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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the 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 Exchange Act). Yes o No ý

There were 69,040,202 shares of the Registrant's common stock outstanding at August 1, 2008.



PART I.		FINANCIAL INFORMATION
	Item 1.	Unaudited Condensed Consolidated Balance Sheets at June 30, 2008 and December 31, 2007	4
		Unaudited Condensed Consolidated Statements of Operations for the Quarters and Six Months Ended June 30, 2008 and 2007	5
		Unaudited Condensed Consolidated Statements of Comprehensive Income for the Quarters and Six Months Ended June 30, 2008 and 2007	6
		Unaudited Condensed Consolidated Statement of Stockholders' Equity for the Six Months Ended June 30, 2008	7
		Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2008 and 2007	8
		Notes to Unaudited Condensed Consolidated Financial Statements	9
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
	Item 4.	Controls and Procedures	53
PART II.		OTHER INFORMATION
	Item 1.	Legal Proceedings	54
	Item 1A.	Risk Factors	55
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
	Item 4.	Submission of Matters to a Vote of Security Holders	72
	Item 6.	Exhibits	73
SIGNATURES			76

In this document, except where otherwise defined, "United Online," the "Company," "we," "us" and "our" refer to United Online, Inc. and its subsidiaries.

Acquisition. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Any such forward-looking statements are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. The section entitled "Risk Factors" in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission set forth some of the important risk factors that may affect our business, financial position, results of operations, and cash flows. Statements indicating factors that we believe may impact our results or financial condition are not intended to be exclusive. We undertake no obligation to revise or update publicly any forward-looking statements, other than as required by law.

UNITED ONLINE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

			June 30, 2008			December 31, 2007

Assets
Current assets:
	Cash and cash equivalents		$	113,667		$	149,507
	Short-term investments			126,323			68,800
	Accounts receivable, net of allowance for doubtful accounts of $3,026 and $2,378 at June 30, 2008 and December 31, 2007, respectively			26,894			28,765
	Deferred tax assets, net			9,719			7,050
	Other current assets			17,212			19,992

		Total current assets		293,815			274,114
Property and equipment, net				36,489			39,570
Deferred tax assets, net				54,955			57,559
Goodwill				132,239			132,352
Intangible assets, net				36,103			40,915
Other assets				9,663			7,883

		Total assets	$	563,264		$	552,393

Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	37,161		$	38,095
	Accrued liabilities			19,872			30,586
	Member redemption liability			21,507			19,499
	Deferred revenue			71,221			63,086
	Capital leases			5			13

		Total current liabilities		149,766			151,279
Member redemption liability				5,181			5,061
Deferred revenue				4,843			4,691
Other liabilities				10,904			10,734

		Total liabilities		170,694			171,765

Commitments and contingencies
Stockholders' equity:
	Common stock			7			7
	Additional paid-in capital			400,173			414,841
	Accumulated other comprehensive income			52			182
	Accumulated deficit			(7,662	)		(34,402	)

		Total stockholders' equity		392,570			380,628

		Total liabilities and stockholders' equity	$	563,264		$	552,393

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

UNITED ONLINE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

			Quarter Ended June 30,						Six Months Ended June 30,

			2008			2007			2008			2007
Revenues			$	122,273		$	131,417		$	244,084		$	261,268
Operating expenses:
	Cost of revenues (including stock-based compensation, see Note 6)			26,830			30,409			54,669			59,656
	Sales and marketing (including stock-based compensation, see Note 6)			35,809			42,712			72,590			88,737
	Technology and development (including stock-based compensation, see Note 6)			12,521			13,065			25,423			26,536
	General and administrative (including stock-based compensation, see Note 6)			22,774			16,900			43,658			32,389
	Amortization of intangible assets			2,022			3,204			4,858			6,699
	Restructuring charges			357			394			563			394

		Total operating expenses		100,313			106,684			201,761			214,411

Operating income				21,960			24,733			42,323			46,857
Interest and other income, net				1,947			1,881			3,755			3,581
Interest expense				(379	)		(372	)		(545	)		(732	)

Income before income taxes				23,528			26,242			45,533			49,706
Provision for income taxes				9,790			10,034			18,793			20,470

Net income			$	13,738		$	16,208		$	26,740		$	29,236

Basic net income per share			$	0.20		$	0.24		$	0.39		$	0.44

Diluted net income per share			$	0.19		$	0.23		$	0.38		$	0.43

Shares used to calculate basic net income per share				68,853			66,685			68,499			66,159

Shares used to calculate diluted net income per share				70,492			69,351			70,109			68,719

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

UNITED ONLINE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

UNITED ONLINE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(in thousands)

	Common Stock							Accumulated Other Comprehensive Income

	Common Stock				Additional Paid-In Capital						Accumulated Deficit			Total Stockholders' Equity
	Shares		Amount		Additional Paid-In Capital						Accumulated Deficit			Total Stockholders' Equity
Balance at January 1, 2008		68,019	$	7	$	414,841		$	182		$	(34,402	)	$	380,628
Exercises of stock options		126		—		1,043			—			—			1,043
Issuance of common stock through employee stock purchase plan		284		—		2,576			—			—			2,576
Vesting of restricted stock units		608		—		—			—			—			—
Repurchases of common stock		—		—		(7,124	)		—			—			(7,124	)
Dividends paid on shares outstanding and restricted stock units		—		—		(29,469	)		—			—			(29,469	)
Dividends payable on restricted stock units		—		—		(70	)		—			—			(70	)
Stock-based compensation		—		—		18,151			—			—			18,151
Change in unrealized gain on short-term investments, net of tax		—		—		—			73			—			73
Foreign currency translation		—		—		—			(203	)		—			(203	)
Tax benefits from equity awards		—		—		225			—			—			225
Net income		—		—		—			—			26,740			26,740

Balance at June 30, 2008		69,037	$	7	$	400,173		$	52		$	(7,662	)	$	392,570

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

UNITED ONLINE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

				Six Months Ended June 30,

				2008			2007
Cash flows from operating activities:
	Net income			$	26,740		$	29,236
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			15,183			16,678
		Stock-based compensation			18,151			6,821
		Provision for doubtful accounts receivable			586			1,093
		Deferred taxes, net			18			550
		Tax benefits from equity awards			225			3,710
		Excess tax benefits from equity awards			(264	)		(2,533	)
		Other			87			508
	Changes in operating assets and liabilities:
		Accounts receivable			1,287			873
		Other assets			6,773			(4,324	)
		Accounts payable and accrued liabilities			(14,210	)		(3,616	)
		Member redemption liability			2,127			2,829
		Deferred revenue			8,287			9,292
		Other liabilities			100			(71	)

			Net cash provided by operating activities		65,090			61,046

Cash flows from investing activities:
	Purchases of property and equipment				(7,256	)		(12,563	)
	Purchases of short-term investments				(120,378	)		(164,505	)
	Proceeds from maturities of short-term investments				48,300			26,520
	Proceeds from sales of short-term investments				14,523			109,061
	Cash paid for proposed acquisition				(3,165	)		—
	Proceeds from sales of assets, net				29			21

			Net cash used for investing activities		(67,947	)		(41,466	)

Cash flows from financing activities:
	Payments on capital leases				(8	)		(8	)
	Proceeds from exercises of stock options				1,043			6,837
	Proceeds from employee stock purchase plan				2,576			3,485
	Repurchases of common stock				(7,124	)		(3,782	)
	Payments for dividends				(29,469	)		(28,174	)
	Excess tax benefits from equity awards				264			2,533

			Net cash used for financing activities		(32,718	)		(19,109	)

Effect of exchange rate changes on cash and cash equivalents					(265	)		(25	)
Change in cash and cash equivalents					(35,840	)		446
Cash and cash equivalents, beginning of period					149,507			19,252

Cash and cash equivalents, end of period				$	113,667		$	19,698

Supplemental disclosure of non-cash investing and financing activities:
	Increase in accounts payable and accrued liabilities for proposed acquisition			$	3,030		$	—
	Dividends payable on restricted stock units			$	70		$	—

The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.

UNITED ONLINE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS

United Online, Inc. ("United Online" or the "Company") is a leading provider of consumer Internet and media services through a number of brands, including Classmates, MyPoints, NetZero, and Juno. The Company reports its business in two reportable operating segments: Classmates Media and Communications. The Company's Classmates Media services are online social networking and online loyalty marketing. The Company's primary Communications services are Internet access and email. On a combined basis, the Company's Web properties attract a significant number of Internet users and the Company offers a broad array of Internet marketing products and services for advertisers.

The accompanying unaudited condensed consolidated financial statements for the quarters and six months ended June 30, 2008 and 2007, which include United Online and its subsidiaries, are unaudited except for the condensed consolidated balance sheet information at December 31, 2007, which is derived from the Company's audited consolidated financial statements, filed on February 20, 2008 with the Securities and Exchange Commission ("SEC"), in the Company's Annual Report on Form 10-K for the year ended December 31, 2007 but does not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP"). The Company's unaudited condensed consolidated financial statements have been prepared in accordance with GAAP, including those for interim financial information, and with the instructions for Form 10-Q and Article 10 of Regulation S-X issued by the SEC. Accordingly, they do not include all of the information and note disclosures required by GAAP for complete financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of the results for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for any future periods.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities and the reported amounts of revenues and expenses. Actual results could differ from these estimates and assumptions. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2007 included in the Company's Annual Report on Form 10-K filed on February 20, 2008 with the SEC.

The most significant areas of the unaudited condensed consolidated financial statements that require management judgment and which are susceptible to possible change in the near term include the Company's revenue recognition, goodwill, intangible assets and other long-lived assets, member redemption liability, income taxes, and legal contingencies.

Reclassifications—Certain prior year amounts have been reclassified to conform to the current year presentation. These changes had no impact on the previously reported consolidated results of operations or stockholders' equity.

1. DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION, AND RECENT ACCOUNTING PRONOUNCEMENTS (Continued)

In December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141(R), Business Combinations. SFAS No. 141(R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 141(R) is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. SFAS No. 141(R) requires prospective application for all acquisitions after the date of adoption. The Company expects SFAS No. 141(R) to have an impact on its consolidated financial statements when effective, but the timing, nature and magnitude of the specific effects will depend upon the nature, terms and size of any acquisitions the Company consummates after the effective date. The Company will continue to evaluate the impact of the adoption of SFAS No. 141(R).

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. The Company has not yet determined the effect on its consolidated financial statements, if any, upon adoption of SFAS No. 160.

Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities

In June 2008, the FASB issued Staff Position ("FSP") EITF Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("FSP EITF 03-6-1"), in which the FASB concluded that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends (such as restricted stock units granted by the Company) are considered participating securities. Because the awards are considered participating securities, the issuing entity is required to apply the two-class method of computing basic and diluted earnings per share. The provisions of FSP EITF 03-6-1 will be effective for the Company on January 1, 2009 and will be applied retroactively to all prior-period earnings per share computations. The Company has not yet determined the effect on its earnings per share amounts upon adoption of FSP EITF 03-6-1.

In April 2008, the Company entered into a definitive merger agreement with FTD Group, Inc. ("FTD"), a leading provider of floral and related products and services to consumers and retail florists in the United States, Canada, the United Kingdom, and the Republic of Ireland, providing for the proposed acquisition of FTD by the Company (the "Acquisition"). Under the terms of the merger agreement and subject to the conditions therein, FTD stockholders will receive $10.15 in cash and 0.4087 of a share of United Online common stock for each share of FTD common stock (subject to adjustment as described below), for a total value of $14.38 per share of FTD common stock, based on

the Company's closing stock price of $10.36 on July 21, 2008. Based on the number of shares of FTD common stock outstanding on July 21, 2008, and the closing stock price of United Online common stock on July 21, 2008, it is expected that FTD stockholders will receive total merger consideration of approximately $434 million, consisting of approximately $306 million in cash and approximately 12.3 million shares of United Online common stock. Upon closing of the proposed transaction, the former FTD stockholders will own approximately 15% of the Company.

The Company plans to finance a portion of the cash merger consideration with financing from Silicon Valley Bank, and received a commitment from Silicon Valley Bank to provide to the Company, on the terms and subject to the conditions therein, a $60 million senior secured term loan facility (the "UOL Credit Facility") to be used to fund a portion of the cash merger consideration for the proposed acquisition of FTD by the Company. The term loans under the UOL Credit Facility will bear interest at either LIBOR plus 3.5% per annum (with a LIBOR floor of 3.0%) or a base rate plus 2% per annum. In connection with receipt of the commitment from Silicon Valley Bank, the Company and FTD entered into an amendment to the previously announced merger agreement pursuant to which the Company has elected to exercise its right under the terms of the merger agreement related to the Company obtaining additional financing to increase the per share cash merger consideration payable to FTD's stockholders by $2.81 in full substitution of the $3.31 principal amount of United Online 13% senior secured notes due in 2013 ("UOL notes").

If the Silicon Valley Bank financing is unavailable to the Company for any reason, the Company is required to adjust the merger consideration so that FTD stockholders would instead receive $7.34 in cash, 0.4087 of a share of United Online common stock and $3.31 principal amount of UOL notes for each share of FTD common stock in the Acquisition, for a total value of $14.88 per share of FTD common stock based on United Online's closing stock price of $10.36 on July 21, 2008. In such case, the Company and FTD have agreed to notify FTD's stockholders by press release of such change in merger consideration on or before the fifth business day prior to the scheduled date of the special meeting of the FTD stockholders to consider the merger. Based on the number of shares of FTD common stock outstanding on July 21, 2008 and the closing stock price of United Online common stock on July 21, 2008, it is expected that FTD stockholders would receive total merger consideration of approximately $449 million, consisting of approximately $221 million in cash, approximately 12.3 million shares of United Online common stock and $100 million aggregate principal amount of UOL notes. The UOL notes would be secured by a pledge of the stock of Classmates Media Corporation ("CMC") and guaranteed by all of the Company's domestic subsidiaries other than FTD, FTD's direct parent and FTD's subsidiaries. The UOL notes would be issued on the terms set forth in the form of indenture filed with the SEC as an exhibit to the Company's registration statement on Form S-4 with respect to the proposed acquisition.

is either a base rate plus 3.5% per annum, or LIBOR plus 4.5% per annum (with a LIBOR floor of 3.0%), in each case, with a step-down in the interest rate depending on FTD's leverage ratio. In addition, FTD will pay a commitment fee equal to 0.50% per annum (with step-downs in the interest rate depending on FTD's leverage ratio) on the unused portion of the revolving credit facility. The Credit Facilities will be secured by substantially all of FTD's assets. It is expected that on the closing date of the Acquisition, the Credit Facilities will be funded and FTD and its subsidiaries will undertake UNOLA Corp.'s obligations under the Credit Facilities.

Wells Fargo's commitment to fund the Credit Facilities on the closing date of the Acquisition is subject to the satisfaction of certain conditions, including, among other things, the consummation of the equity issuance of United Online common stock described above, its receipt of FTD's interim consolidated financial statements and other financial information, the satisfaction of the conditions in the merger agreement that are material to the interests of the lenders under the Credit Facilities, the absence of a material adverse effect at FTD, the achievement by FTD of at least $97.5 million of adjusted EBITDA, as defined in connection with the Credit Facilities, for the most recently completed trailing 12-month period ended at least 30 days prior to the Acquisition closing date for which financial statements are available, and the consummation of the defeasance of FTD's 7.75% senior subordinated notes due in 2014 (or, in the Company's discretion, the Company's funding of the purchase of all such senior subordinated notes pursuant to a tender offer and consent solicitation by FTD and the defeasance of any such senior subordinated notes not so acquired in such tender offer).

