefore, consumers generally pay for floral and specialty gift orders before FTD pays the floral network members and third-party providers to fulfill and deliver them. FTD's floral network members are generally billed for products and services and are billed or credited for net order activity on a monthly basis.

        The vast majority of the pay accounts for our Classmates Media and Communications segments pay us in advance with a credit card. Other payment options for some of our pay services include automated clearing-house ("ACH"), personal check or money order, or via a customer's local telephone bill. Internet access pay accounts that elect to pay with a personal check or money order are not provisioned until their payment is received and they are required to subscribe for one of our prepaid multi-month billing plans.

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        We utilize a combination of third-party and internally-developed software applications for customer billing. Customer billing is a complex process and our billing systems must efficiently interface with third parties' systems, such as our credit card, ACH and telephone bill processors' systems. Our ability to accurately and efficiently bill and collect payment from our members and customers is dependent on the successful operation of our billing systems and various third-party processors. In addition, our ability to offer new pay services or alternative payment plans is dependent on our ability to customize our billing systems.

Customer Support and Retention

        We believe reliable customer service and technical support are important to retaining our customers. Our businesses generally offer a variety of online and offline tools designed to provide solutions and answers to frequently asked questions. These tools are also designed to assist our members and customers in verifying and updating their account information. In addition, we offer traditional email support and certain of our services provide live telephone support as well.

        Our customer relationship management and support infrastructure includes employees at our facilities in Woodland Hills, California; Hyderabad, India; Fort Lee, New Jersey; Seattle, Washington; San Francisco, California; Downers Grove, Illinois; Centerbrook, Connecticut; Medford, Oregon; Sherwood, Arkansas; Sleaford, England; and Nottingham, England. We also outsource to a third party substantially all of our telephone customer support and some of our email customer support for our Classmates Media and Communications services, and some of our telephone customer support for FTD. We monitor the effectiveness of our customer support functions and measure performance metrics such as average hold time and first call resolution and abandonment rates. Communications with our customers are logged and categorized to enable us to recognize and act on trends. An internal quality assurance team monitors the performance of our customer support vendor and provides feedback to improve their skills and establish consistency throughout our customer support functions.

Technology

        Each of our services, including our floral network services, our online social networking services, our Internet access services and our online loyalty marketing services, operates on a separate and distinct technology platform. Each of our services is generally provided through a combination of internally-developed and third-party software, industry standard hardware and outsourced network services. We have internally-developed order processing, order fulfillment and customer service systems which provide communication to our floral network members and third-party suppliers. We also have developed software to enhance the functionality of certain components of our services, including connectivity, Web services, billing, email, customer support, customer loyalty applications, and targeted advertising. We maintain data centers in multiple locations in the U.S. and Europe. In some cases, we have redundant systems to provide high levels of service availability and connectivity. We host or outsource the majority of our data center services in third-party co-location facilities and we outsource all of our bandwidth and managed modem services.

        We license from third parties a number of our software applications and components, including applications for our billing, customer support, advertising, and database systems, our client and server applications, and portions of our dial-up Internet access accelerator services. These licenses generally have terms ranging from several years to perpetual.

Government Regulations

        We are subject to a number of international, federal, state, and local laws and regulations, including, without limitation, those relating to taxation, bulk email or "spam," advertising, user privacy, data protection, and consumer protection. In addition, proposed laws and regulations relating to the

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foregoing are being debated and considered for adoption in the U.S. and other countries, and such legislation could be passed in the future. For additional information, see "Risk Factors," which appears in Item 1A of this Annual Report on Form 10-K.

Proprietary Rights

        Our trade names, trademarks, service marks, patents, copyrights, domain names, and trade secrets are important to the success of our business. In particular, we view our primary trademarks as critical to our success. We principally rely upon patent, trademark, copyright, trade secret, and contract laws to protect our proprietary rights. We also license some of our intellectual property rights, including the Mercury Man logo, to third parties. We continuously assess whether to seek patent and other intellectual property protections for those aspects of our business and technology that we believe constitute innovations providing competitive advantages. We generally enter into confidentiality or license agreements with our employees, consultants and corporate partners, and generally control access to, and distribution of, our technologies, documentation and other proprietary information. We consider our United Online, FTD, Interflora, Classmates, NetZero, Juno, StayFriends and MyPoints trademarks to be very valuable assets, and these trademarks have been registered in the U.S. or, in certain cases, in other countries.

International Operations

        We have international operations in the U.K., India and Germany. Our operations in the U.K. provide floral and related products and services to consumers and floral network members in the U.K. and the Republic of Ireland. Our operations in India primarily handle email customer support, product development and quality assurance. Our operations in Germany provide online social networking services in Sweden, Germany, France, Austria, and Switzerland. We do not generate revenues directly from our operations in India. Our U.S. revenues totaled $818.9 million, $602.8 million and $506.2 million for the years ended December 31, 2009, 2008 and 2007, respectively. International revenues totaled $171.2 million, $66.6 million and $7.3 million for the years ended December 31, 2009, 2008 and 2007, respectively. Revenues from our operations in the U.K. and the Republic of Ireland totaled $141.2 million and $48.0 million for the years ended December 31, 2009 and 2008, respectively. For information regarding risks associated with our international operations, see "Risk Factors," which appears in Item 1A of this Annual Report on Form 10-K. For information regarding long-lived assets, see Note 2—"Segment Information" of the Notes to the Consolidated Financial Statements, which appears in Part II, Item 8 of this Annual Report on Form 10-K.

Employees

        At December 31, 2009, we had 1,699 employees, 1,172 of which were located in the U.S., 263 of which were located in Europe, and 264 of which were located in Hyderabad, India. None of these employees are subject to a collective bargaining agreement, and we consider our relationships with our employees to be good.

Executive Officers

        See Part III, Item 10 "Directors, Executive Officers and Corporate Governance" of this Annual Report on Form 10-K for information about executive officers of the Registrant.

Available Information

        Our corporate Web site is www.unitedonline.com. On this Web site, we make available, free of charge, our annual, quarterly and current reports (including all amendments to such reports), changes in the stock ownership of our directors and executive officers, our code of ethics, and other documents

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filed with, or furnished to, the Securities and Exchange Commission ("SEC"), as soon as reasonably practicable after such documents are filed with, or furnished to, the SEC.

        The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements and other information regarding our Company that we file electronically with the SEC at www.sec.gov.

        By referring to our Web sites, including www.unitedonline.com, www.ftd.com, www.interflora.co.uk, www.interflora.ie, www.classmates.com, www.stayfriends.se, www.stayfriends.de, www.stayfriends.at, www.stayfriends.ch, www.trombi.com, and www.mypoints.com, we do not incorporate these Web sites or their contents into this Annual Report on Form 10-K.

ITEM 1A.    RISK FACTORS

RISKS RELATING TO OUR BUSINESS GENERALLY

Current or future economic conditions may have a material and adverse impact on our business, financial condition, results of operations, and cash flows.

        Economic conditions in the United States and the European Union have been depressed and may remain depressed for the foreseeable future. Our products and services are discretionary and dependent upon levels of consumer spending. Consumer spending patterns are difficult to predict and are sensitive to, among other factors, the general economic climate, the consumers' level of disposable income, consumer debt, and overall consumer confidence. The current economic conditions have adversely impacted certain aspects of our businesses in a number of ways including reduced demand, more aggressive pricing for similar products and services by our competitors, decreased spending by advertisers, increased credit risks, increased credit card failures, a loss of customers, and increased use of discounted pricing plans for certain of our products and services. It is likely that these and other factors will continue to adversely impact our businesses, at least in the near term. The current economic conditions may adversely impact our key vendors. The depressed economic conditions and decreased consumer spending have, in certain cases, resulted in, and may in the future result in, a variety of negative effects such as a reduction in revenues, increased costs, lower gross margin and operating margin percentages, increased allowances for doubtful accounts and write-offs of accounts receivable, and recognition of impairments of assets, including goodwill and other intangible and long-lived assets. Any of the above factors could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Our business is subject to fluctuations.

        Our results of operations and changes in our key business metrics from period to period have varied in the past and may fluctuate significantly in the future due to a variety of factors, many of which are outside of our control and difficult to predict. Each of the risk factors discussed in this Item 1A and the other factors described elsewhere in this Annual Report on Form 10-K and in our other filings with the SEC may affect us from period to period and may affect our long-term performance. As a result, you should not rely on period-to-period comparisons as an indication of our future performance. In addition, these factors and the depressed economic conditions create difficulties with respect to our ability to forecast our financial performance and business metrics accurately. We believe that these difficulties in forecasting present even greater challenges for financial analysts who publish their own estimates of our future financial results and business metrics. We cannot assure you that we will achieve the expectations of, or projections made by, our management or the financial analysts. In the event we do not achieve such expectations or projections, our financial results and the price of our common stock could be adversely affected.

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We may be unable to maintain or grow our advertising revenues. Reduced advertising revenues may reduce our profits.

        Advertising revenues are a key component of our revenues and profitability. Factors that have caused, or may cause in the future, our advertising revenues to fluctuate include, without limitation, the effect of, changes to, or terminations of key advertising relationships, changes in applicable laws, regulations or business practices, changes in the online advertising market, changes in the economy, advertisers' budgeting and buying patterns, competition, changes in the number of consumers purchasing our products and services, changes in our business models, changes in our advertising inventory, and changes in usage of our services. Decreases in our advertising revenues are likely to adversely impact our profitability.

        Our advertising revenues have in the past declined, and may in the future decline, when compared to prior periods. For 2010, we expect that our advertising revenues will decrease as compared to 2009. We anticipate advertising revenues generated by our Communications segment to continue to decline primarily as a result of the decrease in our dial-up Internet access pay accounts. In addition, our Communications segment has derived significant advertising revenues from search, and we are in the process of changing Internet search providers. Changes to the terms of our search agreement or difficulties or delays with the transition of our new search provider's service onto our Web sites, or the inability of the new search provider's service to monetize as well as the prior service, could have a material adverse effect on our Communications segment's advertising revenues. Also, all of our revenues from our online loyalty marketing service are derived from advertising, and we have experienced from time to time, and may continue to experience, significant declines in revenues from this service. In addition, prior to 2010, our Classmates Media and FTD segments have collectively derived significant advertising revenues from domestic post-transaction sales agreements. Post-transaction sales involve the online presentation of a third-party offer following the point where a consumer has purchased our subscription services or floral products, as applicable. In January 2010, we terminated our domestic post-transaction sales agreements. As discussed in greater detail in the risk factor related to changes in laws and regulations, certain governmental agencies have been investigating post-transaction sales practices and the companies that have engaged in such practices, including us. Although we expect to continue to offer our members and customers complementary services or products at the end of our registration or sale processes, including third-party offers as well as our own offers, there are no assurances that we will enter into any such third-party arrangements or that such offers will be well received by our members or customers. Even if we do enter into third-party arrangements, we anticipate that the revenues generated from such arrangements will be significantly less than the post-transaction sales revenues generated in 2009. Any or all of the above factors could cause our advertising revenues and profits to significantly decline in the future.

Changes in exchange rates could adversely affect comparisons of our operating results.

        We transact business in different foreign currencies and may be exposed to financial market risk resulting from fluctuations in foreign currency exchange rates, including the British Pound, the Euro, the Indian Rupee, and the Canadian Dollar. Revenues and expenses in foreign currencies translate into higher or lower revenues and expenses in U.S. Dollars as the U.S. Dollar weakens or strengthens against such other currencies. Substantially all of the revenues of our foreign subsidiaries are received, and substantially all expenses are incurred, in currencies other than the U.S. Dollar, which increases or decreases the related U.S. Dollar-reported revenues and expenses depending on the trend in currency exchange rates. Certain of our key business metrics, such as the FTD segment's average order value, are similarly affected by such currency fluctuations. Changes in global economic conditions, market factors, and governmental actions, among other factors, can affect the value of these currencies in relation to the U.S. Dollar. A strengthening of the U.S. Dollar compared to these currencies and, in particular, to the British Pound, has had, and in future periods could have, an adverse effect on the

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comparisons of our revenues and operating income against prior periods. We cannot accurately predict the impact of future foreign currency exchange rate fluctuations on our operating results, and such fluctuations could negatively impact the comparisons of such results against prior periods.

Our marketing efforts may not be successful, which could increase our costs and adversely impact our key metrics and financial results.

        We spend significant resources marketing our brands, products and services. We rely on relationships with a wide variety of third parties, including Internet search providers, Internet advertising networks, co-registration partners, retailers, distributers and direct marketers, to promote or distribute our products and services. In addition, one of our strategies is to cross market our various products and services to our existing customer base. If our marketing, including cross marketing, activities are inefficient or unsuccessful, or if important third-party relationships become more expensive or unavailable, our key metrics and financial results could be materially and adversely impacted.

Significant problems with our key systems or those of our third-party vendors could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        The systems underlying the operations of each of our business segments are complex and diverse, and must efficiently integrate with third-party systems, such as credit card processors. Key systems include, without limitation, billing; Web site and database management; order transmission, fulfillment and processing including the system for transmitting orders through the floral network; customer support; telecommunications network management; advertisement serving and management systems; and internal financial systems. Some of these systems, such as customer support, are outsourced to third parties, and other systems, such as FTD's order transmission and fulfillment system and the platform for our international social networking Web sites, are not redundant. We have experienced systems problems in the past, and we or these third parties may experience problems in the future. In addition, if these third parties face financial or other difficulties, our business could be adversely impacted. Any significant errors, failures, interruptions, delays, or other problems with our systems or our third-party vendors or their systems could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        In addition, our Classmates Media and Communications businesses outsource a majority of their live technical and billing support functions. These businesses rely on one customer support vendor, and we maintain only a small number of internal customer support personnel for these businesses. Our internal customer support personnel are not equipped to provide the necessary range of customer support functions in the event that this vendor unexpectedly becomes unable or unwilling to provide these services to us.

Our failure to enforce and protect our proprietary rights could harm our business.

        Our trade names, trademarks, service marks, patents, copyrights, domain names, and trade secrets are important to the success of our businesses. In particular, we view our primary trademarks as critical to our success. We rely upon patent, trademark, copyright, trade secret, and domain name laws in the U.S. and similar laws in other countries, as well as licenses and other agreements with our employees, members, consumers, suppliers and other parties, to establish and maintain our proprietary rights in the technology, products, services and content used in our operations. These laws and agreements may not guarantee that our proprietary rights will be protected and our proprietary rights could be challenged or invalidated. We also license some of our intellectual property rights, including the Mercury Man logo, to third parties. The steps we and such third parties have taken to protect our proprietary rights may not be adequate, and other third parties may infringe or misappropriate our proprietary rights. The protection of our proprietary rights may require the expenditure of significant financial and

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internal resources. We cannot assure you that we have taken adequate steps to prevent misappropriation of our proprietary rights. Our failure to adequately protect our proprietary rights could adversely affect our brands and could harm our business.