In connection with the Acquisition, on July 28, 2008, FTD, Inc. ("FTDI"), a wholly-owned subsidiary of FTD, commenced a cash tender offer for any and all of the $170.1 million aggregate outstanding principal amount of FTDI's 7.75% senior subordinated notes due in 2014. In conjunction with the tender offer, noteholder consents are being solicited to effect certain amendments and waivers to the indenture governing such notes. The tender offer is scheduled to expire at 5:00 p.m., New York City time, on August 25, 2008, unless extended or earlier terminated by FTDI, including any extension required because the conditions to the closing of the Acquisition have not been satisfied as of that date. The consent solicitation is scheduled to expire at 5:00 p.m., New York City time, on August 11, 2008, unless extended or earlier terminated by FTDI. The tender offer is conditioned on, among other things, consummation of the Acquisition.

At June 30, 2008, the Company had incurred approximately $6.5 million in costs associated with the Acquisition. These costs include charges associated with the Company's due diligence efforts and expenses related to the negotiation and financing of the Acquisition and have been included in other assets on the Company's accompanying unaudited condensed consolidated balance sheet at June 30, 2008.

The Company has filed with the SEC a Registration Statement on Form S-4, which includes a proxy statement/prospectus of FTD and the Company and other relevant materials in connection with the Acquisition. Investors and stockholders are urged to read the proxy statement/prospectus and Registration Statement, and any and all amendments or supplements thereto, because they contain important information about the proposed transaction, including risk factors relating to the proposed transaction, the FTD business, and the Company's proposed financing of the transaction.

Changes in gross unrealized gains and losses are presented net of tax in accumulated other comprehensive income on the unaudited condensed consolidated balance sheets. The Company had no material realized gains or losses from the sale of short-term investments in the quarters and six months ended June 30, 2008 and 2007.

The Company did not have any gross unrealized losses in its short-term investments at December 31, 2007. The following table summarizes the fair value and gross unrealized losses on the Company's short-term investments, aggregated by type of investment instrument and length of time that individual securities have been in a continuous unrealized loss position, at June 30, 2008 (in thousands):

At June 30, 2008, one individual customer comprised 10% of the consolidated net accounts receivable balance. For the quarters and six months ended June 30, 2008 and 2007, the Company did not have any individual customers that comprised more than 10% of consolidated total revenues.

On January 1, 2008, the Company adopted certain provisions of SFAS No. 157, Fair Value Measurements, which establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and expands on required disclosures about fair value measurement. The provisions of SFAS No. 157 relate to financial assets and liabilities as well as other assets and liabilities carried at

fair value on a recurring basis and did not have a material impact on the Company's consolidated financial statements. The provisions of SFAS No. 157 related to nonfinancial assets and liabilities will be effective for the Company on January 1, 2009 in accordance with FASB Staff Position ("FSP") FAS 157-2, Effective Date of FASB Statement No. 157 and will be applied prospectively. The Company is currently evaluating the impact that these additional provisions will have on the Company's consolidated financial statements. In accordance with FSP FAS 157-2, the Company will apply the provisions of SFAS No. 157 to property and equipment, goodwill and intangible assets at January 1, 2009.

SFAS No. 157 establishes a three-tiered hierarchy that draws a distinction between market participant assumptions based on (i) quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1), (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2) and (iii) unobservable inputs that require the Company to use present value and other valuation techniques in the determination of fair value (Level 3). The following table presents information about assets required to be carried at fair value on a recurring basis at June 30, 2008 (in thousands):

At December 31, 2007, there were 350,000 shares of common stock that were subject to repurchase related to unvested shares under restricted stock agreements. The 350,000 restricted shares outstanding at December 31, 2007 vested entirely at the end of a four-year vesting period in January 2008, at which time 142,000 shares were withheld and employee withholding taxes of $1.5 million were paid.

The Company's Board of Directors authorized a common stock repurchase program (the "program") that allows the Company to repurchase shares of its common stock through open market or privately negotiated transactions based on prevailing market conditions and other factors through December 31, 2008. From August 2001 through June 30, 2008, the Company had repurchased $139.2 million of its common stock under the program. We have not repurchased any shares of our common stock under the program since February 2005, and at June 30, 2008, the remaining amount available under the program was $60.8 million.

Shares withheld upon vesting of restricted stock units to pay applicable employee withholding taxes are considered common stock repurchases, but are not counted as purchases against the program.

Upon vesting, the Company currently does not collect the applicable employee withholding taxes for restricted stock units from employees. Instead, the Company automatically withholds, from the restricted stock units that vest, 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. The Company then pays the applicable withholding taxes in cash. In the six months ended June 30, 2008 and 2007, 485,000 and 265,000 shares, respectively, were withheld from restricted stock units and restricted stock awards that vested in order to pay the applicable employee withholding taxes.

Dividends are paid on shares of common stock and unvested restricted stock units outstanding as of the record date.

In January and April 2008, the Company's Board of Directors declared quarterly cash dividends of $0.20 per share of common stock. The dividends were paid on February 29, 2008 and May 30, 2008 and totaled $14.6 million and $14.9 million, respectively.

In July 2008, the Company's Board of Directors declared a quarterly cash dividend of $0.20 per share of common stock. The record date for the dividend is August 14, 2008, and the dividend is payable on August 29, 2008.

The payment of future dividends is discretionary and is subject to determination by the Company's Board of Directors each quarter following its review of the Company's financial performance and other factors. Dividends are declared and paid out of the Company's surplus, as defined and computed in accordance with the General Corporation Law of the State of Delaware. Following the closing of the Acquisition, the Company expects to decrease its regular quarterly cash dividend from $0.20 per share of common stock to $0.10 per share of common stock.

The following table summarizes the stock-based compensation that has been included in the following captions within the unaudited condensed consolidated statements of operations for each of the periods presented (in thousands):

In connection with the preparation for the potential initial public offering ("IPO") by the Company's CMC subsidiary, employment agreements were signed with certain employees, which guaranteed such employees an aggregate $13.0 million of value in restricted stock units in CMC. If the employment agreements are not modified, because the IPO was not effective by April 30, 2008, these equity awards will be issued as restricted stock units in the Company based on prices set forth in the employment agreements. Stock-based compensation associated with these equity awards has been recorded in the Company's consolidated financial statements from the execution dates of these agreements. In the quarter and six months ended June 30, 2008, certain of the employment agreements with guaranteed values totaling $1.3 million and $5.3 million in restricted stock units in CMC, respectively, were canceled and $0.3 million and $0.6 million of stock-based compensation was reversed and reflected in general and administrative expenses in the Company's unaudited condensed consolidated statement of operations for the quarter and six months ended June 30, 2008, respectively.

Effective February 15, 2008, the Compensation Committee of the Board of Directors approved grants of 0.3 million restricted stock units with a fair value equal to $3.9 million to certain members of the Company's senior management. Each restricted stock unit entitles the recipient to receive one share of the Company's common stock upon vesting. The restricted stock units vest one-third annually over the three-year period beginning February 15, 2008.

Effective February 15, 2008, the Company approved grants of 1.2 million restricted stock units with a fair value equal to $14.2 million to the Company's employees. The restricted stock units vest twenty-five percent on February 15, 2009 and quarterly thereafter for three years.

Effective February 15, 2008, 0.2 million shares of common stock with a fair value equal to $2.4 million were issued to certain members of senior management and certain of the Company's employees.

On March 14, 2008, the Compensation Committee of the Board of Directors awarded Mark. R. Goldston, the Company's Chairman, President and Chief Executive Officer, a restricted stock unit award covering a minimum of 200,000 shares of the Company's common stock and a maximum of 600,000 shares under the Company's 2001 Stock Incentive Plan. The 200,000-share minimum will vest and become issuable upon Mr. Goldston's continuation in the Company's service through February 28, 2011. The number of shares above that minimum that may vest and become issuable pursuant to the restricted stock unit award will depend on the Company's highest 30-day volume-weighted average closing share price for any consecutive 30-day period between December 1, 2010 and February 28, 2011. However, if, beginning July 1, 2009, the Company's closing share price is at least equal to the share price necessary to earn the maximum shares, and the volume-weighted average closing share price for the subsequent six months is at least equal to such share price, 600,000 shares of the restricted stock unit award will vest and become immediately issuable. Upon vesting, Mr. Goldston would be entitled to any dividend equivalents that are accrued with respect to any shares that vest.

The following table sets forth the computation of basic and diluted net income per share for the quarters and six months ended June 30, 2008 and 2007 (in thousands, except per share amounts):

		Quarter Ended June 30,					Six Months Ended June 30,

		2008		2007			2008			2007
Numerator:
Net income		$	13,738	$	16,208		$	26,740		$	29,236

Denominator:
Weighted-average common shares—basic			68,853		67,153			68,549			66,630
	Less: weighted-average common shares subject to repurchase rights		—		(468	)		(50	)		(471	)

Shares used to calculate basic net income per share			68,853		66,685			68,499			66,159

	Add: Dilutive effect of stock options and restricted stock		1,639		2,666			1,610			2,560

Shares used to calculate diluted net income per share			70,492		69,351			70,109			68,719

Basic net income per share		$	0.20	$	0.24		$	0.39		$	0.44

Diluted net income per share		$	0.19	$	0.23		$	0.38		$	0.43

The diluted net income per share computations exclude stock options and restricted stock units which are antidilutive. The number of antidilutive shares at June 30, 2008 and 2007 was 3.2 million and 2.7 million, respectively.

The Company manages its working capital on a consolidated basis and does not allocate long-lived assets to segments. In addition, segment assets are not reported to, or used by, the chief operating decision maker to allocate resources to, or assess performance of, the segments and therefore, pursuant to SFAS No. 131, total segment assets have not been disclosed.

A reconciliation of segment income from operations (which excludes depreciation and amortization of intangible assets) to consolidated operating income, is as follows for each period presented (in thousands):

International revenues totaled $4.4 million and $7.8 million for the quarter and six months ended June 30, 2008, respectively. International revenues totaled $1.5 million and $2.7 million for the quarter and six months ended June 30, 2007, respectively.

In the quarter and six months ended June 30, 2008, the Company recorded restructuring charges totaling $0.4 million and $0.6 million, respectively, primarily associated with the closure of its Orem, Utah facility. The Company believes these activities will result in total restructuring charges of approximately $0.7 million during 2008, comprised largely of employee termination benefits and facility-exit costs.

In the quarter and six months ended June 30, 2007, the Company recorded restructuring charges of $0.4 million primarily for termination benefits paid to certain employees associated with our Web hosting and photo sharing businesses.

10. POTENTIAL SUBSIDIARY INITIAL PUBLIC OFFERING OF CLASSMATES MEDIA CORPORATION

CMC was formed in August 2007 for the purposes of consolidating the Company's Classmates, The Names Database and MyPoints business units in preparation of an IPO by CMC. The businesses were contributed to CMC by the Company on August 9, 2007. In August 2007, CMC filed a Form S-1 registration statement with the SEC for the IPO of its common stock.

In December 2007, the Company determined that proceeding with the IPO under then-current market conditions was not in the best interests of its stockholders and CMC withdrew its Form S-1 registration statement previously filed with the SEC. Approximately $0.5 million of transaction costs were determined not to have continuing value after the withdrawal of the IPO and were expensed in the quarter ended December 31, 2007. Because it remained the Company's strategy to complete an IPO of CMC during 2008, certain IPO transaction- related costs incurred during 2007 and the first quarter of 2008 totaling $3.9 million were deferred and were included in other assets on the Company's consolidated balance sheet at March 31, 2008. While it still remains the Company's strategy to

10. POTENTIAL SUBSIDIARY INITIAL PUBLIC OFFERING OF CLASSMATES MEDIA CORPORATION (Continued)

complete an IPO of CMC, because the Company believes that capital markets have not improved significantly since the CMC Form S-1 registration statement was withdrawn in December 2007 and there is limited visibility as to when capital markets might improve significantly, the Company has concluded that it is unlikely that an IPO will be completed before 2009. As such, the Company determined, on June 23, 2008, that the $3.9 million in deferred transaction-related costs relating to the IPO would be expensed in the quarter ended June 30, 2008 and the Company's financial results and the financial results of its Classmates Media segment for the quarter and six months ended June 30, 2008 were negatively impacted.

If the UOL notes are issued in connection with the Acquisition, the UOL notes will be guaranteed by each of the Company's current and future domestic subsidiaries, other than UNOL Intermediate, Inc., UNOLA Corp., FTD, and their respective subsidiaries. These guarantees will be full and unconditional joint and several obligations of the guarantors. The obligations of each guarantor under its note guarantee will be limited as necessary to prevent that note guarantee from constituting a fraudulent conveyance under applicable law.

The following presents the supplemental condensed consolidating financial information separately for:

Each guarantor subsidiary is wholly owned, directly or indirectly, by the Parent Company at the date of each balance sheet presented. The UOL notes will be fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. Each entity included in the supplemental condensed consolidating financial information follows the same accounting policies as described in the notes to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2007 filed with the SEC on February 20, 2008.

			Parent		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated

Assets
Current assets:
	Cash and cash equivalents		$	—	$	101,588		$	12,079		$	—		$	113,667
	Short-term investments			—		126,323			—			—			126,323
	Accounts receivable, net			—		26,425			469			—			26,894
	Deferred tax assets, net			—		9,719			—			—			9,719
	Other current assets			—		16,442			770			—			17,212

		Total current assets		—		280,497			13,318			—			293,815
Property and equipment, net				—		35,672			817			—			36,489
Deferred tax assets, net				—		54,955			—			—			54,955
Goodwill				—		132,024			215			—			132,239
Intangible assets, net				—		35,481			622			—			36,103
Investments in subsidiaries				416,867		3,170			—			(420,037	)		—
Other assets				—		9,618			45			—			9,663

		Total assets	$	416,867	$	551,417		$	15,017		$	(420,037	)	$	563,264

Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	—	$	33,999		$	3,162		$	—		$	37,161
	Accrued liabilities			—		18,869			1,003			—			19,872
	Intercompany payables			24,297		(22,224	)		(2,073	)		—			—
	Member redemption liability			—		21,507			—			—			21,507
	Deferred revenue			—		61,466			9,755			—			71,221
	Capital leases			—		5			—			—			5

		Total current liabilities		24,297		113,622			11,847			—			149,766
Member redemption liability				—		5,181			—			—			5,181
Deferred revenue				—		4,843			—			—			4,843
Other liabilities				—		10,904			—			—			10,904

		Total liabilities		24,297		134,550			11,847			—			170,694

		Total stockholders' equity		392,570		416,867			3,170			(420,037	)		392,570

		Total liabilities and stockholders' equity	$	416,867	$	551,417		$	15,017		$	(420,037	)	$	563,264

Supplemental Condensed Consolidating Balance Sheet
December 31, 2007
(in thousands)

			Parent		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated

Assets
Current assets:
	Cash and cash equivalents		$	—	$	142,172		$	7,335		$	—		$	149,507
	Short-term investments			—		68,800			—			—			68,800
	Accounts receivable, net			—		28,421			344			—			28,765
	Deferred tax assets, net			—		7,050			—			—			7,050
	Other current assets			—		19,305			687			—			19,992

		Total current assets		—		265,748			8,366			—			274,114
Property and equipment, net				—		38,929			641			—			39,570
Deferred tax assets, net				—		57,559			—			—			57,559
Goodwill				—		132,153			199			—			132,352
Intangible assets, net				—		40,282			633			—			40,915
Investments in subsidiaries				406,541		2,759			—			(409,300	)		—
Other assets				—		7,871			12			—			7,883

		Total assets	$	406,541	$	545,301		$	9,851		$	(409,300	)	$	552,393

Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	—	$	35,476		$	2,619		$	—		$	38,095
	Accrued liabilities			—		29,699			887			—			30,586
	Intercompany payables			25,913		(23,672	)		(2,241	)		—			—
	Member redemption liability			—		19,499			—			.—			19,499
	Deferred revenue			—		57,259			5,827			—			63,086
	Capital leases			—		13			—			—			13

		Total current liabilities		25,913		118,274			7,092			—			151,279
Member redemption liability				—		5,061			—			—			5,061
Deferred revenue				—		4,691			—			—			4,691
Other liabilities				—		10,734			—			—			10,734

		Total liabilities		25,913		138,760			7,092			—			171,765

		Total stockholders' equity		380,628		406,541			2,759			(409,300	)		380,628

		Total liabilities and stockholders' equity	$	406,541	$	545,301		$	9,851		$	(409,300	)	$	552,393

Supplemental Condensed Consolidating Statement of Operations
Quarter Ended June 30, 2008
(in thousands)

			Parent		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		Elimination Entries			Consolidated

Revenues			$	—	$	119,614		$	5,614	$	(2,955	)	$	122,273
Operating expenses:
	Cost of revenues			—		27,111			382		(663	)		26,830
	Sales and marketing			—		33,352			2,481		(24	)		35,809
	Technology and development			—		13,106			1,324		(1,909	)		12,521
	General and administrative			—		22,309			811		(346	)		22,774
	Amortization of intangible assets			—		1,993			29		—			2,022
	Restructuring charges			—		357			—		—			357

		Total operating expenses		—		98,228			5,027		(2,942	)		100,313

Operating income				—		21,386			587		(13	)		21,960
Interest and other income, net				—		2,958			192		(1,203	)		1,947
Interest expense				—		(1,582	)		—		1,203			(379	)

Income before income taxes				—		22,762			779		(13	)		23,528
Provision for income taxes				—		9,790			—		—			9,790

Income before income in equity investees				—		12,972			779		(13	)		13,738
Income in equity investees				13,738		—			—		(13,738	)		—

Net income			$	13,738	$	12,972		$	779	$	(13,751	)	$	13,738

Supplemental Condensed Consolidating Statement of Operations
Quarter Ended June 30, 2007
(in thousands)

			Parent		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated

Revenues			$	—	$	137,633		$	2,820		$	(9,036	)	$	131,417
Operating expenses:
	Cost of revenues			—		35,673			87			(5,351	)		30,409
	Sales and marketing			—		40,504			2,208			—			42,712
	Technology and development			—		13,198			1,181			(1,314	)		13,065
	General and administrative			—		16,660			240			—			16,900
	Amortization of intangible assets			—		3,179			25			—			3,204
	Restructuring charges			—		394			—			—			394

		Total operating expenses		—		109,608			3,741			(6,665	)		106,684

Operating income				—		28,025			(921	)		(2,371	)		24,733
Interest and other income, net				—		1,878			3			—			1,881
Interest expense				—		(372	)		—			—			(372	)

Income before income taxes				—		29,531			(918	)		(2,371	)		26,242
Provision for income taxes				—		10,034			—			—			10,034

Income before income in equity investees				—		19,497			(918	)		(2,371	)		16,208
Income in equity investees				16,208		—			—			(16,208	)		—

Net income			$	16,208	$	19,497		$	(918	)	$	(18,579	)	$	16,208

Supplemental Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2008
(in thousands)

			Parent		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries		Elimination Entries			Consolidated

Revenues			$	—	$	239,720		$	10,380	$	(6,016	)	$	244,084
Operating expenses:
	Cost of revenues			—		55,263			792		(1,386	)		54,669
	Sales and marketing			—		67,769			4,845		(24	)		72,590
	Technology and development			—		26,518			2,832		(3,927	)		25,423
	General and administrative			—		42,872			1,452		(666	)		43,658
	Amortization of intangible assets			—		4,801			57		—			4,858
	Restructuring charges			—		563			—		—			563

		Total operating expenses		—		197,786			9,978		(6,003	)		201,761

Operating income				—		41,934			402		(13	)		42,323
Interest and other income, net				—		5,948			213		(2,406	)		3,755
Interest expense				—		(2,951	)		—		2,406			(545	)

Income before income taxes				—		44,931			615		(13	)		45,533
Provision for income taxes				—		18,793			—		—			18,793

Income before income in equity investees				—		26,138			615		(13	)		26,740
Income in equity investees				26,740		—			—		(26,740	)		—

Net income			$	26,740	$	26,138		$	615	$	(26,753	)	$	26,740

Supplemental Condensed Consolidating Statement of Operations
Six Months Ended June 30, 2007
(in thousands)

			Parent		Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries			Consolidated

Revenues			$	—	$	273,827		$	5,471		$	(18,030	)	$	261,268
Operating expenses:
	Cost of revenues			—		69,977			158			(10,479	)		59,656
	Sales and marketing			—		84,761			3,976			—			88,737
	Technology and development			—		26,820			2,518			(2,802	)		26,536
	General and administrative			—		31,986			403			—			32,389
	Amortization of intangible assets			—		6,649			50			—			6,699
	Restructuring charges			—		394			—			—			394

		Total operating expenses		—		220,587			7,105			(13,281	)		214,411

Operating income				—		53,240			(1,634	)		(4,749	)		46,857
Interest and other income, net				—		3,578			3			—			3,581
Interest expense				—		(731	)		(1	)		—			(732	)

Income before income taxes				—		56,087			(1,632	)		(4,749	)		49,706
Provision for income taxes				—		20,470			—			—			20,470

Income before income in equity investees				—		35,617			(1,632	)		(4,749	)		29,236
Income in equity investees				29,236		—			—			(29,236	)		—

Net income			$	29,236	$	35,617		$	(1,632	)	$	(33,985	)	$	29,236

Supplemental Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2008
(in thousands)

			Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated

Net cash provided by (used for) operating activities			$	(39	)	$	62,263		$	2,866		$	—	$	65,090

Cash flows from investing activities:
	Purchases of property and equipment			—			(6,673	)		(583	)		—		(7,256	)
	Purchases of short-term investments			—			(120,378	)		—			—		(120,378	)
	Proceeds from maturities of short-term investments			—			48,300			—			—		48,300
	Proceeds from sales of short-term investments			—			14,523			—			—		14,523
	Cash paid for proposed acquisition			—			(3,146	)		(19	)		—		(3,165	)
	Proceeds from sales of assets, net			—			29			—			—		29

		Net cash used for investing activities		—			(67,345	)		(602	)		—		(67,947	)

Cash flows from financing activities:
	Net contributions (distributions) of capital			32,749			(35,494	)		2,745			—		—
	Payments on capital leases			—			(8	)		—			—		(8	)
	Proceeds from exercises of stock options			1,043			—			—			—		1,043
	Proceeds from employee stock purchase plan			2,576			—			—			—		2,576
	Repurchases of common stock			(7,124	)		—			—			—		(7,124	)
	Payments for dividends			(29,469	)		—			—			—		(29,469	)
	Excess tax benefits from equity awards			264			—			—			—		264

		Net cash provided by (used for) financing activities		39			(35,502	)		2,745			—		(32,718	)

Effect of exchange rate changes on cash and cash equivalents				—			—			(265	)		—		(265	)
Change in cash and cash equivalents				—			(40,584	)		4,744			—		(35,840	)
Cash and cash equivalents, beginning of period				—			142,172			7,335			—		149,507

Cash and cash equivalents, end of period			$	—		$	101,588		$	12,079		$	—	$	113,667

Supplemental Condensed Consolidating Statement of Cash Flows
Six Months Ended June 30, 2007
(in thousands)

			Parent			Combined Guarantor Subsidiaries			Combined Non-Guarantor Subsidiaries			Elimination Entries		Consolidated

Net cash provided by (used for) operating activities			$	1,177		$	62,626		$	(2,757	)	$	—	$	61,046

Cash flows from investing activities:
	Purchases of property and equipment			—			(12,386	)		(177	)		—		(12,563	)
	Purchases of short-term investments			—			(164,505	)		—			—		(164,505	)
	Proceeds from maturities of short-term investments			—			26,520			—			—		26,520
	Proceeds from sales of short-term investments			—			109,061			—			—		109,061
	Proceeds from sales of assets, net			—			21			—			—		21

		Net cash used for investing activities		—			(41,289	)		(177	)		—		(41,466	)

Cash flows from financing activities:
	Net contributions (distributions) of capital			17,924			(21,330	)		3,406			—		—
	Payments on capital leases			—			(8	)		—			—		(8	)
	Proceeds from exercises of stock options			6,837			—			—			—		6,837
	Proceeds from employee stock purchase plan			3,485			—			—			—		3,485
	Repurchases of common stock			(3,782	)		—			—			—		(3,782	)
	Payments for dividends			(28,174	)		—			—			—		(28,174	)
	Excess tax benefits from equity awards			2,533			—			—			—		2,533

		Net cash provided by (used for) financing activities		(1,177	)		(21,338	)		3,406			—		(19,109	)

Effect of exchange rate changes on cash and cash equivalents				—			—			(25	)		—		(25	)
Change in cash and cash equivalents				—			(1	)		447			—		446
Cash and cash equivalents, beginning of period				—			16,428			2,824			—		19,252

Cash and cash equivalents, end of period			$	—		$	16,427		$	3,271		$	—	$	19,698

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q 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 the markets in which we compete, our pay accounts, our product and service offerings, the advertising market, operating expenses, operating efficiencies, revenues, dividends, including our intention to reduce the dividends following the closing of our proposed acquisition (the "Acquisition") of FTD Group, Inc., capital requirements, capital expenditures, tax payments, stock-based compensation, restructuring charges, our cash position, and the Acquisition. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Any such forward-looking statements are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. The section entitled "Risk Factors" in this Quarterly Report on Form 10-Q and our other filings with the Securities and Exchange Commission set forth some of the important risk factors that may affect our business, financial position, results of operations, and cash flows. Statements indicating factors that we believe may impact our results or financial condition are not intended to be exclusive. We undertake no obligation to revise or update publicly any forward-looking statements, other than as required by law.

We are a leading provider of consumer Internet and media services through a number of brands including Classmates, MyPoints, NetZero, and Juno. 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 array of Internet marketing products and services for advertisers.


Segment		Internet Services
Classmates Media		Social networking and loyalty marketing
Communications		Internet access, email, Internet security, and Web hosting

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 social networking under the StayFriends and Trombi brands. For additional information regarding our Classmates Media segment, see Note 8—"Segment Information" of the notes to unaudited condensed consolidated financial statements, which appears in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Our Communications pay services principally include consumer dial-up Internet access and email under the NetZero and Juno brands. We also offer several additional pay services, such as DSL services, Internet security services, Web hosting services and premium email. For additional information regarding our Communications segment, see Note 8—"Segment Information" of the notes to unaudited condensed consolidated financial statements, which appears in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We review a number of key business metrics to help us monitor our performance and trends affecting our businesses, and to develop forecasts and budgets. These measures include:

Pay Accounts. Our pay accounts generate a significant portion of our revenues and represent one of the most important drivers of our business model. A pay account is defined as a member who has subscribed to, and paid for, our billable services, and whose subscription has not expired. In general, the key metrics that drive revenues from our pay accounts base include the number of pay accounts and the average monthly revenue per pay account. In general, a pay account becomes a free account following the expiration or termination of the related subscription.

ARPU. We monitor the average monthly revenue per pay account, or ARPU. ARPU is calculated by dividing billable services revenues for a period by the average number of pay accounts for that period, divided by the number of months in that period. The average number of pay accounts is the simple average of the number of pay accounts at the beginning and end of a period. ARPU may fluctuate from period to period as a result of a variety of factors, including, but not limited to: changes in the mix of pay services and the related subscription pricing plans; the use of promotional or retention pricing to attract new, or retain existing, paying subscribers; increases or decreases in the price of our services; a greater percentage of social networking pay accounts represented by international pay accounts which have lower-priced subscription plans compared to U.S. social networking pay accounts; and the timing of pay accounts being added or removed during a period.

Churn. To evaluate the retention characteristics of our membership base, we also monitor the percentage of pay accounts that terminate or expire, which we refer to as our average monthly churn rate. Our average monthly churn rate is calculated as the total number of pay accounts that terminated or expired in a period divided by the average number of pay accounts for the same period, divided by the number of months in that period. Our average monthly churn percentage may fluctuate from period to period due to our mix of subscription terms, which affects the timing of subscription expirations, and other factors. We make certain normalizing adjustments to the calculation of our churn percentage for periods in which we add a significant number of pay accounts due to acquisitions. Except with respect to our social networking pay accounts, we do not include in our churn calculation those accounts canceled during the first 30 days of service unless the accounts have upgraded from free accounts, although a number of such accounts will be included in our account totals at any given measurement date. Subscribers who cancel one pay service but subscribe to another pay service are not necessarily considered to have canceled a pay account depending on the services and, as such, our overall churn rate is not necessarily indicative of the percentage of subscribers cancelling any particular service.

Active Accounts. We monitor the number of active accounts among our membership base. Active Classmates Media segment accounts are defined as: all segment pay accounts as of the date presented; the monthly average for the reporting period of all free social networking accounts who have visited the Company's domestic or international social networking Web sites (excluding The Names Database) at least once during the reporting period; and the monthly average for the reporting period of all loyalty

marketing members who have earned or redeemed points during such period. Active Communications segment accounts include all segment pay accounts as of the date presented and the number of free Internet access and email accounts that logged on to the Company's services at least once during the preceding 31 days.

In general, we count and track pay accounts and free accounts by unique member identifiers. Users have the ability to register for separate services under separate brands and member identifiers independently. We do not track whether a pay account has purchased more than one of our services unless the account uses the same member identifier. As a result, total active accounts may not represent total unique users. At any point in time, our pay account base includes a number of accounts receiving a free period of service as either a promotion or retention tool and a number of accounts that have notified us that they are terminating their service but whose service remains in effect.

The following table sets forth, for the dates or three-month periods presented, as applicable, our pay accounts (at the end of the period), segment revenues, ARPU (monthly average for the period), churn (monthly average for the period) and active accounts.

				June 30, 2008			March 31, 2008			December 31, 2007			September 30, 2007			June 30, 2007

Consolidated:
	Total pay accounts(a) (in thousands)				5,725			5,564			5,349			5,239			5,118
	Churn(a)				4.3	%		4.5	%		4.6	%		4.8	%		4.6	%
Classmates Media:
	Segment revenues (in thousands)			$	57,013		$	51,884		$	53,273		$	49,972		$	47,740
		% of Total revenues			46.6	%		42.6	%		42.5	%		39.4	%		36.3	%
	Pay accounts (in thousands)				3,809			3,521			3,199			2,983			2,710
			% of Total pay accounts		66.5	%		63.3	%		59.8	%		56.9	%		53.0	%
	Segment churn				4.2	%		4.3	%		4.7	%		4.6	%		4.6	%
	ARPU			$	3.10		$	3.10		$	3.26		$	3.33		$	3.32
	Segment active accounts (in millions)				15.1			13.9			12.6	(b)		12.8			11.7
Communications:
	Segment revenues (in thousands)			$	65,260		$	69,927		$	72,137		$	76,853		$	83,677
			% of Total revenues		53.4	%		57.4	%		57.5	%		60.6	%		63.7	%
	Pay accounts(a) (in thousands):
		Access			1,560			1,682			1,786			1,886			2,016
		Other			356			361			364			370			392

		Total Communications pay accounts			1,916			2,043			2,150			2,256			2,408

			% of Total pay accounts		33.5	%		36.7	%		40.2	%		43.1	%		47.0	%
	Segment churn(a)				4.5	%		4.8	%		4.4	%		4.9	%		4.7	%
	ARPU			$	9.45		$	9.45		$	9.28		$	9.45		$	9.61
	Segment active accounts (in millions)				2.9			3.1			3.3			3.5			3.7

Potential Subsidiary Initial Public Offering of Classmates Media Corporation

Classmates Media Corporation, or CMC, was formed in August 2007 for the purposes of consolidating our Classmates, The Names Database and MyPoints business units in preparation of an initial public offering, or IPO, by CMC. The businesses were contributed to CMC by us on August 9, 2007. In August 2007, CMC filed a Form S-1 registration statement with the Securities and Exchange Commission, or SEC, for the IPO of its common stock.