We may be unsuccessful at acquiring additional businesses, services or technologies. Even if we complete an acquisition, it may not improve our results of operations and may also adversely impact our business, financial condition and cash flows.

        One of our strategic objectives is to acquire businesses, services or technologies that will provide us with an opportunity to diversify the products and services we offer, leverage our assets and core competencies, or expand our geographic reach, or that otherwise may be complementary to our existing businesses. However, acquiring companies is a difficult process with many factors outside of our control. In addition, our credit agreements impose certain restrictions on our ability to complete acquisitions and there is no assurance that we will be successful in completing additional acquisitions.

        We have evaluated and expect to continue to evaluate, a wide variety of potential strategic transactions that we believe may complement our current or future business activities. However, we cannot assure you that the anticipated benefits and synergies of an acquisition will materialize or that any integration attempts will be successful. Acquiring a business, service or technology involves many operational and financial risks, including risks relating to:

•

disruption of our ongoing business and significant diversion of resources and management time from day-to-day responsibilities;



•

acquisition financings that involve the issuance of potentially dilutive equity or the incurrence of debt;



•

reduction of cash and other resources available for operations and other uses;



•

exposure to risks specific to the acquired business, service or technology to which we are not currently exposed;



•

risks of entering markets in which we have little or no direct prior experience;



•

unforeseen obligations or liabilities;



•

difficulty assimilating the acquired customer bases, technologies and operations;



•

difficulty assimilating and retaining management and employees of the acquired business;



•

potential impairment of relationships with users, customers or vendors as a result of changes in management of the acquired business or other factors;



•

large write-offs either at the time of the acquisition or in the future, the incurrence of restructuring charges, the amortization of identifiable intangible assets, and the impairment of amounts capitalized as goodwill, intangible assets and other long-lived assets; and



•

lack of, or inadequate, controls, policies and procedures appropriate for a public company, and the time, cost and difficulties related to the implementation of such controls, policies and procedures or the remediation of any deficiencies.

        Any of these risks could harm our business, financial condition, results of operations, and cash flows.

        In addition, an acquisition of a foreign business involves risks in addition to those set forth above, including risks associated with foreign currency exchange rates, potentially unfamiliar economic, political and regulatory environments and integration difficulties due to language, cultural and geographic differences.

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A security breach or inappropriate access to, or use of, our networks, computer systems or services or those of third-party vendors could expose us to liability, claims and a loss of revenue.

        The success of our business depends on the security of our networks and, in part, on the security of the network infrastructures of our third-party vendors. Unauthorized or inappropriate access to, or use of, our networks, computer systems or services, whether intentional, unintentional or as a result of criminal activity, could potentially jeopardize the security of confidential information, including credit card information, of our customers and of third parties. We cannot assure you that the security measures we take will be effective in preventing these types of activities. We also cannot assure you that the security measures of our third-party network providers, providers of customer and billing support services or other vendors will be adequate. In addition to potential legal liability, these activities may adversely impact our reputation or our revenues and may interfere with our ability to provide our products and services, all of which could adversely impact our business.

Legal actions or investigations could subject us to substantial liability, require us to change our business practices, and adversely affect our business, financial condition, results of operations, and cash flows.

        We are currently, and have been in the past, party to various legal actions and investigations. These actions may include, without limitation, claims by private parties in connection with consumer protection and other laws, claims that we infringe third-party patents, claims involving unfair competition, claims in connection with employment practices, securities laws claims, breach of contract claims, and other business-related claims. The nature of our business could subject us to additional claims for similar matters, as well as a wide variety of other claims including, without limitation, claims for defamation, right of publicity, negligence, trademark and copyright infringement, and privacy and security matters. Various governmental agencies have in the past, and may in the future, assert claims, institute legal actions, inquiries or investigations, or impose obligations relating to our business practices, such as our marketing, billing, customer retention, renewal, cancelation, refund, or disclosure practices. As discussed in the risk factor related to changes in laws and regulations, certain governmental agencies have been investigating post-transaction sales practices and the companies that engage in such practices, including us. Defending against lawsuits, inquiries and investigations involves significant expense and diversion of management's attention and resources from other matters. We may not prevail in existing or future claims. The failure to successfully defend against certain types of claims, including claims relating to our business practices or alleging infringement of proprietary rights, could result in our incurring significant liabilities related to judgments or settlements or require us to change our business practices. Infringement claims may also result in our being required to obtain licenses from third parties, which licenses may not be available on acceptable terms, if at all. Both the cost of defending claims, as well as the effect of settlements and judgments, could cause our results of operations to fluctuate significantly from period to period and could materially and adversely affect our business, financial condition, results of operations, and cash flows.

Our online social networking and online loyalty marketing services, as well as our FTD segment's consumer business, rely heavily on email campaigns, and any disruptions or restrictions on the sending of emails or increase in the associated costs could adversely affect our business and results of operations.

        Our emails generate the majority of the traffic on our social networking Web sites and are the most important driver of member activity for our online loyalty marketing service. A significant number of members of our online social networking and online loyalty marketing services elect to opt-out of receiving certain types of emails. Without the ability to email these members, we have very limited means of inducing members to return to our Web sites and utilize our services. In addition, each month, a significant number of email addresses for members of our online social networking and online

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loyalty marketing services become invalid. This disrupts our ability to email these members and prevents social networking members from being able to contact these members, which is a key reason why members use our online social networking services.

        Our FTD segment generates a significant portion of its consumer orders from the emails we send to customers who have previously ordered products from us. We also engage in a number of third-party email marketing campaigns in which such third parties include our marketing offers in the emails they send.

        An increase in the number of members or customers who elect to not receive, or are unable to receive, our emails could adversely affect our business and results of operations. From time to time, Internet service providers block bulk email transmissions or otherwise experience technical difficulties that result in our inability to successfully deliver emails to our members. Third parties may also block, impose restrictions on, or start to charge for, the delivery of emails through their email systems. Due to the importance of email to our businesses, any disruption or restriction on the distribution of emails or increase in the associated costs could materially and adversely affect our revenues and profitability.

Our substantial amount of indebtedness could adversely affect our ability to raise additional capital to fund operations, our flexibility in operating our business and our ability to react to changes in the economy or our industry, and prevent us from satisfying our debt obligations.

        We have a substantial amount of indebtedness which could have important consequences for our business and financial condition. For example:

•

if we fail to meet payment obligations or otherwise default under the agreements governing our indebtedness, the lenders under those agreements will have the right to accelerate the indebtedness and exercise other rights and remedies against us;



•

we will be required to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing funds available for working capital, capital expenditures, dividends, acquisitions, and other purposes;



•

our ability to obtain additional financing to fund future working capital, capital expenditures, additional acquisitions, and other general corporate requirements could be limited;



•

the credit agreements impose operating and financial covenants and restrictions on us, including limitations on our ability to use FTD cash flow for the benefit of our subsidiaries other than FTD, and on our ability to use the cash flow of our subsidiaries other than FTD for the benefit of FTD, and compliance with such covenants and restrictions may adversely affect our ability to adequately finance our operations or capital needs in the future, to pursue attractive business opportunities that may arise in the future, to redeem or repurchase capital stock, to pay dividends, to sell assets, and to make capital expenditures;



•

our failure to comply with the covenants in the credit agreements, including failure as a result of events beyond our control, could result in an event of default under the applicable credit agreement (and any other credit agreement which contains a cross-default provision), which could cause all amounts outstanding with respect to that debt to become immediately due and payable and could materially and adversely affect our operating results, financial condition and liquidity;



•

we will experience increased vulnerability to, and limited flexibility in planning for, changes to our businesses and adverse economic and industry conditions;



•

we could be placed at a competitive disadvantage relative to other companies with less indebtedness;

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•

our ability to apply excess cash flow or proceeds from certain types of securities offerings, asset sales and other transactions to purposes other than the repayment of debt, as well as servicing of the debt, could be limited;



•

the interest rates under the credit agreements will fluctuate and, accordingly, interest expense may increase; and



•

if we make voluntary prepayments on our debt, we will have to accelerate the related discount accretion and debt issuance cost amortization, which would impact interest expense, and certain prepayments may be subject to penalties.