In December 2007, we determined that proceeding with the IPO under then-current market conditions was not in the best interests of our stockholders and CMC withdrew its Form S-1 registration statement previously filed with the SEC. Approximately $0.5 million of transaction costs were determined not to have continuing value after the withdrawal of the IPO and were expensed in the quarter ended December 31, 2007. Because it remained our strategy to complete an IPO of CMC during 2008, certain IPO transaction-related costs incurred during 2007 and the first quarter of 2008 totaling $3.9 million were deferred and were included in other assets on our consolidated balance sheet at March 31, 2008. While it still remains our strategy to complete an IPO of CMC, because we believe that capital markets have not improved significantly since the CMC Form S-1 registration statement was withdrawn in December 2007 and there is limited visibility as to when capital markets might improve significantly, we have concluded that it is unlikely that an IPO will be completed before 2009. As such, we determined, on June 23, 2008, that the $3.9 million in deferred transaction-related costs relating to the IPO would be expensed in the quarter ended June 30, 2008 and our financial results and the financial results of our Classmates Media segment for the quarter and six months ended June 30, 2008 were negatively impacted.

The following tables set forth, for the periods presented, selected historical statements of operations data. The information contained in the tables below should be read in conjunction with Liquidity and Capital Resources, Contractual Obligations, and Other Commitments included in this Item 2 as well as the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q.

			Quarter Ended June 30,						Six Months Ended June 30,

			2008			2007			2008			2007
Billable services			$	90,268		$	97,125		$	180,930		$	193,445
Advertising				32,005			34,292			63,154			67,823

	Total revenues			122,273			131,417			244,084			261,268

Operating expenses:
	Cost of revenues			26,830			30,409			54,669			59,656
	Sales and marketing			35,809			42,712			72,590			88,737
	Technology and development			12,521			13,065			25,423			26,536
	General and administrative			22,774			16,900			43,658			32,389
	Amortization of intangible assets			2,022			3,204			4,858			6,699
	Restructuring charges			357			394			563			394

		Total operating expenses		100,313			106,684			201,761			214,411

Operating income				21,960			24,733			42,323			46,857
Interest and other income, net				1,947			1,881			3,755			3,581
Interest expense				(379	)		(372	)		(545	)		(732	)

Income before income taxes				23,528			26,242			45,533			49,706
Provision for income taxes				9,790			10,034			18,793			20,470

Net income			$	13,738		$	16,208		$	26,740		$	29,236

Information for our two reportable operating segments was as follows (in thousands):

			Classmates Media				Communications

			Quarter Ended June 30,				Quarter Ended June 30,
			2008		2007		2008		2007
Billable services			$	34,134	$	25,632	$	56,134	$	71,493
Advertising				22,879		22,108		9,126		12,184

	Total revenues			57,013		47,740		65,260		83,677

Operating expenses:
	Cost of revenues			10,628		9,758		14,073		18,566
	Sales and marketing			20,904		20,806		14,802		21,815
	Technology and development			5,245		3,932		5,689		7,601
	General and administrative			12,299		7,122		9,208		8,252
	Restructuring charges			—		—		357		394

		Total operating expenses		49,076		41,618		44,129		56,628

Segment income from operations			$	7,937	$	6,122	$	21,131	$	27,049

			Classmates Media				Communications

			Six Months Ended June 30,				Six Months Ended June 30,
			2008		2007		2008		2007
Billable services			$	65,375	$	47,859	$	115,555	$	145,586
Advertising				43,522		42,315		19,632		25,508

	Total revenues			108,897		90,174		135,187		171,094

Operating expenses:
	Cost of revenues			19,915		18,650		30,276		36,919
	Sales and marketing			40,462		41,204		31,915		47,315
	Technology and development			10,452		7,433		11,850		16,510
	General and administrative			22,178		12,444		18,967		16,864
	Restructuring charges			—		—		563		394

		Total operating expenses		93,007		79,731		93,571		118,002

Segment income from operations			$	15,890	$	10,443	$	41,616	$	53,092

Quarter and Six Months Ended June 30, 2008 compared to Quarter and Six Months Ended June 30, 2007

Billable services revenues are comprised of amounts charged to pay accounts for our billable services. Classmates Media billable services revenues consist of amounts charged to pay accounts for social networking services. Communications billable 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 generated from Internet access. Our billable services revenues are primarily dependent on two factors: the average number of pay accounts for a period and the ARPU.

Consolidated Billable Services Revenues. Consolidated billable services revenues decreased by $6.9 million, or 7%, to $90.3 million for the quarter ended June 30, 2008, compared to $97.1 million for the quarter ended June 30, 2007. Consolidated billable services revenues decreased by $12.5 million, or 6%, to $180.9 million for the six months ended June 30, 2008, compared to $193.4 million for the six months ended June 30, 2007. The decrease in billable services revenues for the quarter and six months ended June 30, 2008 was due to a decrease in revenues from our Communications segment, partially offset by an increase in revenues from our Classmates Media segment. Billable services revenues

related to our Classmates Media segment and our Communications segment constituted 37.8% and 62.2%, respectively, of our consolidated billable services revenues for the quarter ended June 30, 2008, compared to 26.4% and 73.6%, respectively, for the quarter ended June 30, 2007. Billable services revenues related to our Classmates Media segment and our Communications segment constituted 36.1% and 63.9%, respectively, of our consolidated billable services revenues for the six months ended June 30, 2008, compared to 24.7% and 75.3%, respectively, for the six months ended June 30, 2007. We anticipate that our consolidated billable services revenues will continue to decline in 2008 when compared to 2007 as a result of an expected continued decline in Communications billable services revenues which is expected to exceed the anticipated increase in Classmates Media billable services revenues.

Classmates Media Billable Services Revenues. Classmates Media billable services revenues increased by $8.5 million, or 33%, to $34.1 million for the quarter ended June 30, 2008, compared to $25.6 million for the quarter ended June 30, 2007. The increase in Classmates Media billable services revenues was due to a 43% increase in our average number of pay accounts from 2.6 million for the quarter ended June 30, 2007 to 3.7 million for the quarter ended June 30, 2008. The increase was partially offset by a 7% decrease in ARPU from $3.32 for the quarter ended June 30, 2007 to $3.10 for the quarter ended June 30, 2008. The decrease in ARPU was primarily attributable to limited-time promotional subscription offerings in the fourth quarter of 2007 which negatively impacted ARPU in the quarter ended June 30, 2008 and, to a lesser extent, a greater percentage of pay accounts represented by international social networking pay accounts which have lower-priced subscription plans compared to U.S. social networking pay accounts. We anticipate our Classmates Media pay accounts and billable services revenues will continue to grow, at least in the near term.

Classmates Media billable services revenues increased by $17.5 million, or 37%, to $65.4 million for the six months ended June 30, 2008, compared to $47.9 million for the six months ended June 30, 2007. The increase in Classmates Media billable services revenues was due to a 44% increase in our average number of pay accounts from 2.4 million for the six months ended June 30, 2007 to 3.5 million for the six months ended June 30, 2008. This increase was partially offset by a 5% decrease in ARPU from $3.27 for the six months ended June 30, 2007 to $3.11 for the six months ended June 30, 2008. The decrease in ARPU was primarily attributable to limited-time promotional subscription offerings in the fourth quarter of 2007 which negatively impacted ARPU in the six months ended June 30, 2008 and, to a lesser extent, a greater percentage of pay accounts represented by international social networking pay accounts which have lower-priced subscription plans compared to U.S. social networking pay accounts.

Communications Billable Services Revenues. Communications billable services revenues decreased by $15.4 million, or 21%, to $56.1 million for the quarter ended June 30, 2008, compared to $71.5 million for the quarter ended June 30, 2007. The decrease in Communications billable services revenues was due to a 24% decrease in our average number of dial-up Internet access pay accounts from 2.1 million for the quarter ended June 30, 2007 to 1.6 million for the quarter ended June 30, 2008. In addition, the decrease in revenues was partially due to a $0.5 million decrease in revenues associated with our VoIP business, which we exited in the third quarter of 2007. These decreases were partially offset by an increase in revenues from our DSL services in the quarter ended June 30, 2008 compared to the quarter ended June 30, 2007. We anticipate continued declines in our Communications pay accounts, which will result in continued declines in Communications billable services revenues.

Communications billable services revenues decreased by $30.0 million, or 21%, to $115.6 million for the six months ended June 30, 2008, compared to $145.6 million for the six months ended June 30, 2007. The decrease in Communications billable services revenues was due to a 24% decrease in our average number of dial-up Internet access pay accounts from 2.1 million for the six months ended June 30, 2007 to 1.6 million for the six months ended June 30, 2008. In addition, the decrease in

revenues was partially due to a $1.0 million decrease in revenues associated with our VoIP business, which we exited in the third quarter of 2007. These decreases were partially offset by an increase in revenues from our DSL services in the six months ended June 30, 2008 compared to the six months ended June 30, 2007.

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 for advertisers.

Our social networking services generate advertising revenues primarily from display advertisements and from post-transaction sales. 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. Post-transaction sales are generated when a Classmates pay account is provided a third-party offer at the end of the pay account registration process.

Our loyalty marketing service revenues are derived almost entirely from advertising fees, consisting primarily of fees generated when emails are transmitted to members, when members respond to emails and when members complete online transactions. We sell marketing solutions to advertisers with both brand and direct response objectives through a full suite of email, display and other advertising opportunities. We also use targeting technologies and Web site integrations in order to provide effective solutions for advertisers.

Our Communications services generate advertising revenues from our search agreement with Yahoo!, display advertisements, referring members to third-party Web sites or services, 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.

Consolidated Advertising Revenues. Consolidated advertising revenues decreased by $2.3 million, or 7%, to $32.0 million for the quarter ended June 30, 2008, compared to $34.3 million for the quarter ended June 30, 2007. Consolidated advertising revenues decreased by $4.7 million, or 7%, to $63.2 million for the six months ended June 30, 2008, compared to $67.8 million for the six months ended June 30, 2007. The decrease was primarily attributable to a decrease in advertising revenues in our Communications segment, partially offset by an increase in advertising revenues in our Classmates Media segment. Advertising revenues related to our Classmates Media segment and our Communications segment constituted 71.5% and 28.5%, respectively, of our consolidated advertising revenues for the quarter ended June 30, 2008, compared to 64.5% and 35.5%, respectively, for the quarter ended June 30, 2007. Advertising revenues related to our Classmates Media segment and our Communications segment constituted 68.9% and 31.1%, respectively, of our consolidated advertising revenues for the six months ended June 30, 2008, compared to 62.4% and 37.6%, respectively, for the six months ended June 30, 2007.

Classmates Media Advertising Revenues. Classmates Media advertising revenues increased by $0.8 million, or 3%, to $22.9 million for the quarter ended June 30, 2008, compared to $22.1 million

for the quarter ended June 30, 2007. The increase was primarily related to a $1.7 million increase in revenues from our loyalty marketing service and, to a lesser extent, a $0.4 million increase in revenues associated with our international social networking services. These increases were partially offset by a $1.3 million decrease in revenues from post-transaction sales resulting from a change in our advertising partner in the fourth quarter of 2007. Our new post-transaction sales partners have not generated as much revenue as generated under the agreement with our previous advertising partner.

Classmates Media advertising revenues increased by $1.2 million, or 3%, to $43.5 million for the six months ended June 30, 2008, compared to $42.3 million for the six months ended June 30, 2007. The increase was primarily related to a $3.1 million increase in revenues from our loyalty marketing service and, to a lesser extent, a $0.7 million increase in revenues associated with our international social networking services. These increases were partially offset by a $2.6 million decrease in revenues from post-transaction sales resulting from a change in our advertising partner in the fourth quarter of 2007.

Communications Advertising Revenues. Communications advertising revenues decreased by $3.1 million, or 25%, to $9.1 million for the quarter ended June 30, 2008, from $12.2 million for the quarter ended June 30, 2007. The decrease was primarily attributable to a decrease in advertising revenue from our start pages and, to a lesser extent, search revenues, as a result of a decrease in pay accounts. We anticipate that Communications advertising revenues will decrease going forward as a result of decreasing pay accounts.

Communications advertising revenues decreased by $5.9 million, or 23%, to $19.6 million for the six months ended June 30, 2008, from $25.5 million for the six months ended June 30, 2007. The decrease was primarily attributable to a decrease in advertising revenue from our start pages and, to a lesser extent, search revenues, as a result of a decrease in pay accounts.

Cost of revenues includes telecommunications and data center costs; costs of providing rewards to members of our loyalty marketing service; personnel- and overhead-related costs associated with operating our networks and data centers; depreciation of network computers and equipment; email technical support and license fees; costs related to providing telephone technical support; customer billing and billing support for our pay accounts; fees associated with the storage and processing of customer credit cards and associated bank fees; and domain name registration fees. Costs associated with our social networking services are relatively fixed. Costs associated with our loyalty marketing service, primarily costs of providing rewards to members, are largely variable based on revenues. The majority of the costs that comprise our Communications cost of revenues are variable. As such, our Communications cost of revenues as a percentage of revenues is highly dependent on our ARPU, our average hourly telecommunications cost and usage, and our average customer billing and billing support costs per pay account.

Consolidated Cost of Revenues. Consolidated cost of revenues decreased by $3.6 million, or 12%, to $26.8 million for the quarter ended June 30, 2008, compared to $30.4 million for the quarter ended June 30, 2007. The decrease was primarily due to decreased costs associated with our Communications segment, partially offset by increased costs associated with our Classmates Media segment. Cost of revenues related to our Classmates Media segment and our Communications segment constituted 43.0% and 57.0%, respectively, of our total segment cost of revenues for the quarter ended June 30, 2008, compared to 34.5% and 65.5%, respectively, for the quarter ended June 30, 2007.

Consolidated cost of revenues decreased by $5.0 million, or 8%, to $54.7 million for the six months ended June 30, 2008, compared to $59.7 million for the six months ended June 30, 2007. The decrease was primarily due to decreased costs associated with our Communications segment, partially offset by increased costs associated with our Classmates Media segment and a $0.4 million increase in

depreciation. Cost of revenues related to our Classmates Media segment and our Communications segment constituted 39.7% and 60.3%, respectively, of our total segment cost of revenues for the six months ended June 30, 2008, compared to 33.6% and 66.4%, respectively, for the six months ended June 30, 2007.

Classmates Media Cost of Revenues. Classmates Media cost of revenues increased by $0.9 million, or 9%, to $10.6 million, or 18.6% of Classmates Media revenues, for the quarter ended June 30, 2008, compared to $9.8 million, or 20.4% of Classmates Media revenues, for the quarter ended June 30, 2007. The increase in costs was primarily related to a $0.7 million increase in overhead, personnel- and customer support-related costs associated with our social networking services and a $0.2 million increase in costs associated with our loyalty marketing service.

Classmates Media cost of revenues increased by $1.3 million, or 7%, to $19.9 million, or 18.3% of Classmates Media revenues, for the six months ended June 30, 2008, compared to $18.7 million, or 20.7% of Classmates Media revenues, for the six months ended June 30, 2007. The increase in costs was primarily related to a $1.3 million increase in overhead, personnel- and customer support-related costs associated with our social networking services.

Communications Cost of Revenues. Communications cost of revenues decreased by $4.5 million, or 24%, to $14.1 million, or 21.6% of Communications revenues, for the quarter ended June 30, 2008, compared to $18.6 million, or 22.2% of Communications revenues, for the quarter ended June 30, 2007. The decrease in costs was due to a $3.7 million decrease in telecommunications costs associated with our dial-up Internet access business primarily due to a decrease in the number of pay accounts, a decrease in hourly usage per pay account as well as slightly lower average hourly telecommunications costs. In addition, Communications costs of revenues decreased as a result of a $1.1 million decrease in customer support- and billing-related costs in the quarter ended June 30, 2008, compared to the quarter ended June 30, 2007, as a result of a decrease in the number of dial-up Internet access pay accounts and a decrease in the hourly rate charged by our third-party vendor, a $0.6 million decrease in costs associated with our VoIP services as a result of our decision to exit the VoIP business in the third quarter of 2007, and a $0.4 million decrease in overhead costs. These decreases were partially offset by a $1.7 million increase in costs associated with our DSL services.

Communications cost of revenues decreased by $6.6 million, or 18%, to $30.3 million, or 22.4% of Communications revenues, for the six months ended June 30, 2008, compared to $36.9 million, or 21.6% of Communications revenues, for the six months ended June 30, 2007. The decrease in costs was due to a $6.3 million decrease in telecommunications costs associated with our dial-up Internet access business primarily due to a decrease in the number of pay accounts, a decrease in hourly usage per pay account as well as slightly lower average hourly telecommunications costs. In addition, Communications costs of revenues decreased as a result of a $1.8 million decrease in customer support-and billing-related costs in the quarter ended June 30, 2008, compared to the quarter ended June 30, 2007, as a result of a decrease in the number of dial-up Internet access pay accounts and a decrease in the hourly rate charged by our third-party vendor, a $1.3 million decrease in costs associated with our VoIP services as a result of our decision to exit the VoIP business in the third quarter of 2007, and a $0.8 million decrease in overhead costs. These decreases were partially offset by a $4.2 million increase in costs associated with our DSL services.

Sales and marketing expenses include expenses associated with promoting our services and with generating advertising revenues. Expenses associated with promoting our services include advertising and promotion expenses; fees paid to distribution partners, third-party advertising networks and co-registration partners to acquire new pay and free accounts; personnel and overhead-related expenses for marketing personnel; and telemarketing costs incurred to acquire and retain pay accounts and

up-sell pay accounts to additional services. Expenses associated with generating advertising revenues include sales commissions and personnel-related expenses. We have expended significant amounts on sales and marketing, including branding and customer acquisition campaigns consisting of television, Internet, radio, print and outdoor advertising, and on retail and other performance-based distribution relationships. Marketing and advertising costs to promote our products and services are expensed in the period incurred. Advertising and promotion expenses include media, agency and promotion expenses. Media production costs are expensed the first time the advertisement is run. Media and agency costs are expensed over the period the advertising runs.

Consolidated Sales and Marketing Expenses. Consolidated sales and marketing expenses decreased by $6.9 million, or 16%, to $35.8 million, or 29.3% of consolidated revenues, for the quarter ended June 30, 2008, compared to $42.7 million, or 32.5% of consolidated revenues, for the quarter ended June 30, 2007. The decrease was primarily attributable to a reduction in marketing expenses related to our Communications segment, partially offset by a slight increase in marketing expenses related to our Classmates Media segment. Sales and marketing expenses related to our Classmates Media segment and our Communications segment constituted 58.5% and 41.5%, respectively, of total segment sales and marketing expenses for the quarter ended June 30, 2008 versus 48.8% and 51.2%, respectively, for the quarter ended June 30, 2007.

Consolidated sales and marketing expenses decreased by $16.1 million, or 18%, to $72.6 million, or 29.7% of consolidated revenues, for the six months ended June 30, 2008, compared to $88.7 million, or 34.0% of consolidated revenues, for the six months ended June 30, 2007. The decrease was primarily attributable to a reduction in marketing expenses related to our Communications segment and, to a lesser extent, a decrease in marketing expenses related to our Classmates Media segment. Sales and marketing expenses related to our Classmates Media segment and our Communications segment constituted 55.9% and 44.1%, respectively, of total segment sales and marketing expenses for the six months ended June 30, 2008 versus 46.5% and 53.5%, respectively, for the six months ended June 30, 2007.

Classmates Media Sales and Marketing Expenses. Classmates Media sales and marketing expenses increased by $0.1 million to $20.9 million, or 36.7% of Classmates Media revenues, for the quarter ended June 30, 2008, compared to $20.8 million, or 43.6% of Classmates Media revenues, for the quarter ended June 30, 2007.

Classmates Media sales and marketing expenses decreased by $0.7 million, or 2%, to $40.5 million, or 37.2% of Classmates Media revenues, for the six months ended June 30, 2008, compared to $41.2 million, or 45.7% of Classmates Media revenues, for the six months ended June 30, 2007. The decrease was the result of a $0.6 million decrease in personnel- and overhead-related expenses and a $0.4 million decrease in marketing costs related to acquiring new members. These decreases were partially offset by a $0.3 million increase in stock-based compensation primarily related to new equity awards issued in 2007 and the six months ended June 30, 2008.

Communications Sales and Marketing Expenses. Communications sales and marketing expenses decreased by $7.0 million, or 32%, to $14.8 million, or 22.7% of Communications revenues, for the quarter ended June 30, 2008, compared to $21.8 million, or 26.1% of Communications revenues, for the quarter ended June 30, 2007. This decrease was attributable to a $5.6 million decline in advertising, promotion and distribution costs related to our dial-up Internet access services, a $1.3 million decrease in personnel- and overhead-related expenses as a result of lower headcount, and a $0.9 million decrease in promotion costs related to our DSL services. These decreases were partially offset by a $0.7 million increase in stock-based compensation primarily related to new equity awards issued in 2007 and the six months ended June 30, 2008.

Communications sales and marketing expenses decreased by $15.4 million, or 33%, to $31.9 million, or 23.6% of Communications revenues, for the six months ended June 30, 2008, compared to $47.3 million, or 27.7% of Communications revenues, for the six months ended June 30, 2007. This decrease was attributable to a $12.4 million decline in advertising, promotion and distribution costs related to our dial-up Internet access services, a $2.9 million decrease in personnel- and overhead-related expenses as a result of lower headcount, and a $1.1 million decrease in promotion costs related to our DSL services. These decreases were partially offset by a $1.3 million increase in stock-based compensation primarily related to new equity awards issued in 2007 and the six months ended June 30, 2008.

Technology and development expenses include expenses for the maintenance of existing software and technology and the development of new or improved software and technology, including personnel-related expenses for the software engineering department and the costs associated with operating our facility in India. Costs incurred by us to manage and monitor our technology and development activities are expensed as incurred. Costs relating to the acquisition and development of internal-use software are capitalized and depreciated over their estimated useful lives, generally three years.

Consolidated Technology and Development Expenses. Consolidated technology and development expenses decreased by $0.5 million, or 4%, to $12.5 million, or 10.2% of consolidated revenues, for the quarter ended June 30, 2008, compared to $13.1 million, or 9.9% of consolidated revenues, for the quarter ended June 30, 2007. The decrease in costs was attributable to a decrease in expenses in the Communications segment, partially offset by an increase in expenses in the Classmates Media segment and a $0.1 million increase in depreciation. Technology and development expenses related to our Classmates Media segment and our Communications segment constituted 48.0% and 52.0%, respectively, of total segment technology and development expenses for the quarter ended June 30, 2008, compared to 34.1% and 65.9%, respectively, for the quarter ended June 30, 2007.

Consolidated technology and development expenses decreased by $1.1 million, or 4%, to $25.4 million, or 10.4% of consolidated revenues, for the six months ended June 30, 2008, compared to $26.5 million, or 10.2% of consolidated revenues, for the six months ended June 30, 2007. The decrease in costs was attributable to a decrease in expenses in the Communications segment, partially offset by an increase in expenses in the Classmates Media segment and a $0.5 million increase in depreciation. Technology and development expenses related to our Classmates Media segment and our Communications segment constituted 46.9% and 53.1%, respectively, of total segment technology and development expenses for the six months ended June 30, 2008, compared to 31.0% and 69.0%, respectively, for the six months ended June 30, 2007.

Classmates Media Technology and Development Expenses. Classmates Media technology and development expenses increased by $1.3 million, or 33%, to $5.2 million, or 9.2% of Classmates Media revenues, for the quarter ended June 30, 2008, compared to $3.9 million, or 8.2% of Classmates Media revenues, for the quarter ended June 30, 2007. The increase was primarily due to a $1.0 million increase in personnel-related expenses due to increased headcount and, to a lesser extent, a $0.3 million increase in overhead-related expenses.

Classmates Media technology and development expenses increased by $3.0 million, or 41%, to $10.5 million, or 9.6% of Classmates Media revenues, for the six months ended June 30, 2008, compared to $7.4 million, or 8.2% of Classmates Media revenues, for the six months ended June 30, 2007. The increase was primarily due to a $2.5 million increase in personnel-related expenses due to increased headcount and, to a lesser extent, a $0.5 million increase in overhead-related expenses.

Communications Technology and Development Expenses. Communications technology and development expenses decreased by $1.9 million, or 25%, to $5.7 million, or 8.7% of Communications revenues, for the quarter ended June 30, 2008, compared to $7.6 million, or 9.1% of Communications revenues, for the quarter ended June 30, 2007. The decrease was primarily the result of a $2.1 million decrease in personnel-related expenses as a result of lower headcount. We anticipate that Communications technology and development expenses will continue to decline in 2008 when compared to 2007 as a result of a restructuring-related reduction in the number of technology and development employees in this segment in October 2007.

Communications technology and development expenses decreased by $4.7 million, or 28%, to $11.9 million, or 8.8% of Communications revenues, for the six months ended June 30, 2008, compared to $16.5 million, or 9.6% of Communications revenues, for the six months ended June 30, 2007. The decrease was primarily the result of a $4.7 million decrease in personnel-related expenses as a result of lower headcount.

General and administrative expenses include personnel-related expenses for executive, finance, legal, human resources, facilities, and internal customer support personnel. In addition, general and administrative expenses include, among other costs, professional fees for legal, accounting and financial services; non-income taxes; insurance; occupancy and other overhead-related costs; and expenses incurred and credits received as a result of certain legal settlements.

General and administrative expenses, in the aggregate and as a percentage of revenues, increased in the six months ended June 30, 2008 compared to the six months ended June 30, 2007. Stock-based compensation has increased as a result of several factors, including: bonuses for certain members of senior management for the year ending December 31, 2008 (the "2008 Bonuses") will be paid primarily in shares of our common stock whereas such bonuses were historically paid primarily in cash; the effect of shares of common stock and restricted stock units awarded in the first quarter of fiscal 2008; and the effect of restricted stock units awarded in 2007 to members of senior management in connection with the renewal of employment agreements or in connection with initial employment agreements. Also, the resignation of an executive officer in 2007 resulted in the reversal in 2007 of stock-based compensation recorded in prior periods which reduced stock-based compensation associated with general and administrative expenses in 2007. The payment of the 2008 Bonuses in shares of common stock as opposed to cash, while increasing stock-based compensation, is not anticipated to have a significant impact on general and administrative expenses in 2008.

Consolidated General and Administrative Expenses. Consolidated general and administrative expenses increased by $5.9 million, or 35%, to $22.8 million, or 18.6% of consolidated revenues, for the quarter ended June 30, 2008, compared to $16.9 million, or 12.9% of consolidated revenues, for the quarter ended June 30, 2007. The increases were due to an increase in expenses associated with our Classmates Media segment and, to a lesser extent, an increase in expenses associated with our Communications segment, partially offset by a $0.3 million decrease in depreciation. General and administrative expenses related to our Classmates Media segment and our Communications segment constituted 57.2% and 42.8%, respectively, of total segment general and administrative expenses for the quarter ended June 30, 2008, compared to 46.3% and 53.7%, respectively, for the quarter ended June 30, 2007.

Consolidated general and administrative expenses increased by $11.3 million, or 35%, to $43.7 million, or 17.9% of consolidated revenues, for the six months ended June 30, 2008, compared to $32.4 million, or 12.4% of consolidated revenues, for the six months ended June 30, 2007. The increases were due to an increase in expenses associated with our Classmates Media segment and, to a lesser extent, an increase in expenses associated with our Communications segment, partially offset by a

$0.6 million decrease in depreciation. General and administrative expenses related to our Classmates Media segment and our Communications segment constituted 53.9% and 46.1%, respectively, of total segment general and administrative expenses for the six months ended June 30, 2008, compared to 42.5% and 57.5%, respectively, for the six months ended June 30, 2007.

Classmates Media General and Administrative Expenses. Classmates Media general and administrative expenses increased by $5.2 million, or 73%, to $12.3 million, or 21.6% of Classmates Media revenues, for the quarter ended June 30, 2008, compared to $7.1 million, or 14.9% of Classmates Media revenues, for the quarter ended June 30, 2007. The increase was primarily related to the expensing of $3.9 million in deferred transaction-related costs relating to the proposed IPO of CMC, a $1.7 million increase in stock-based compensation primarily related to guaranteed equity awards to be issued to certain members of senior management and to recent equity awards, and a $0.5 million increase in personnel-related expenses due to increased headcount. These increases were partially offset by a $0.6 million decrease in consulting expenses and a $0.3 million decrease in facilities and other overhead-related costs.

Classmates Media general and administrative expenses increased by $9.7 million, or 78%, to $22.2 million, or 20.4% of Classmates Media revenues, for the six months ended June 30, 2008, compared to $12.4 million, or 13.8% of Classmates Media revenues, for the six months ended June 30, 2007. The increase was primarily related to a $4.5 million increase in stock-based compensation primarily related to guaranteed equity awards to be issued to certain members of senior management and to recent equity awards, the expensing of $3.9 million in deferred transaction-related costs relating to the proposed IPO of CMC in the quarter ended June 30, 2008, a $1.3 million increase in personnel-related expenses due to increased headcount, and a $0.4 million increase in facilities and other overhead-related costs. These increases were partially offset by a $0.4 million decrease in consulting expenses.

Communications General and Administrative Expenses. Communications general and administrative expenses increased by $1.0 million, or 12%, to $9.2 million, or 14.1% of Communications revenues, for the quarter ended June 30, 2008, compared to $8.3 million, or 9.9% of Communications revenues, for the quarter ended June 30, 2007. The increase was due to a $2.8 million increase in stock-based compensation primarily related to the accrual for the 2008 Bonuses for certain members of senior management and equity awards issued in 2007 and in the six months ended June 30, 2008. The increase was partially offset by a $0.9 million decrease in personnel-related expenses as a result of the 2008 Bonuses being expensed as stock-based compensation as described above as well as lower headcount, a $0.7 million decrease in facilities and other overhead-related expenses and a $0.2 million decrease in recruiting and relocation costs.

Communications general and administrative expenses increased by $2.1 million, or 12%, to $19.0 million, or 14.0% of Communications revenues, for the six months ended June 30, 2008, compared to $16.9 million, or 9.9% of Communications revenues, for the six months ended June 30, 2007. The increase was due to a $5.2 million increase in stock-based compensation primarily related to the accrual for the 2008 Bonuses for certain members of senior management and equity awards issued in 2007 and in the six months ended June 30, 2008. The increase was partially offset by a $1.6 million decrease in personnel-related expenses as a result of the 2008 Bonuses being expensed as stock-based compensation as described above as well as lower headcount, a $1.1 million decrease in facilities and other overhead-related expenses and a $0.4 million decrease in recruiting and relocation costs.

Amortization of intangible assets principally includes amortization of: acquired pay accounts and free accounts; acquired trademarks and trade names; purchased software and technology; acquired contracts and related relationships; acquired patents and domain names; and other identifiable

intangible assets. In accordance with the provisions set forth in SFAS No. 142, goodwill is not being amortized but is tested for impairment at a reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would indicate the fair value of a reporting unit is below its carrying value.

Consolidated amortization of intangible assets decreased by $1.2 million, or 37%, to $2.0 million for the quarter ended June 30, 2008, compared to $3.2 million for the quarter ended June 30, 2007. Consolidated amortization of intangible assets decreased by $1.8 million, or 27%, to $4.9 million for the six months ended June 30, 2008, compared to $6.7 million for the six months ended June 30, 2007. These decreases were primarily attributable to the accelerated amortization of intangible assets in earlier years associated with our Classmates acquisition in November 2004 and, to a lesser extent, a decrease in amortization in the six months ended June 30, 2008 compared to the six months ended June 30, 2007 as a result of certain assets from the acquisition of Web hosting assets in April 2004 becoming fully amortized in March 2007.