        Under the terms of the credit agreements, we will be permitted to incur additional indebtedness subject to certain conditions, and the risks described above may be increased if we incur additional indebtedness.

        Our credit agreements include guarantees on a joint and several basis by our existing and future, direct and indirect domestic subsidiaries and are secured by first priority security interests in, and mortgages on, substantially all of our direct and indirect subsidiaries' tangible and intangible assets and first priority pledges of all the equity interests owned by us in our existing and future direct and indirect subsidiaries (except with respect to foreign subsidiaries in which case such pledges are limited to 66% of the outstanding capital stock). The occurrence of an event of default under the credit agreements could permit the lenders to terminate the commitments of such lenders to make further extensions of credit under the credit agreements, to call and enforce the guarantees, and to foreclose on the collateral securing such debt.

We may not realize the benefits associated with our assets and may be required to record a significant charge to earnings if we are required to expense certain costs or impair our assets.

        We have capitalized goodwill and identifiable intangible assets in connection with our acquisitions. We perform an impairment test of our goodwill and indefinite-lived intangible assets annually during the fourth quarter of our fiscal year or when events occur or circumstances change that would more likely than not indicate that goodwill or any such assets might be permanently impaired. If our acquisitions are not commercially successful or, if due to economic or other conditions, our assumptions regarding the performance of the acquired businesses are not achieved, we would likely be required to record impairment charges which would negatively impact our financial condition and results of operations. We have experienced impairment charges in the past, and in the fourth quarter of 2008, we recorded material impairment charges related to our FTD segment's goodwill and indefinite-lived intangible assets. Given the current economic environment and the uncertainties regarding the impact on our businesses, there can be no assurance that our estimates and assumptions regarding the duration of the depressed economic conditions, or the period or strength of recovery, made for purposes of our goodwill and identifiable intangible assets impairment testing will prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or growth rates of certain reporting units or other factors are not achieved or are revised downward, we may be required to record additional impairment charges in future periods. In addition, from time to time, we record tangible or intangible assets on our balance sheet that, due to changes in value or in our strategy, may have to be expensed in future periods. Write-downs or impairments of assets, whether tangible or intangible, could adversely and materially impact our financial condition and results of operations.

Our ability to operate our business could be seriously harmed if we lose members of our senior management team or other key employees.

        Our business is largely dependent on the efforts and abilities of our senior management, particularly Mark R. Goldston, our chairman, president and chief executive officer, and other key personnel. Any of our officers or employees can terminate his or her employment relationship at any

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time. The loss of any of these key employees or our inability to attract or retain other qualified employees could seriously harm our business and prospects. We do not carry key-person life insurance on any of our employees.

Foreign, state and local governments may attempt to impose additional income taxes, sales and use taxes, value-added taxes or other taxes on our business activities and Internet-based transactions, including our past sales, which could decrease our ability to compete, reduce our sales, or have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        We are subject to income and various other taxes in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our worldwide provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. In addition, our effective income tax rates could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher (or determined to be higher by a particular taxing jurisdiction) than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets and liabilities or by, among other factors, changes in the relevant tax, accounting and other laws, regulations, principles and interpretations. We are subject to audit in various jurisdictions, and such jurisdictions may assess additional income and other taxes against us. Although we believe our tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from our historical income tax provisions, and our historical recognition of other tax matters. The results of an audit or litigation could have a material effect on our business, financial condition, results of operations, and cash flows.

        In connection with our Internet-based transactions, a number of states have been considering or adopting legislation or instituting policy initiatives, including those that would facilitate a finding of nexus to exist between Internet companies with the states, aimed at expanding the reach of sales and use taxes or imposing state income or other taxes on various innovative theories, including agency attribution from independent third-party service providers. Such legislation or initiatives could result in the imposition of additional sales and use taxes, or the payment of state income or other taxes, on certain transactions conducted over the Internet. If such legislation is enacted, or such initiatives are instituted, and upheld by the courts, the legislation or initiatives could subject us to substantially increased tax liabilities for past and future sales or state income or other taxes, require us to collect additional sales and use taxes, cause our future sales to decrease, otherwise negatively impact our businesses, and thus have a material adverse affect on us.

Changes in laws and regulations and new laws and regulations may adversely affect our business, financial condition, results of operations, and cash flows.

        We are subject to a variety of international, federal, state, and local laws and regulations, including, without limitation, those relating to taxation, bulk email or "spam," advertising, user privacy and data protection, consumer protection, antitrust, and unclaimed property. Compliance with the various laws and regulations, which in many instances are unclear or unsettled, is complex. Any changes in such laws and regulations, the enactment of any additional laws or regulations, failure to comply with, or increased enforcement activity of, such laws and regulations, could significantly impact our products and services, our costs, or the manner in which we conduct business, all of which could adversely impact our results of operations and cause our business to suffer.

        The Federal Trade Commission and certain state agencies have investigated Internet companies, including us, in connection with consumer protection and privacy matters. Federal, state and foreign governments have also enacted consumer protection laws, including laws protecting the privacy of consumers' nonpublic personal information. In 2009, a committee of the U.S. Senate commenced an investigation of post-transaction sales practices and the companies that have engaged in such practices.

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As part of such investigation, we received a request for information from the committee, and we have cooperated with such request. In addition, we have received a civil investigative demand from the Attorney General of the State of Washington and subpoenas from the Attorney General of the State of New York regarding their respective investigations into such practices and the companies that have engaged in them, including us. We have been cooperating with the investigations, but we cannot predict their outcome or their potential implications for our business. There are no assurances that additional governmental investigations or other legal actions will not be instituted in connection with our former post-transaction sales practices or other current or former business practices. Enforcement actions or changes in enforcement policies and procedures, the adoption of new laws or regulations, or our failure to comply with existing laws, including those of foreign countries in which we operate, could decrease our revenues and increase the costs of operating our business. To the extent that our services and business practices change as a result of claims or actions by governmental agencies, changes in laws and regulations, or claims or actions by private parties, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

We face risks relating to operating and doing business internationally that could adversely affect our businesses and results of operations.

        Our businesses operate in a number of countries outside the U.S. Conducting international operations involves risks and uncertainties, including:

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adverse fluctuations in currency exchange rates;



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potentially adverse tax consequences, including the complexities of foreign value-added taxes and restrictions on the repatriation of earnings;



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increased financial accounting, tax and reporting burdens and complexities;



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disruption of our ongoing business and significant diversion of management attention from day-to-day responsibilities;



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localization of our services, including translation into foreign languages and adaptation for local practices and regulatory requirements;



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lack of familiarity with, and unexpected changes in, foreign regulatory requirements;



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longer accounts receivable collection cycles;



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difficulties in managing and staffing international operations;



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the burdens of complying with a wide variety of foreign laws, regulations and legal and regulatory standards;



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political, social and economic instability abroad, terrorist attacks and security concerns in general; and



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reduced or varied protection for intellectual property rights.

        The occurrence of any one of these risks could negatively affect our international operations, our key business metrics, and our financial results.

Our businesses could be shut down or severely impacted by a catastrophic event.

        Our businesses could be materially and adversely affected by a catastrophic event. A disaster such as a fire, earthquake, flood, power loss, terrorism, or other similar event, affecting any of our facilities, data centers or computer systems, or those of our third-party vendors, could result in a significant and extended disruption of our operations and services. Any prolonged disruption of our services due to these or other events would severely impact our businesses. We do not carry flood insurance for one of

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our facilities, and the property, business interruption and other insurance we do carry may not be sufficient to cover, if at all, losses that may occur as a result of any events which cause interruptions in our services.

We cannot predict our future capital needs and we may not be able to secure additional financing which could adversely impact us.

        We may need to raise additional funds in the future to fund our operations, for acquisitions of businesses, services or technologies or for other purposes. Additional financing may not be available in a timely manner, on terms favorable to us, or at all. We incurred substantial indebtedness in connection with the acquisition of FTD. The terms of such indebtedness in addition to the degree to which we are leveraged, will adversely affect our ability to obtain additional financing. In addition, the current extreme volatility of, and disruption in, the securities and credit markets may restrict our ability to raise any such additional funds. If adequate funds are not available or not available when required and in sufficient amounts or on acceptable terms, our businesses and future prospects may suffer.

We may stop paying, or reduce, quarterly cash dividends on our common stock.

        The payment of future dividends is discretionary and is subject to determination by our Board of Directors each quarter following its review of our financial condition, results of operations and cash flows and such other factors as are deemed relevant by our Board of Directors. The terms of our indebtedness impose limitations on our ability to pay dividends. Commencing with the third quarter of 2008, we have decreased our quarterly cash dividend from $0.20 per share of common stock to $0.10 per share of common stock. Changes in our business needs, including working capital and funding for acquisitions, or a change in tax laws relating to dividends, among other factors, could cause our Board of Directors to decide to cease the payment of, or further reduce, dividends in the future. We cannot assure you that we will not decrease or discontinue quarterly cash dividends, and if we do, our stock price could be negatively impacted.

We have anti-takeover provisions that may make it difficult for a third party to acquire us.

        Provisions of our certificate of incorporation, our bylaws and Delaware law could make it difficult for a third party to acquire us, even if doing so might be beneficial to our stockholders because of a premium price offered by a potential acquirer. Our Board of Directors adopted a stockholder rights plan, which is an anti-takeover measure that will cause substantial dilution to a third party who attempts to acquire our Company on terms not approved by our Board of Directors.

Our stock price has been highly volatile and may continue to be volatile.

        The market price of our common stock has fluctuated significantly and it may continue to be volatile with extreme trading volume fluctuations. In addition, The Nasdaq Global Select Market has experienced substantial price and trading volume fluctuations. The broad market and industry factors that influence or affect such fluctuations may harm the market price of our common stock, regardless of our actual operating performance. As a result of these or other reasons, we have experienced and may continue to experience significant volatility in the market price of our common stock.

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ADDITIONAL RISKS RELATING TO OUR FTD SEGMENT

Competition could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        We compete in the market for flowers and, to a lesser degree, specialty gifts. In the consumer market, consumers are our customers for direct sales of floral and specialty gifts through our Web sites and toll-free telephone numbers. In the floral network services market, retail florists and supermarkets are our principal customers for memberships and subscriptions to our various floral network services including, among other things, access to the FTD and Interflora brands and the Mercury Man logo, access to the floral network, credit card processing services, e-commerce Web sites, online advertising tools, and telephone answering, order-taking, transmission and clearing-house services.

        The consumer market for flowers and specialty gifts is highly competitive, and consumers can purchase the products we offer from numerous sources, including traditional local retail florists, supermarkets, mass merchants, specialty gift retailers, and nationwide floral marketers, such as those that use Web sites, toll-free telephone numbers and catalogs. The floral network services market is highly competitive as well, and retail florists and supermarkets may choose from a few floral network service providers that offer similar products and services. In the U.S., our key competitors in the consumer market include 1-800-FLOWERS.COM, Inc., Proflowers.com and Teleflora, and our key competitors in the floral network services market include Teleflora and BloomNet Wire Service, a subsidiary of 1-800-FLOWERS.COM. International key competitors include Marks & Spencer, NEXT, John Lewis, Teleflorist (also known as eFlorist), and Flowers Direct.

        We believe competition in the consumer market will likely intensify. Supermarkets and nationwide floral marketers have been gaining market share over retail florists as consumers continue to shift more of their floral purchases to these channels. We expect the sales volumes at supermarkets and other mass merchants to continue to increase, and that nationwide floral marketers will continue to increase their competition with us. In particular, the nature of the Internet as a marketplace facilitates competitive entry and comparative shopping, and we have experienced increased competition based on price. Some of our competitors may have significant competitive advantages over us, may devote significantly greater resources to marketing campaigns or other aspects of their business or may respond more quickly and effectively than we can to new or changing opportunities or customer requirements.

        We expect competition in the floral network services market to continue to increase as well. We believe we will continue to experience increasing competition from the other floral network services providers. In addition, we expect retail florists likely will continue to lose sales to supermarkets and nationwide floral marketers, which likely will result in a continuing decrease in their revenues and in the number of retail florists. As the number of retail florists and their revenues decrease, competition for the business of the remaining retail florists will intensify.

        Increased competition in the consumer market or the floral network services market may result in lower revenues, reduced gross margins, loss of market share, and increased marketing expenditures. We cannot provide assurance that we will be able to compete successfully or that competitive pressures will not have a material adverse effect on our business, financial condition, results of operations, and cash flows.

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We are dependent on third parties who fulfill orders and deliver goods and services to our customers and their failure to provide our customers with high-quality products and customer service may harm our brands and could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        We believe that our success in promoting and enhancing our brands depends on our ability to provide our customers high-quality products and a high level of customer service. Our business depends, in part, on the ability of our independent floral network members and third-party suppliers who fulfill our orders to do so at high-quality levels. We work with our floral network members and third-party suppliers to develop best practices for quality assurance; however, we generally do not directly control or continuously monitor any floral network member or third-party supplier. The failure of our floral network members or third-party suppliers to fulfill orders to our customers' satisfaction, at an acceptable level of quality and within the required timeframe, could adversely impact our brands and cause us to lose customers, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        Additionally, because we depend upon third parties for the delivery of our products to customers, strikes or other service interruptions affecting these shippers could have an adverse effect on our ability to deliver our products on a timely basis. If any of our shippers are unable or unwilling to deliver our products, we would have to engage alternative shippers which could increase our costs. A disruption in any of our shippers' delivery of our products could cause us to lose customers or could increase our costs, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

The success of our business is dependent on our floral network members and on the financial performance of the retail floral industry.

        A significant portion of our profitability is dependent on our floral network members. We have lost, and may continue to lose, floral network members as a result of both our members choosing not to do business with us as well as declines in the number of local retail florists as a result of economic factors and competition. If we lose a significant number of floral network members, or if we are not able to maintain or increase revenues from our floral network members, our business, financial condition, results of operations, and cash flows may be materially and adversely affected.

If the supply of flowers becomes limited, the price of these products could rise or these products may become unavailable, which could result in our not being able to meet consumer demand and could cause an adverse effect on our business, financial condition, results of operations, and cash flows.