In the quarter and six months ended June 30, 2008, we recorded restructuring charges totaling $0.4 million and $0.6 million, respectively, primarily associated with the closure of our Orem, Utah facility. We believe these activities will result in total restructuring charges of approximately $0.7 million during 2008, comprised largely of employee termination benefits and facility-exit costs.

Interest income consists of earnings on our cash, cash equivalents and short-term investments. Other income, net, consists of realized gains and losses recognized in connection with the sale of short-term investments.

Interest and other income, net, remained flat at $1.9 million for the quarter ended June 30, 2008, compared to the quarter ended June 30, 2007. Interest and other income, net, increased by $0.2 million, or 5%, to $3.8 million for the six months ended June 30, 2008, compared to $3.6 million for the six months ended June 30, 2007. These increases were primarily due to an increase in cash, cash equivalents and short-term investments, partially offset by lower average interest rates. Net realized gains on sales of our short-term investments were not significant for the quarters and six months ended June 30, 2008 and 2007.

Interest expense consists of interest expense on capital leases, the amortization of premiums on certain of our short-term investments, and imputed interest on the acquired member redemption liability related to our acquisition of MyPoints in April 2006, which was amortized through the quarter ended September 30, 2007.

Interest expense remained flat at $0.4 million for the quarter ended June 30, 2008, compared to the quarter ended June 30, 2007. Interest expense decreased by $0.2 million, or 26%, to $0.5 million for the six months ended June 30, 2008, compared to $0.7 million for the six months ended June 30, 2007. The decrease in the six months ended June 30, 2008 compared to the six months ended June 30, 2007 was primarily related to a decrease in imputed interest on the acquired member redemption liability, which was amortized through the quarter ended September 30, 2007.

For the quarter and six months ended June 30, 2008, we recorded a provision for income taxes of $9.8 million and $18.8 million, respectively on pre-tax income of $23.5 million and $45.5 million, respectively, resulting in a year-to-date effective income tax rate of 41.3%. For the quarter and six months ended June 30, 2007, we recorded a provision for income taxes of $10.0 million and $20.5 million, respectively, on pre-tax income of $26.2 million and $49.7 million, respectively, resulting in a year-to-date effective income tax rate of 41.2%. The increase in the effective income tax rate was primarily due to (1) an increase in compensation, including stock-based compensation in the quarter and six months ended June 30, 2008 versus the prior-year comparable periods that is limited under Section 162(m) of the Internal Revenue Code and (2) lower amounts of tax-free interest income generated in the quarter and six months ended June 30, 2008 compared to the prior-year comparable periods. These increases were partially offset by (1) the benefits of a lower state income tax rate, net of federal benefit, in 2008 as a result of changes to our state nexus profile and (2) the release of a portion of the deferred tax valuation allowance in the quarter and six months ended June 30, 2008 attributable to the utilization of certain foreign net operating loss carryforwards. The quarterly effective income tax rate is subject to fluctuation due to discrete items.

In April 2008, we entered into a definitive merger agreement with FTD Group, Inc. ("FTD"), a leading provider of floral and related products and services to consumers and retail florists in the United States, Canada, the United Kingdom, and the Republic of Ireland, providing for the proposed acquisition of FTD by us. Under the terms of the merger agreement and subject to the conditions therein, FTD stockholders will receive $10.15 in cash and 0.4087 of a share of United Online common stock for each share of FTD common stock (subject to adjustment as described below), for a total value of $14.38 per share of FTD common stock, based on United Online's closing stock price of $10.36 on July 21, 2008. Based on the number of shares of FTD common stock outstanding on July 21, 2008, and the closing stock price of United Online common stock on July 21, 2008, it is expected that FTD stockholders will receive total merger consideration of approximately $434 million, consisting of approximately $306 million in cash and approximately 12.3 million shares of United Online common stock. Upon closing of the proposed transaction, the former FTD stockholders will own approximately 15% of United Online.

We plan to finance a portion of the cash merger consideration with financing from Silicon Valley Bank, and received a commitment from Silicon Valley Bank to provide to us, on the terms and subject to the conditions therein, a $60 million senior secured term loan facility (the "UOL Credit Facility") to be used to fund a portion of the cash merger consideration for the proposed acquisition of FTD by us. The term loans under the UOL Credit Facility will bear interest at either LIBOR plus 3.5% per annum (with a LIBOR floor of 3.0%) or a base rate plus 2% per annum. In connection with receipt of the commitment from Silicon Valley Bank, United Online and FTD entered into an amendment to the previously announced merger agreement pursuant to which we have elected to exercise our right under the terms of the merger agreement related to United Online obtaining additional financing to increase the per share cash merger consideration payable to FTD's stockholders by $2.81 in full substitution of the $3.31 principal amount of United Online 13% senior secured notes due in 2013 ("UOL notes").

If the Silicon Valley Bank financing is unavailable to us for any reason, we are required to adjust the merger consideration so that FTD stockholders would instead receive $7.34 in cash, 0.4087 of a share of United Online common stock and $3.31 principal amount of UOL notes for each share of FTD common stock in the Acquisition, for a total value of $14.88 per share of FTD common stock based on United Online's closing stock price of $10.36 on July 21, 2008. In such case, United Online and FTD have agreed to notify FTD's stockholders by press release of such change in merger consideration on or before the fifth business day prior to the scheduled date of the special meeting of

the FTD stockholders to consider the merger. Based on the number of shares of FTD common stock outstanding on July 21, 2008 and the closing stock price of United Online common stock on July 21, 2008, it is expected that FTD stockholders would receive total merger consideration of approximately $449 million, consisting of approximately $221 million in cash, approximately 12.3 million shares of United Online common stock and $100 million aggregate principal amount of UOL notes. The UOL notes would be secured by a pledge of the stock of CMC and guaranteed by all of our domestic subsidiaries other than FTD, FTD's direct parent and FTD's subsidiaries. The UOL notes would be issued on the terms set forth in the form of indenture filed with the SEC as an exhibit to our registration statement on Form S-4 with respect to the proposed acquisition.

In connection with the Acquisition, on August 4, 2008, UNOLA Corp., an indirect wholly-owned subsidiary of United Online, entered into senior secured credit facilities (the "Credit Facilities") with Wells Fargo Bank, National Association ("Wells Fargo"), as lead arranger, providing for an aggregate principal amount of up to $425 million, consisting of (i) a term loan A facility of up to $75 million, (ii) a term loan B facility of up to $300 million, and (iii) a revolving credit facility of up to $50 million. The interest rate set forth in the Credit Facilities for loans made under the revolving credit facility and term loan A facility is either a base rate plus 2.5% per annum, or LIBOR plus 3.5% (with a LIBOR floor of 3.0%), in each case, with step-downs in the interest rate depending on FTD's leverage ratio. The interest rate set forth in the Credit Agreement for loans made under a term loan B facility is either the base rate plus 3.5% per annum, or LIBOR plus 4.5% per annum (with a LIBOR floor of 3.0%), in each case, with a step-down in the interest rate depending on FTD's leverage ratio. In addition, FTD will pay a commitment fee equal to 0.50% per annum (with step-downs in the interest rate depending on FTD's leverage ratio) on the unused portion of the revolving credit facility. The Credit Facilities will be secured by substantially all of FTD's assets. It is expected that on the closing date of the Acquisition, the Credit Facilities will be funded and FTD and its subsidiaries will undertake UNOLA Corp.'s obligations under the Credit Facilities.

Wells Fargo's commitment to fund the Credit Facilities on the closing date of the Acquisition is subject to the satisfaction of certain conditions, including, among other things, the consummation of the equity issuance of United Online common stock described above, its receipt of FTD's interim consolidated financial statements and other financial information, the satisfaction of the conditions in the merger agreement that are material to the interests of the lenders under the Credit Facilities, the absence of a material adverse effect at FTD, the achievement by FTD of at least $97.5 million of adjusted EBITDA, as defined in connection with the Credit Facilities, for the most recently completed trailing 12-month period ended at least 30 days prior to the Acquisition closing date for which financial statements are available, and the consummation of the defeasance of FTD's 7.75% senior subordinated notes due in 2014 (or, in our discretion, our funding of the purchase of all such senior subordinated notes pursuant to a tender offer and consent solicitation by FTD and the defeasance of any such senior subordinated notes not so acquired in such tender offer).

Our total cash, cash equivalent and short-term investments balances increased by $21.7 million, or 10%, to $240.0 million at June 30, 2008, compared to $218.3 million at December 31, 2007. Our summary cash flows for the six months ended June 30, 2008 and 2007 were as follows (in thousands):


	Six Months Ended June 30,
	2008		2007
Net cash provided by operating activities	$	65,090		$	61,046
Net cash used for investing activities	$	(67,947	)	$	(41,466	)
Net cash used for financing activities	$	(32,718	)	$	(19,109	)

Net cash provided by operating activities increased by $4.0 million, or 7%, for the six months ended June 30, 2008 compared to the six months ended June 30, 2007. Net cash provided by operating activities is driven by our net income adjusted for non-cash items, including, but not limited to, depreciation and amortization, provision for doubtful accounts receivable, stock-based compensation, impairment of goodwill, intangible assets and long-lived assets, deferred taxes, tax and excess tax benefits from equity awards, and changes in operating assets and liabilities. The increase was primarily due to a $7.6 million increase in non-cash items, partially offset by a $2.5 million decrease in net income for the six months ended June 30, 2008, compared to the six months ended June 30, 2007, and a $0.6 million unfavorable change in operating assets and liabilities.

Net cash used for investing activities increased by $26.5 million, or 64%, for the six months ended June 30, 2008 compared to the six months ended June 30, 2007. The increase was primarily the result of a $28.6 million increase in net purchases of short-term investments and a $3.2 million increase in cash paid for the Acquisition, partially offset by a $5.3 million decrease in purchases of property and equipment.

We have invested significantly in our network infrastructure, software licenses, leasehold improvements, and computer equipment and we will need to make further investments in the future. Capital expenditures for the six months ended June 30, 2008 were $7.3 million. We currently anticipate that our total capital expenditures for 2008 will be in the range of $18 million to $22 million. The actual amount of future capital expenditures may fluctuate due to a number of factors including, without limitation, potential future acquisitions and new business initiatives, which are difficult to predict and which could change significantly over time. Additionally, technological advances may require us to make capital expenditures to develop or acquire new equipment or technology in order to replace aging or technologically obsolete equipment.

Net cash used for financing activities increased by $13.6 million, or 71%, for the six months ended June 30, 2008 compared to the six months ended June 30, 2007. The increase was related to a combined $6.7 million decrease in proceeds from exercises of stock options and proceeds from our employee stock purchase plan; a $3.3 million increase in repurchases of common stock in connection with shares withheld upon vesting of restricted stock awards and restricted stock units to pay applicable employee withholding taxes; a $2.3 million decrease in excess tax benefits from equity awards; and a $1.3 million increase in the payment of dividends.

In January 2008 and April 2008, our Board of Directors declared regular quarterly cash dividends of $0.20 per share of common stock, which were paid on February 29, 2008 and May 30, 2008 and totaled $14.6 million and $14.9 million, respectively. In July 2008, our Board of Directors declared a regular quarterly cash dividend of $0.20 per share of common stock. The record date for the dividend is August 14, 2008, and the dividend is payable on August 29, 2008. Following the closing of the Acquisition, we expect to decrease our regular quarterly cash dividend from $0.20 per share of common stock to $0.10 per share of common stock. In addition, the UOL notes impose certain restrictions on our ability to pay dividends following the closing of the Acquisition, and as a result of the terms of the Credit Facilities, cash flows at FTD will, in general, not be available to United Online and its

subsidiaries (other than subsidiaries of FTD). 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 performance and other factors. The payment of dividends will negatively impact cash flows from financing activities.

Future cash flows from financing activities may also be affected by our repurchases of our common stock. Our 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, 2008. From August 2001 through June 30, 2008, we had repurchased a total of $139.2 million of our common stock under the program. We have not repurchased any shares of our common stock under the program since February 2005, and at June 30, 2008, the remaining amount available under the program was $60.8 million. Other than pursuant to the program or in connection with the withholding of shares related to the vesting of restricted stock units and the issuance of stock awards as discussed below, the merger agreement for the Acquisition imposes restrictions on our ability to repurchase shares of our common stock prior to the closing of the Acquisition. Following the Acquisition closing, the UOL notes or the UOL Credit Facility, as applicable, will impose certain restrictions on our ability to repurchase shares of our common stock.

Cash flows from financing activities may also be negatively impacted by the withholding of a portion of shares underlying the restricted stock units, restricted stock awards and stock awards we award to employees. We currently do not collect the applicable employee withholding taxes upon vesting of restricted stock units and restricted stock awards and upon the issuance of stock awards from employees. Instead, we automatically withhold, from the restricted stock units that vest and 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. We then pay the applicable withholding taxes in cash. The withholding of these shares, although accounted for as a common stock repurchase, does not reduce the amount available under the program. Similar to repurchases of common stock under the program, the net effect of such withholding will adversely impact our cash flows from financing activities. The amounts remitted in the six months ended June 30, 2008 and 2007 were $7.1 million and $3.8 million, respectively, for which we withheld 627,000 shares and 265,000 shares of common stock, respectively, that were underlying the restricted stock units and restricted stock awards which vested and stock awards that were issued. The amount we pay in future quarters will vary based on our stock price and the number of restricted stock units vesting and stock awards being issued during the quarter.

On August 8, 2007, Classmates Online, Inc. and MyPoints.com, Inc. declared a dividend to us, which was evidenced by unsecured notes payable in the aggregate principal amount of $50.0 million (the "Notes"). The Notes bear interest at an annual rate of 9.625%, payable quarterly in arrears. No principal is due on the Notes until maturity on August 31, 2013, and the Notes may be repaid in whole or in part at any time prior to maturity without penalty. Historically, our net cash provided by operating activities has been positively impacted by our Classmates and MyPoints businesses which have been transferred to CMC. We attempted to effect an IPO of CMC in the fourth quarter of 2007. However, CMC withdrew its Form S-1 registration statement previously filed with the SEC for the proposed IPO in December 2007 due to then-current market conditions. It remains our strategy to complete an IPO of CMC. If an IPO occurs, the Notes may be repaid in whole or in part from the proceeds from the offering, although there can be no assurance that the IPO will occur or that the Notes will be repaid. If the IPO were to occur, it is likely that the net cash provided by operating, investing and financing activities associated with CMC will remain with CMC and will not be available for our use. As such, cash flows available to us may significantly decrease if an IPO of CMC is consummated. In addition, the UOL notes provide that, in the event CMC completes an IPO, we must retire $50 million of the UOL notes at par and repay accrued but unpaid interest on the retired UOL notes. We expect that the UOL Credit Facility will provide that, in the event CMC completes an IPO,

UOL must repay the loans under the UOL Credit Facility in an amount equal to the greater of (i) 50% of the net cash proceeds received by UOL in connection with the IPO and (ii) $30 million.

Based on our current projections, we expect to continue to generate positive cash flows from operations, at least in the near term. We intend to use our existing cash balances and future cash generated from operations to fund, among other things, dividend payments, if declared by our Board of Directors; to develop and acquire other services, businesses or technologies with our focus in the near term primarily on the proposed acquisition of FTD; to repurchase our common stock underlying restricted stock units and stock awards and pay the employee withholding taxes due on vested restricted stock units and stock awards issued; and to fund future capital expenditures. To fund the proposed acquisition of FTD, we intend to use a substantial portion of our cash balances and to incur significant indebtedness. In accordance with the terms of the Credit Facilities with Wells Fargo, the UOL Credit Facility and the UOL notes, there will be significant limitations on our ability to use cash flows from operations generated by our Communications and Classmates Media segments for the benefit of FTD and, conversely, there will be significant limitations on our ability to use cash flows from operations generated by FTD for the benefit of United Online or the Communications and Classmates Media segments. Following the Acquisition, among other factors, the degree to which our assets are leveraged and the terms of our debt could materially and adversely affect our ability to obtain additional capital. In addition, a significant amount of our cash generated from operations will be used for debt service.