        Many factors, such as weather conditions, agricultural limitations and restrictions relating to the management of pests and disease, affect the supply of flowers and the price of our floral products. If the supply of flowers available for sale is limited, the wholesale prices of flowers could rise, which would cause us to increase our prices or reduce our profits. An increase in our prices could result in a decline in customer demand for our floral products, which would decrease our revenues.

        Alternatively, we may not be able to obtain high-quality flowers in an amount sufficient to meet customer demand. Even if available, flowers from alternative sources may be of lesser quality or more expensive than those currently offered by us. A large portion of our supply of flowers is sourced from Colombia, Ecuador and Holland.

        The availability and price of our products could be affected by a number of other factors affecting suppliers, including:

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severe weather;



•

import duties and quotas;

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•

time-consuming import regulations or controls at airports;



•

changes in trading status;



•

economic uncertainties and currency fluctuations, including as a result of the recent volatility and disruptions in the credit markets and general economy;



•

foreign government regulations, laws and political unrest;



•

governmental bans or quarantines; and



•

trade restrictions, including U.S. retaliation against foreign trade practices.

Foreign, state and local governments may attempt to impose additional sales and use taxes, value-added taxes or other taxes on our business activities, including our past sales, which could decrease our ability to compete, reduce our sales, and have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        In accordance with current industry practice by domestic floral and specialty gift order gatherers and our interpretation of applicable law, our FTD consumer business collects and remits sales and use taxes on orders that are delivered in states where it has a physical presence or other form of jurisdictional nexus, which is a limited number of states. If states successfully challenge this practice and impose sales and use taxes on orders delivered in states where we do not have physical presence or another form of jurisdictional nexus, we could incur substantial tax liabilities for past sales and lose future sales as a result of the increased tax cost that would be borne by the customer. Also, states may seek to reclassify the status of Internet order gatherers, such as our FTD consumer business, as persons that are deemed to fulfill the underlying order, in which case, a state may seek to impose taxes on the receipts generated by our FTD consumer business for orders fulfilled and delivered by florists outside such state. In addition, future changes in the operation of our online and telephonic sales channels could result in the imposition of additional sales and use tax or other tax obligations.

        Additionally, in accordance with current industry practice by international floral and specialty gift direct marketers and our interpretation of applicable law, we collect and remit value-added taxes on certain consumer orders placed through Interflora. Future changes in the operation of our Interflora business could result in the imposition of additional tax obligations. Moreover, if a foreign taxing authority challenges our current practice or implements new legislative initiatives, additional taxes on consumer sales could be due by us. The imposition of additional tax liabilities for past or future sales could decrease our ability to compete with traditional retailers and reduce our sales, which could have a material adverse effect on our business, financial condition, results of operations, and cash flow.

We utilize outsourced staff and temporary employees, who may not be as well trained or committed to our customers as our permanent employees, and their failure to provide our customers with high-quality customer service may cause our customers not to return, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

        We utilize and rely on a significant number of outsourced staff and temporary employees in addition to our permanent employees, to take orders and respond to customer inquiries. These outsourced staff and temporary employees may not have the same level of commitment to our customers or be as well trained as our permanent employees. In addition, we may not hire enough outsourced staff or temporary employees to adequately handle the increased volume of telephone calls we receive during peak periods. If our customers are dissatisfied with the quality of the customer service they receive, they may not place orders with us again, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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ADDITIONAL RISKS RELATING TO OUR CLASSMATES MEDIA SEGMENT

We expect to face increasing competition that could result in a loss of members, reduced revenues and decreased profitability.

        Our online social networking services compete with a wide variety of social networking Web sites, including broad social networking Web sites such as Facebook; a number of specialty niche Web sites, including LinkedIn and MyLife.com, that offer online social networking services focused on particular affiliations such as school or work communities; and schools, employers and associations that maintain their own Internet-based alumni information services. We also compete with a wide variety of Web sites that provide users with alternative networks and ways of locating and interacting with acquaintances from various affiliations, including online services designed to locate individuals such as White Pages and US Search, Internet search engines that have the ability to locate individuals, including by finding individuals through their profiles on social networking Web sites, and Web portals such as Yahoo!, MSN and AOL. We believe that there are currently only a small number of competitive online social networking services that are focused specifically on our niche of the market, which is to help people find and reconnect with enduring relationships and important memories from school. However, as the membership bases of broad social networking Web sites continue to grow, users may be able to locate individuals from their past, free of charge in certain cases, without having to use a niche Web site or other online search service. As a result of the growth of the social networking market and minimal barriers to entry, a number of companies have entered or are attempting to enter our market, either directly or indirectly, some of which may become significant competitors in the future. In addition, many existing online social networking services are broadening their service offerings to compete with our services.

        The market for online loyalty marketing services is highly competitive, and we expect competition to significantly increase in the future as loyalty marketing programs grow in popularity. Our MyPoints online loyalty marketing service faces competition for members from several other online loyalty marketing programs as well as offline loyalty marketing programs that have a significant online presence, such as those operated by credit card, airline and hotel companies.

        Some of our competitors have longer operating histories, greater name and brand recognition, larger user bases, significantly greater financial, technical, sales, and marketing resources, and engage in more extensive research and development than we do. Some of our competitors also have lower customer acquisition costs than we do, offer a wider variety of services, have more compelling Web sites with more extensive user-generated content or offer their services free to their users. If our competitors are more successful than we are in attracting and retaining members, our ability to maintain a large and growing member base will be adversely affected. If our social networking competitors provide similar services for free, we may not be able to continue to charge for any of our online social networking services. Competition could have a material adverse effect on our subscription revenues from online social networking services, as well as on advertising revenues from our online social networking and online loyalty marketing services. More intense competition could also require us to increase our marketing or other expenditures. As a result of competition, our number of members, revenues, cash flows, and profitability could be adversely affected.

Failure to increase or maintain the number of pay accounts for our online social networking services could cause our business and financial results to suffer.

        Pay accounts are critical to our business model. Only a small percentage of users initially registering for our online social networking services sign up for a paid subscription at the time of registration. As a result, our ability to generate subscription revenue is highly dependent on our ability to attract users to our Web sites and register them as free members, to encourage them to return to our Web sites, and to convince them to become pay accounts in order to access the pay features of our

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Web sites. If we are not able to attract users to our Web sites and convert a significant portion to pay accounts, we may not be able to increase or maintain the number of pay accounts for our online social networking services and our business and financial results would be adversely affected.

        A number of our social networking pay account subscriptions each month are not renewed or are canceled, which, for the Classmates 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. We must continually add new social networking 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. We also experienced an increase in the percentage of credit card failures in 2009. 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.

Failure to increase or maintain the number of members for our online social networking and online loyalty marketing services or the activity level of these members could cause our business and financial results to suffer.

        The success of our online social networking and online loyalty marketing services depends upon our ability to increase or maintain our base of free members and the level of activity of those members. A decline in the number of registered or active free social networking members, or a decline in the activity of those members, could result in decreased pay accounts, decreased content on our Web sites and decreased advertising revenues. A decline in the number of registered or active online loyalty marketing service members could result in decreased advertising revenues. The failure to increase or maintain our base of free members, or the failure to convince our free members to actively participate in our Web sites or services, could have a material adverse effect on our business and our financial results.

        In addition, our online social networking services have expended, and may in the future expend, significant resources in developing and implementing new products and services. The development of new products and services involves a number of uncertainties, including unanticipated delays and expenses and technological problems. They also may not be accepted by our members. We cannot assure you that we will be successful in developing or implementing new or enhanced products or services, or that any new products or services will be commercially successful.

Failure to maintain our standard pricing could have adverse effects on our financial results.

        Due to the economic conditions in the U.S. and for competitive and other reasons, we recently have been offering a greater percentage of discounted plans on a promotional basis than we typically have offered in the past. In general, these discounted plans offer a one-year subscription term for $9.95, which is a significant discount compared to the current standard pricing for a one-year subscription term of $39.00. We anticipate that the increase in the percentage of pay accounts under a discounted plan will likely result in a decrease in subscription revenues and ARPU, at least in the near term. Although these discounted plans will renew at the then-current standard pricing for such subscription term upon the expiration of the initial term, there are no assurances as to the number of pay accounts that will renew at the standard pricing. We intend to continue offering discounted plans in the future, and there are no assurances that the percentage of discounted plans offered during a period will not be higher than anticipated. Our continued use of discounted plans may result in our becoming dependent on offering such plans in order to obtain new pay accounts and retain existing pay accounts

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and may result in our having to reduce our standard pricing, which would adversely impact our financial results.

ADDITIONAL RISKS RELATING TO OUR COMMUNICATIONS SEGMENT

Our business will suffer if we are unable to compete successfully.

        We compete with numerous other dial-up Internet access providers as well as providers of broadband services. Our key dial-up Internet access competitors include established online service and content providers, such as AOL and MSN, and independent national Internet service providers, such as EarthLink and its PeoplePC subsidiary. Dial-up Internet access services do not compete favorably with broadband services with respect to connection speed and do not have a significant, if any, price advantage over certain broadband services. Many broadband providers, including cable companies and local exchange carriers, bundle their offerings with telephone, entertainment or other services, which may result in lower prices than standalone services. In addition to competition from broadband providers, competition among dial-up Internet access service providers is intense and neither our pricing nor our features provides us with a significant competitive advantage, if any, over certain of our dial-up Internet access competitors. We expect that competition, particularly with respect to price, both for broadband as well as dial-up Internet access services, will continue. We also expect that our dial-up Internet access subscriber base will continue to decrease, potentially at an increasing rate, and that our broadband services will not experience significant growth.

        In order to compete effectively, we may have to make significant revisions to our services, pricing and marketing strategies, and business model. For example, we may have to lower our introductory rates, offer additional free periods of service, offer additional features at little or no additional cost to the consumer, or reduce the standard pricing of our services. Measures such as these could decrease our revenues and our average revenue per dial-up Internet access pay account. We may also have to allocate more marketing resources toward our dial-up Internet access services than we anticipate. All of the foregoing could adversely affect the profitability of our dial-up Internet access services which could materially and adversely impact our business, financial condition, results of operations, and cash flows.

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. We expect our dial-up Internet access pay accounts to continue to decline. As a result of expected continued 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 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. The rate of decline in Communications services revenues has accelerated in some periods and may continue to accelerate. Continued declines, particularly if such declines accelerate, in Communications revenues will materially and adversely impact the profitability of this segment.

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Our Internet access business is dependent on the availability of telecommunications services and compatibility with third-party systems and products.

        Our Internet access business substantially depends on the availability, capacity, affordability, reliability, and security of our telecommunications networks. Only a limited number of telecommunications providers offer the network and data services we currently require, and we purchase most of our telecommunications services from a few providers. Some of our telecommunications services are provided pursuant to short-term agreements that the providers can terminate or elect not to renew. In addition, some telecommunications providers may cease to offer network services for certain less populated areas, which would reduce the number of providers from which we may purchase services and may entirely eliminate our ability to purchase services for certain areas. If we are unable to maintain, renew or obtain new agreements with telecommunications providers, our business, financial condition, results of operations, and cash flows could be materially and adversely affected.

        Our dial-up Internet access services also rely on their compatibility with other third-party systems, products and features, including operating systems. Incompatibility with third-party systems and products could adversely affect our ability to deliver our services or a user's ability to access our services and could also adversely impact the distribution channels for our services. Our services are dependent on dial-up modems and an increasing number of computer manufacturers, including certain manufacturers with whom we have distribution relationships, do not pre-load their new computers with dial-up modems, requiring the user to separately acquire a modem to access our services. There can be no assurance that, as the dial-up Internet access market declines and new technologies emerge, we will be able to continue to effectively distribute and deliver our services.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None.

ITEM 2.    PROPERTIES

        Our corporate headquarters are located in Woodland Hills, California and consist of leased space of approximately 0.1 million square feet. We also lease office space in Fort Lee, New Jersey and Hyderabad, India, which is generally used by our Communications segment. Additionally, we lease office space in Seattle, Washington; San Francisco, California; Schaumburg, Illinois; Erlangen, Germany; and Berlin, Germany, which is generally used by our Classmates Media segment. Our FTD segment also leases space for call center facilities in Centerbrook, Connecticut; Medford, Oregon; Sherwood, Arkansas; and Nottingham, England. We also lease warehouse space in a distribution center in Naperville, Illinois, which is used by our FTD segment.

        We own office space in Downers Grove, Illinois and Sleaford, England which is occupied by our FTD segment. We entered into a credit agreement in conjunction with the acquisition of FTD, which includes a security interest in substantially all of its assets, including a mortgage on the owned real property at the Downers Grove, Illinois location.

        We believe that our existing facilities are adequate to meet our current requirements and that suitable additional or substitute space will be available as needed to accommodate any physical expansion of our corporate and operations facilities, customer support and technology centers or for any additional sales offices. For additional information regarding our obligations under leases, see Note 15—"Commitments and Contingencies" to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

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ITEM 3.    LEGAL PROCEEDINGS

        In April 2001 and in May 2001, lawsuits were filed in the United States District Court for the Southern District of New York against NetZero, Inc. ("NetZero"), certain officers and directors of NetZero and the underwriters of NetZero's initial public offering, Goldman Sachs Group, Inc., BancBoston Robertson Stephens, Inc. and Salomon Smith Barney, Inc. A consolidated amended complaint was filed in April 2002. The complaint alleges that the prospectus through which NetZero conducted its initial public offering in September 1999 was materially false and misleading because it failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors material portions of the restricted number of NetZero shares issued in connection with the offering; and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate NetZero shares to those customers in the offering in exchange for which the customers agreed to purchase additional NetZero shares in the aftermarket at pre-determined prices. Plaintiffs are seeking injunctive relief and damages. The case against NetZero was coordinated with approximately 300 other suits filed against more than 300 issuers that conducted their initial public offerings between 1998 and 2000, their underwriters and an unspecified number of their individual corporate officers and directors. The parties in the approximately 300 coordinated class actions, including NetZero, the underwriter defendants in the NetZero class action, and the plaintiff class in the NetZero action, have reached an agreement in principle under which the insurers for the issuer defendants in the coordinated cases will make a settlement payment on behalf of the issuers, including NetZero. On October 5, 2009, the district court issued an order granting final approval of the settlement and certifying the settlement class. Certain individuals have appealed the October 5, 2009 order.

        In 2009, a committee of the U.S. Senate commenced an investigation of post-transaction sales practices and the companies that have engaged in such practices. As part of such investigation, we received a request for information from the committee, and we have cooperated with such request. In addition, we have received a civil investigative demand from the Attorney General of the State of Washington and subpoenas from the Attorney General of the State of New York regarding their respective investigations into such practices and the companies that have engaged in them, including us. We have been cooperating with the investigations, but we cannot predict their outcome or their potential implications for our business. There are no assurances that additional governmental investigations or other legal actions will not be instituted in connection with our former post-transaction sales practices or other current or former business practices.