If we need to raise additional capital through public or private debt or equity financings, strategic relationships or other arrangements, this capital might not be available to us in a timely manner, on acceptable terms, or at all. Our failure to raise sufficient capital when needed could severely constrain or prevent us from, among other factors, developing new or enhancing existing services or products, repurchasing our common stock, acquiring other services, businesses or technologies or funding significant capital expenditures, and have a material adverse effect on our business, financial position, results of operations, and cash flows as well as impair our ability to pay future dividends. If additional funds were raised through the issuance of equity or convertible debt securities, the percentage of stock owned by the then-current stockholders could be reduced. Furthermore, such equity or debt securities that we issue might have rights, preferences or privileges senior to holders of our common stock.

Commitments under standby letters of credit at June 30, 2008 are scheduled to expire as follows (in thousands):

Standby letters of credit are maintained pursuant to certain of our lease arrangements. The standby letters of credit remain in effect at declining levels through the terms of the related leases.

In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of such agreements, services to be provided by us, or from intellectual property infringement claims made by third-parties. In addition, we have entered into indemnification agreements with our directors and certain of our officers and employees that will require us, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors, officers or employees. We have also agreed to indemnify certain former officers, directors and employees of acquired companies in connection with the acquisition of such companies, and under the proposed merger agreement with FTD we are required to indemnify FTD's officers and directors for certain claims. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and certain of our officers and employees, and former officers, directors and employees of acquired companies, in certain circumstances.

It is not possible to determine the maximum potential amount of exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements may not be subject to maximum loss clauses.

At June 30, 2008, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations. SFAS No. 141(R) requires an acquirer to measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. SFAS No. 141(R) is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. SFAS No. 141(R) requires prospective application for all acquisitions after the date of adoption. We expect SFAS No. 141(R) to have an impact on our consolidated financial statements when effective, but the timing, nature and magnitude of the specific effects will depend upon the nature, terms and size of any acquisitions we consummate after the effective date. We will continue to evaluate the impact of the adoption of SFAS No. 141(R).

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity in the consolidated financial statements. The calculation of earnings per share will continue to be based on income amounts attributable to the parent. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. We have not yet determined the effect on our consolidated financial statements, if any, upon adoption of SFAS No. 160.

Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities

In June 2008, the FASB issued Staff Position ("FSP") EITF Issue No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("FSP EITF 03-6-1"), in which the FASB concluded that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends (such as restricted stock units granted by the Company) are considered participating securities. Because the awards are considered participating securities, the issuing entity is required to apply the two-class method of computing basic and diluted earnings per share. The provisions of FSP EITF 03-6-1 will be effective for us on January 1, 2009 and will be applied retroactively to all prior-period earnings per share computations. We have not yet determined the effect on our earnings per share amounts upon adoption of FSP EITF 03-6-1.

We are exposed to certain market risks arising from transactions in the normal course of business, principally risk associated with interest rate and foreign currency fluctuations.

We have interest rate risk as well as market rate risk primarily related to our short-term investments portfolio. As a result, we are exposed to the impact of interest rate changes and changes in the market values of our investments. Our interest income is sensitive to changes in the general level of U.S. interest rates.

We maintain a short-term investments portfolio consisting, at times, of U.S. commercial paper, U.S. corporate notes, U.S. Government or U.S. Government agencies obligations, and municipal securities, including auction rate securities. We have not used derivative financial instruments in our short-term investments portfolio. Our primary objective in managing our short-term investments is the preservation of principal and liquidity while maximizing yield without significantly increasing risk. The minimum long-term credit rating is A, and if a long-term credit rating is not available, we require a minimum short-term credit rating of A1 and P1. Furthermore, by policy, we limit the amount of credit exposure to any one issuer. Our short-term investments, at times in both fixed-rate and variable-rate interest-earning instruments, carry a degree of interest rate risk. Fixed-rate securities may have their fair market value adversely impacted due to a rise in interest rates, while variable-rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates, or we may suffer losses in principal by selling securities which have declined in market value due to changes in interest rates.

Our short-term investments at June 30, 2008 consisted of municipal securities, U.S. Government agencies securities and U.S. corporate notes. As a result of the recent adverse conditions in the U.S. credit markets, during 2007, we liquidated, without any losses in principal, our investments in auction rate securities and did not hold any auction rate securities in our portfolio at June 30, 2008. We classify all of our short-term investments as available-for-sale. Available-for-sale securities are carried at fair value, with unrealized gains and losses, net of tax, reported in a separate component of stockholders' equity. At June 30, 2008, gross unrealized gains and gross unrealized losses in our short-term investments aggregated $423,000 and $42,000, respectively.

During the quarter ended June 30, 2008, our short-term investments portfolio yielded an effective annualized interest rate of 2.04% and an annualized taxable equivalent yield of 2.59%. If interest rates were to decrease 100 basis points on a sustained parallel basis throughout the remainder of the year, the result would be an annualized decrease in our interest income related to our short-term investments and cash and cash equivalents of approximately $1.4 million.

We transact business in different foreign currencies and may be exposed to financial market risk resulting from fluctuations in foreign currency exchange rates, particularly the Indian Rupee (INR) and the Euro, which may result in a gain or loss of earnings to us. The volatilities of the INR and the Euro (and all other applicable foreign currencies) are monitored by us throughout the year. We face two risks related to foreign currency exchange rates: translation risk and transaction risk. Amounts invested in our foreign operations are translated into U.S. dollars using period-end exchange rates. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income in stockholders' equity. Our foreign subsidiaries generally collect revenues and pay expenses in currencies other than the U.S. dollar. When the functional currencies of our foreign operations are denominated in the local currency of our subsidiaries, the foreign currency translation adjustments are reflected as a

component of stockholders' equity and do not impact our operating results. Net foreign currency transaction gains or losses arising from transactions in our foreign operations denominated in currencies other than the local functional currency are included in other income (expense), net in the consolidated statements of operations. 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 other currencies. Therefore, changes in foreign currency exchange rates may negatively affect our consolidated revenues and expenses. The effect of foreign currency exchange rate fluctuations for the quarter and six months ended June 30, 2008 was not material to our consolidated results of operations. While we have not engaged in foreign currency hedging, we may in the future use hedging programs, including currency forward contracts, currency options and/or other derivative financial instruments commonly utilized to reduce financial market risks, if it is determined that such hedging activities are appropriate to reduce risk.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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, which is the operative 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. On October 13, 2004, the district court certified a class in six of the other nearly identical actions (the "focus cases"). The underwriter defendants appealed the decision and the United States Court of Appeals for the Second Circuit vacated the district court's decision granting class certification on December 5, 2006. Plaintiffs filed a petition for rehearing. On April 6, 2007, the Second Circuit denied the petition, but noted that the plaintiffs could ask the district court to certify a more narrow class than the one that was rejected. Prior to the Second Circuit's decision, the majority of issuers, including NetZero, and their insurers had submitted a settlement agreement to the district court for approval. In light of the Second Circuit opinion, the parties agreed that the settlement could no longer be approved, and on June 25, 2007, the court approved a stipulation filed by the plaintiffs and the issuers which terminated the proposed settlement. On August 14, 2007, the plaintiffs filed Second Amended class action complaints in the focus cases. The issuers' motion to dismiss the Second Amended class action complaints has been granted in part and denied in part. A ruling on the plaintiffs' motion for class certification in the focus cases is pending.

On March 6, 2006, plaintiff Anthony Piercy filed a purported consumer class action lawsuit in the Superior Court of the State of California, County of Los Angeles, against NetZero claiming that NetZero continues to charge consumers fees after they cancel their Internet access account. On July 27, 2006, plaintiff Donald E. Ewart filed a purported consumer class action lawsuit in the Superior Court of the State of California, County of Los Angeles, against NetZero containing substantially similar allegations to the Piercy case. Plaintiffs in both cases are seeking injunctive and declaratory relief and damages. NetZero filed a response to both lawsuits denying the material allegations of the complaints. Both Messrs. Piercy and Ewart subsequently withdrew from the actions as class representatives. On March 16, 2007, Barbara Rasnake and Robert Du Verger were substituted as purported class representatives. On May 25, 2007, the court consolidated the actions under the caption Rasnake v. NetZero, Inc. On July 13, 2007, the plaintiffs filed a consolidated amended class action complaint at which time Peter Chrisler was also substituted as a purported class representative. A settlement agreement has been entered into by all parties in this case and will be presented to the court for preliminary approval on August 12, 2008.

The pending lawsuits 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 the above outstanding legal proceedings, claims and litigation will have a material adverse effect on our business, financial position, results of operations or cash flows, the results of legal

proceedings, claims and litigation are inherently uncertain and we cannot assure you that we will not be materially and adversely impacted by the results of such proceedings. At June 30, 2008, we had not established allowances for losses relating to any of the matters described above, with the exception of the Rasnake v. NetZero matter.

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 position, results of operations or cash flows. We cannot assure you, however, that such actions will not materially and adversely affect our business, financial position, results of operations, or cash flows.

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

The market for our services is competitive, and we expect competition to significantly increase in the future. Our social networking services compete with a wide variety of social networking Web sites, including broad social networking Web sites such as MySpace and Facebook; a number of specialty Web sites, including LinkedIn, Reunion.com and Monster.com's Military.com service, that offer online social networking services based on school, work or military communities; and an increasing number of 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 Web portals such as Yahoo!, MSN and AOL, and online services designed to locate individuals such as White Pages and US Search. As Internet search engines continue to improve their technology and their ability to locate individuals, including by finding individuals through their profiles on social networking Web sites, these services will increasingly compete with our services. 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. As we broaden our services and also evolve into a service used for meeting new people with similar interests or affiliations, we may compete with the increasing number of social networking Web sites for special niches and areas of interest.

The market for 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 loyalty marketing business faces competition for members from several other online loyalty marketing programs, including Ebates, Upromise, FatWallet, and Inboxdollars. We also face competition from 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 and offer a wider variety of services. If our competitors are more successful than we are in attracting users, our ability to maintain a large and growing user base will be adversely affected. Some of our social networking competitors have more compelling Web sites with more extensive user-generated content and offer their services free to their users. If our social networking services are not as compelling and we do not stay current with evolving consumer trends, we may not succeed in maintaining or increasing our membership base. If our competitors provide similar services for free, we may not be able to charge for any of our services. Competition could have

a material adverse affect on our subscription revenues from social networking services, as well as on advertising revenues from our social networking and loyalty marketing services. More intense competition could also require us to increase our marketing expenditures. As a result of competition, our revenues and profitability could be adversely affected.

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

We may not be successful in increasing or maintaining the number of pay accounts for our social networking services. Only a small percentage of members initially registering for our 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 convince free members to return to our Web sites and become pay accounts. The number of free members returning to our Web sites has decreased from time to time, and if we were to continue to experience such decreases, it would likely adversely impact our number of pay accounts.

Although we have recently experienced an increase in the number of pay accounts, this trend may not continue at the same rate, or at all. We believe that most of our pay accounts elect to purchase our services as a result of a limited number of features. For example, we believe that our Classmates Online digital guestbook feature is responsible for a significant portion of the increase in our new pay accounts since the end of 2006. In addition, international pay accounts are becoming an increasingly large component of our pay account mix and have constituted a significant portion of our growth in pay accounts. If our social networking pay features are not as compelling and we do not stay current with evolving consumer trends, our free members may not subscribe for our pay features. Any decrease in our conversion rate of free members to pay accounts could adversely affect our business and financial results.

A number of our social networking pay account subscriptions each month are not renewed or are cancelled which 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. 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. Any change in our renewal policies or practices 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 for our services, which could reduce our revenues and adversely affect our financial results.

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

The success of our social networking services depends upon our ability to increase or maintain our base of free members because we generate new pay accounts and advertising revenues from our free member base. Our ability to increase our base of free members is dependent upon attracting users to our Web sites. From time to time, we have experienced decreases in the number of new free member registrations, and we may not be able to increase or maintain the level of new free member registrations. Failure to increase or maintain our base of free members could have a material adverse effect on our business, our ability to implement our strategies, and our financial results.

We use online advertising to promote our social networking services to potential new free members. Most of our online advertising arrangements are structured such that we pay a fee for each new free account registration generated through a particular advertisement. The cost of online

advertising has increased from time to time, which has resulted in an increase in our marketing expenditures. If the cost of online advertising continues to escalate, we may experience decreases in the number of new account registrations unless we increase our marketing expenditures. Increases in our marketing expenditures could adversely impact our profitability, and there can be no assurance that our marketing activities will be successful.

If we are not successful in increasing or maintaining the number of our loyalty marketing service members, and in convincing members to actively participate in our program, our business and financial results will suffer.

The success of our MyPoints loyalty marketing service is dependent upon our ability to maintain and expand our active member base. The majority of our new loyalty marketing members are derived from a limited number of co-registration sources, which are services that generate new member registrations for MyPoints and unrelated third-party services. The loss of any of these sources of new member registrations, a decrease in the number of new members acquired through these sources or an increase in the cost to acquire new members through these sources could have an adverse affect on our loyalty marketing service. In addition, we generate a significant portion of our loyalty marketing service revenues from the activity of a small percentage of MyPoints members. If the advertising campaigns directed to our MyPoints members and the rewards offered are not sufficiently compelling, we may not be able to maintain or increase the percentage of our MyPoints members who actively participate in our loyalty marketing service. If we are unable to increase or maintain the number of new MyPoints members and convince existing members to actively participate in our service, our business and financial results would be adversely affected.

If our social networking members do not interact with our Web sites, our business and financial results will suffer.

Our success is dependent upon our social networking members interacting with our Web sites. Currently, the network effect on our social networking Web sites is limited, and the vast majority of our member activity is within our high school communities. Our members do not visit our Web sites frequently and spend a limited amount of time on our Web sites when they visit. In addition, only a limited number of our social networking members post photographs and information about themselves, engage in message board discussions, view other members' profiles or participate in the other features on our Web sites. If we are unable to convince our members to interact more frequently with our social networking Web sites and to increase the amount of user-generated content they provide, our ability to attract new users to our Web sites, convert free members to pay accounts and attract advertisers to our Web sites will be adversely affected. As a result, our business and financial results will suffer, and we will not be able to grow our business as planned.

Our social networking and loyalty marketing businesses rely heavily on email campaigns, and any restrictions on the sending of emails could adversely affect our results of operations.

Our businesses are highly dependent upon email. 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 loyalty marketing service. Each month, a significant number of email addresses for our social networking and loyalty marketing members become invalid. This disrupts our ability to email these members. Further, social networking members cannot contact or interact online with members with invalid emails, which undermines a key reason that members use our social networking services. Due to the importance of email to our businesses, if we are unable to successfully deliver emails to our members, our revenue and profitability would be adversely affected.

With respect to those members for whom we do have valid email addresses, a significant number of our social networking members elect to opt out of receiving our subscription-based emails, such as

Classmates Connections. Without the ability to email these members, we have very limited means of otherwise notifying those members of updates to their affiliations in order to persuade such members to return to our Web sites. If there is an increase in the number of members who opt out of receiving our subscription-based emails and if we are unable to find other ways to convince such members to return to our Web sites, our business and results of operations could be adversely affected.