        Lawsuits and investigations involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to defend. Although we do not believe the outcome of our outstanding legal proceedings, investigations, claims, and litigation will have a material adverse effect on our business, financial condition, results of operations, or cash flows, the results of legal proceedings, investigations, claims, and litigation are inherently uncertain and we cannot provide assurance that we will not be materially and adversely impacted by the results of such proceedings or investigations. At December 31, 2009, we had not established any reserves for legal proceedings and investigations except for a $2.2 million reserve for a pending lawsuit.

        We are subject to various legal proceedings, claims and litigation that arise in the ordinary course of business. Based on information at this time, we believe the amount, and ultimate liability, if any, with respect to these actions will not materially affect our business, financial condition, results of operations, or cash flows. There can be no assurance, however, that such actions will not materially and adversely affect our business, financial condition, results of operations, or cash flows.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        We did not submit any matters to a vote of security holders during the quarter ended December 31, 2009.

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        Our common stock has been quoted on The Nasdaq Global Select Market ("NASDAQ") under the symbol "UNTD" since September 26, 2001. Prior to that, NetZero common stock had been quoted on NASDAQ under the symbol "NZRO" since September 23, 1999. The following table sets forth, for the quarters indicated, the high and low sales prices per share of our common stock as reported on the NASDAQ.

        On February 12, 2010, there were 552 holders of record of our common stock.

Dividends

        United Online, Inc.'s Board of Directors declared quarterly cash dividends of $0.20 per share of common stock in February, April, July and October 2007. The dividends were paid on February 28, May 31, August 31, and November 30, 2007 and totaled $13.7 million, $14.4 million, $14.4 million, and $14.6 million, respectively.

        United Online, Inc.'s Board of Directors declared quarterly cash dividends of $0.20 per share of common stock in January, April and July 2008. The dividends were paid on February 29, May 30, and August 29, 2008 and totaled $14.6 million, $14.9 million, and $14.9 million, respectively. Following the closing of the FTD acquisition, our Board of Directors decreased our quarterly cash dividend from $0.20 per share of common stock to $0.10 per share of common stock. In October 2008, our Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock. The dividend was paid on November 28, 2008 and totaled $8.7 million.

        United Online, Inc.'s Board of Directors declared quarterly cash dividends of $0.10 per share of common stock in January, April, July, and October 2009. The dividends were paid on February 27, May 29, August 31, and November 30, 2009 and totaled $8.8 million, $9.1 million, $9.2 million, and $9.1 million, respectively.

        In February 2010, United Online Inc.'s Board of Directors declared a quarterly cash dividend of $0.10 per share of common stock. The record date was February 14, 2010 and the dividend will be paid on February 26, 2010.

        The payment of future dividends is discretionary and is subject to determination by United Online, Inc.'s Board of Directors each quarter following its review of our financial performance and other factors. In addition, our credit agreement with Silicon Valley Bank imposes certain limitations on our ability to pay dividends. Dividends are declared and paid out of our surplus, as defined and computed in accordance with the General Corporation Law of the State of Delaware.

Common Stock Repurchases

        United Online, Inc.'s Board of Directors authorized a common stock repurchase program (the "program") that allows us to repurchase shares of our common stock through open market or privately negotiated transactions based on prevailing market conditions and other factors through December 31,

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2009. From time to time, the Board of Directors has increased the amount authorized for repurchase under this program and has extended the program. In April 2004, the Board of Directors authorized us to purchase up to an additional $100 million of our common stock under the program, bringing the total amount authorized under the program to $200 million. In December 2009, the Board of Directors again further extended the program through December 31, 2010. From August 2001 through December 31, 2009, we had repurchased $139.2 million of our common stock under the program, leaving $60.8 million of authorization remaining under the program. We have not repurchased any shares of our common stock under the program since February 2005.

        Shares withheld upon the vesting of restricted stock units and restricted stock awards and upon the issuance of stock awards to pay applicable employee withholding taxes are considered common stock repurchases, but are not counted as purchases against the program. Upon vesting of restricted stock units or issuance of stock awards, we currently do not collect the applicable employee withholding taxes from employees. Instead, we automatically withhold, from the restricted stock units that vest and from the stock awards that are issued, the portion of those shares with a fair market value equal to the amount of the employee withholding taxes due, which is accounted for as a repurchase of common stock. We then pay the applicable withholding taxes in cash.

        Common stock repurchases during the quarter ended December 31, 2009 were as follows (in thousands, except per share amounts):

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Performance Graph

        This performance graph shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of United Online, Inc. under the Securities Act of 1933, as amended, or the Exchange Act.

        The following graph compares, for the five-year period ended December 31, 2009, the cumulative total stockholder return for the Company's common stock, The Nasdaq Global Select Market (U.S. companies) Index (the "Nasdaq Composite") and the Morgan Stanley Internet Index ("MS Internet Index"). Measurement points are the last trading day of each of the Company's fiscal years ended December 31, 2004, 2005, 2006, 2007, 2008, and 2009. The graph assumes that $100 was invested on December 31, 2004 in the common stock of the Company, the Nasdaq Composite and the MS Internet Index and assumes reinvestment of any dividends. The stock price performance on the following graph is not necessarily indicative of future stock price performance.

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ITEM 6.    SELECTED FINANCIAL DATA

        The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K.

        The following table presents the consolidated statements of operations data for the years ended December 31, 2009, 2008 and 2007, and the consolidated balance sheet data at December 31, 2009 and 2008. Such financial data are derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The table also presents the consolidated statements of operations data for the years ended December 31, 2006 and 2005 and the consolidated balance sheet data at December 31, 2007, 2006 and 2005 which are derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K except for net income (loss) applicable to common stockholders and net income (loss) per common share information, which has been updated in connection with the adoption of Accounting Standards Codification ("ASC") 260-10-45, Earnings Per Share-Other Presentation Matters.

        The following amounts are in thousands, except per share data:

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

        This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, as amended, based on our current expectations, estimates and projections about our operations, industry, financial condition, performance, results of operations, and liquidity. Statements containing words such as "may," "believe," "anticipate," "expect," "intend," "plan," "project," "projections," "business outlook," "estimate," or similar expressions constitute forward-looking statements. These forward-looking statements include, but are not limited to, statements about future financial performance; advertising revenues; segment metrics; operating expenses; market trends, including those in the markets in which we compete; operating and marketing efficiencies; revenues; liquidity; cash flows and uses of cash; dividends; capital expenditures; depreciation and amortization; tax payments; foreign currency exchange rates; hedging arrangements; our ability to repay indebtedness, pay dividends and invest in initiatives; our products and services; pricing; competition; and strategies and initiatives. Potential factors that could affect the matters about which the forward-looking statements are made include, among others, the factors disclosed in the section entitled "Risk Factors" in this Annual Report on Form 10-K and additional factors that accompany the related forward-looking statements in this Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as the date hereof. Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that may cause actual performance and results to differ materially from those predicted. Reported results should not be considered an indication of future performance. Except as required by law, we undertake no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Overview

        We are a leading provider of consumer products and services over the Internet through a number of brands including FTD, Interflora, Classmates, NetZero, and MyPoints. Our FTD segment provides floral and related products and services to consumers and retail florists, as well as to other retail locations offering floral and related products and services. Our Classmates Media segment services are online social networking and online loyalty marketing. Our primary Communications segment services are Internet access and email. On a combined basis, our Web properties attract a significant number of Internet users, and we offer a broad range of Internet marketing services for advertisers.

Segment Definitions

        We report our businesses in three reportable segments:

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