The CAN-SPAM Act regulates the distribution of commercial emails. Among other things, the CAN-SPAM Act provides a right on the part of an email recipient to request the sender to stop sending certain categories of email messages. In compliance with the CAN-SPAM Act, we do not send commercial emails to our members if they elect to opt out of receiving these emails, and a significant number of our members have opted out of receiving commercial emails from us. An increase in the number of members who opt out of receiving commercial emails from us could adversely affect our business and results of operations. In addition, voluntary actions by third-parties to block, impose restrictions on, or charge for, the delivery of emails through their email systems could materially and adversely impact our businesses. 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. Any disruption or restriction on the distribution of emails or increase in the associated costs could adversely impact our ability to continue our email campaigns, which could materially and adversely affect our revenues and profitability.

Our international operations and plans for international expansion may not be successful.

We have invested significantly in expanding our social networking services into several international markets, primarily Sweden, Germany, France and Austria, and international pay accounts now constitute a significant portion of our pay account growth. One of our strategies is to continue the expansion of our social networking services into additional international markets. We intend to continue to invest in our international operations, including through the expansion of our services into new markets. However, the investment of additional resources may be restricted as a result of the terms of the indebtedness which we anticipate incurring in connection with the proposed acquisition of FTD Group, Inc. (the "Acquisition") and may not produce desired levels of revenue or profitability, and we may not be successful in expanding into new markets. Managing a global organization can be difficult, time consuming and expensive. We have limited experience operating in foreign jurisdictions which may increase the risk that any international expansion efforts we undertake will not be successful. In addition, conducting international operations involves additional risks and uncertainties, including:

The occurrence of any one of these risks could negatively affect our international operations, our number of pay accounts and our financial results.

Our principal Communications services, our Internet access services, compete with many emerging and seasoned competitors, including the following:

Our primary Communications service offering is dial-up Internet access. Our historical success in competing for Internet access subscribers has been based primarily on offering dial-up Internet access services at prices lower than the prices of our principal competitors. However, in the last few years the market has changed dramatically due to a variety of factors including increased availability of broadband services, decreases in broadband pricing and widespread consumer adoption of applications that require a broadband connection. Dial-up Internet access services do not compete favorably with broadband services with respect to connection speed, and dial-up Internet access services no longer have a significant, if any, price advantage over certain broadband services. As a result, dial-up Internet access services have an increasingly difficult time competing with broadband services and the number of dial-up accounts in the United States continues to decline. In addition to competition from broadband providers, competition among dial-up Internet access service providers is intense and neither our pricing nor our features provide us with a significant competitive advantage, if any, over certain of our dial-up competitors. We expect that competition, particularly with respect to price, both for broadband as well as dial-up Internet access services, will continue, and that our dial-up Internet access subscriber base will continue to decrease, potentially at an increasing rate.

In the fourth quarter of 2006, we began offering digital subscriber line ("DSL") services by purchasing and reselling DSL services acquired through third-party providers. The providers from whom we purchase such services are either our direct competitors or acquire their services from our

competitors. We currently have agreements with only a limited number of providers and their services cover only a portion of the U.S. There is no assurance that we will be successful in entering into the agreements necessary to offer DSL services on a significant scale, that we will be able to maintain such agreements or that the pricing under such agreements will enable us to profitably resell the services. Most of the largest providers of broadband services, such as cable and telecommunications companies, control their own networks and offer a wider variety of services than we offer, including phone, data and video services. Their ability to bundle services and to offer broadband services at prices below the price that we can profitably offer comparable services puts us at a competitive disadvantage. Decreases in retail broadband pricing as a result of competition would adversely impact our ability to offer such services profitably or at a competitive price. We only have a limited number of subscribers to our DSL services and there can be no assurance that our DSL services will be commercially successful.

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, and/or reduce the standard pricing of our services. Measures such as these could decrease our revenues and our average revenue per Internet access pay account. We may also have to allocate more marketing resources toward our Internet access services than we anticipate. All of the foregoing could adversely affect the profitability of our Internet access services which could materially and adversely impact our financial position, results of operations and cash flows.

Revenues and profitability of our Communications segment are expected to decrease.

Substantially all of our Communications revenues and profits come from our dial-up Internet access services. 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 billable services revenues and the profitability of this segment will continue to decline over time. The rate of decline in billable services revenues has accelerated in some periods and may continue to accelerate. We also expect that our Communications advertising revenues will continue to decline. Continued declines, particularly if such declines accelerate, in Communications revenues may materially and adversely impact the profitability of this segment and the Company as a whole.

If we are unable to retain users, our business and financial results will suffer.

A number of our Communications pay account subscriptions each month are not renewed or cancelled, which we refer to as churn. We have experienced, and will likely continue to experience, a higher percentage of churn with respect to our accelerated dial-up Internet access services than is indicated by our overall Communications churn rate. Our churn, which may be higher in future periods, makes it more difficult to minimize decreases in the number of pay accounts for our Communications services, which adversely impacts our revenues. Each month, a significant number of free dial-up Internet access accounts become inactive and it is likely that we will continue to experience declines in the number of active free accounts.

Our Internet access business is dependent on our ability to effectively manage our telecommunications and network capacities.

Our Internet access business substantially depends on the capacity, affordability, reliability, and security of our telecommunications networks. Our failure to accurately anticipate our future telecommunications capacity needs within lead-time requirements could result in unnecessary capacity or inadequate service. Only a small 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. Vendors may experience significant

financial difficulties and be unable to perform satisfactorily or to continue to offer their services. The loss of vendors has resulted, and may result, in increased costs, decreased service quality and the loss of users. If we are unable to maintain, renew or obtain new agreements with the third-party providers of our telecommunications services, or to secure new or alternative arrangements with other providers, to provide the scope, quantity, quality, type, and pricing of services to meet our current and future needs, our business, financial position, results of operations, and cash flows could be materially and adversely affected.

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

Advertising revenues are a critical component of our revenues and profitability. Our revenues from advertising have in the past fluctuated, and may in the future fluctuate, due to a variety of factors including, without limitation, the effect of key advertising relationships, competition, changes in our business models, changes in the online advertising market, changes in our advertising inventory, and changes in usage. In particular, we derive significant revenues from search on our Communications services, from post-transaction sales on our Classmates Online service and from certain other advertising initiatives or partners across our services, and any termination, change or decrease in revenues from these sources could have a material impact on our advertising revenues. The Internet advertising field continues to evolve with many different advertising networks, Web publishers, and other providers competing with one another and providing different types of advertising solutions, and our internal sales force competes with some or all of these solutions for advertising dollars. We also compete with television, radio, print, and other offline sources for advertising dollars. Internet advertising techniques are evolving, and if our technology and advertising serving techniques do not keep up with the needs of advertisers, we will not be able to compete effectively. There can be no assurance our advertising initiatives will be effective or that we will successfully compete with third-parties, and our advertising revenues may decline in future periods. Advertising inventory in our Communications segment continues to decline as a result of the decrease in our dial-up access accounts, and we anticipate decreased advertising revenues in the Communications segment which will adversely impact our profitability.

Our results of operations and changes in the number and mix of pay accounts 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. A number of factors that may impact us are discussed in greater detail in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission ("SEC"), and these factors 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 future or long-term performance. In addition, these factors 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 or projections made by our management or by 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.

We spend significant funds to market our services and rely on a variety of channels to obtain new accounts. If our marketing activities or our channels prove to be ineffective, or if the cost to acquire new accounts increases, our financial results could be materially and adversely impacted.

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

One of our strategic objectives is to acquire businesses, services or technologies that will provide us with an opportunity to diversify the services we offer, leverage our assets and core competencies, expand our geographic reach or that otherwise may be complementary to our existing businesses. We may not succeed in growing or maintaining our revenues unless we are able to successfully complete acquisitions. The merger and acquisition market for companies offering Internet services is extremely competitive, particularly for companies who have demonstrated a profitable business model with long-term growth potential. Companies with these characteristics trade publicly or are privately valued at multiples of earnings, revenues, operating income, and other metrics significantly higher than the multiples at which we are currently valued. In April 2008, we signed a definitive merger agreement to acquire FTD. Acquisitions, including the Acquisition, may require us to obtain debt or equity financing, which may not be available to us on reasonable terms, or at all. In addition, negotiating these transactions can be time-consuming, difficult and expensive, and our ability to close these transactions may often be subject to approvals that are beyond our control. These and other factors may make it difficult for us to acquire additional businesses, services or technologies at affordable prices, or at all, and there is no assurance that we will be successful in completing additional acquisitions.

We have evaluated (both in light of the Acquisition and on a stand-alone basis), and expect to continue to evaluate, a wide variety of potential strategic transactions that we believe may complement our current or future business activities. We routinely engage in discussions regarding potential acquisitions and any of these transactions could be material to our financial condition, results of operations and cash flows. However, we cannot assure you that the anticipated benefits of an acquisition (including the Acquisition) will materialize or that any integration attempts will be successful. Acquiring a business, service or technology involves many risks, including:

Risks specific to the proposed acquisition of FTD include our failure to satisfy any of the conditions to complete the Acquisition; our failure to obtain financing to complete the Acquisition; our failure to achieve anticipated benefits of the Acquisition; the impact of, and restrictions associated with, the debt incurred in connection with the Acquisition; acquisition costs being greater than anticipated; unanticipated delays in consummating the Acquisition as a result of regulatory issues or other factors; and risks associated with the combined business of our Company and FTD, as well as the risk factors discussed from time to time in our and FTD's press releases, public statements and/or filings with the SEC. For a further discussion of some of these risks, see "Risks Relating to the Proposed FTD Group, Inc. Acquisition" below.

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

We may not successfully develop or acquire and market new services and features in a timely or cost-effective manner; consumers or advertisers may not accept our new services and features.

We may not be able to compete effectively if we are not able to timely and cost-effectively adapt to changes in technology and industry standards or develop or acquire and successfully commercialize new and enhanced services and features. New services or features may be dependent on our obtaining needed technology or services from third-parties, which we may not be able to obtain in a timely manner upon terms acceptable to us, or at all. We have expended, and may in the future expend, significant resources enhancing our existing services and features and developing, acquiring and implementing new services or features. Product development involves a number of uncertainties, including unanticipated delays and expenses. New or enhanced services and features may have technological problems or may not be accepted by consumers or advertisers. For example, our VoIP and photo sharing services did not meet with commercial success. We cannot assure you that we will be successful in developing, acquiring or implementing new or enhanced services or features, or that new or enhanced services or features will be commercially successful.

Our business is highly dependent on our billing and customer support systems, and on third-parties for technical support and customer support; our business may suffer if these systems do not function and we cannot perform and provide these services.

Customer billing and service are highly complex processes, and our systems must efficiently interface with other third-parties' systems such as the systems of credit card processing companies and other companies to whom we outsource these functions. Our ability to accurately and efficiently bill and service our users is dependent on the successful operation of these systems. We have experienced customer billing and service problems from time to time and may experience additional problems in the future. We currently outsource a majority of our live technical and billing support functions. We rely on one customer support vendor, and its call centers are located in the Philippines and India. As a result, we maintain only a small number of internal customer support personnel. We are not equipped to provide the necessary range of customer support functions in the event that our vendor becomes unable or unwilling to offer these services to us. Problems with our third-party software applications, our internally developed software applications, our credit card processors, our outsourced customer support vendor, other customer billing and support vendors, and any other failures or errors in our customer billing and support systems, could materially and adversely affect our business, financial position, results of operations, and cash flows.

If our software or hardware contains errors or fails, if we fail to operate our services effectively or if we encounter difficulties integrating our systems and technologies, our business could be seriously harmed.

Our services, and the hardware and software systems underlying our services, are complex. Our systems may contain undetected errors or failures and are susceptible to human error. We have in the past encountered, and may in the future encounter, software and hardware errors, system design errors, errors in the operation of our systems, and technical and customer support issues associated with our services and software releases. This has resulted in, and may in the future result in, a number of adverse consequences, which have included or may include:

A number of our material technologies and systems are based on different platforms. To the extent we attempt to integrate these technologies and systems, we may experience a number of difficulties, errors, failures, and unanticipated costs. In addition, our business relies on third-party software for various applications including, without limitation, our internal operations, our billing and customer support, our accelerated dial-up Internet access services, and our advertising products and services. Any significant failure of this software could materially and adversely affect our business, financial position, results of operations, and cash flows. Our services also rely on their compatibility with other third-party systems, particularly operating systems. Incompatibility with future changes to third-party software upon which our systems rely could materially affect our ability to deliver our services. We cannot assure you that we will not experience significant technical problems with our services in the future.

A security breach or inappropriate access to, or use of, our networks, computer systems or services could expose us to liability, claims or 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 could potentially jeopardize the security of

confidential information, including credit card information, of our users and of third-parties. Third-parties have in the past used our networks, services and brand names to perpetrate crimes, such as identity theft or credit card theft, and may do so in the future. Users or third-parties may assert claims of liability against us as a result of any failure by us to prevent security breaches, unauthorized disclosure of user information or other such activities. Although we use security measures that we believe to be effective by industry standards, we cannot assure you that the measures we take will be successfully implemented or 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 services, all of which could adversely impact our business.

Our business is dependent on the continued acceptance of the Internet as an effective medium. Damaging software programs, such as computer viruses, worms and Trojan horses, have from time to time been disseminated through the Internet and have caused significant disruption to Internet users. Certain of these programs have disabled the ability of computers to access the Internet, requiring users to obtain technical support in order to gain access to the Internet. Other programs have had the potential to damage or delete computer programs. The development and widespread dissemination of harmful programs has the potential to seriously disrupt Internet usage. If Internet usage is significantly disrupted for an extended period of time, or if the prevalence of these programs results in decreased residential Internet usage, our business could be materially and adversely impacted. In addition, actions taken by us or our telecommunications providers to attempt to minimize the spread of harmful programs could adversely impact our users' ability to utilize our services.

Our trademarks, patents, copyrights, domain names and trade secrets are important to the success of our business. We principally rely upon patent, trademark, copyright, trade secret and contract laws to protect our proprietary technology, all of which provide only limited protection. The protection of our proprietary rights may require the expenditure of significant financial and 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.

Legal actions, particularly those associated with proprietary rights, could subject us to substantial liability and expense and require us to change our business practices.

We are currently, and have been in the past, party to various legal actions. These actions include, without limitation, claims by private parties in connection with consumer protection and other laws, claims that we infringe third-party patents, 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, negligence, trademark infringement, copyright infringement, and privacy matters. Various governmental agencies may also assert claims, institute legal actions, inquiries or investigations, or impose obligations relating to our business practices, such as our marketing, billing, customer retention, renewal, cancellation, refund, or disclosure practices.

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 claims or claims that may be made in the future. The failure to successfully defend against certain types of claims, including claims based on infringement of proprietary rights, could require us to change our

business practices or obtain licenses from third-parties, which licenses may not be available on acceptable terms, if at all. Lawsuits, inquiries and investigations also involve the risk of significant settlements or judgments against us. 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 position, results of operations, and cash flows.

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 other intangible assets in connection with our acquisitions. We evaluate the recoverability of our identifiable intangible assets and other long-lived assets for impairment when events occur or circumstances change that would indicate that the carrying amount of an asset may not be recoverable. In addition, we perform an impairment test of our goodwill 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 might be permanently impaired. If our acquisitions are not commercially successful, we would likely be required to record impairment charges which would negatively impact our financial condition and results of operations. For example, in the fourth quarter of 2006, we impaired certain long-lived assets associated with our VoIP services and certain goodwill and intangible assets associated with the acquisition of our photo sharing services. We have experienced impairment charges in the past, and we cannot assure you that we will not experience such charges in the future. In addition, from time to time, we record assets on our balance sheet that, due to changes in value or in our strategy, may have to be expensed in future periods. In connection with the proposed acquisition of FTD, we have incurred and capitalized approximately $6.5 million of acquisition costs through June 30, 2008, and continue to incur and capitalize such costs, which we will have to expense in a future period if the Acquisition does not occur. 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 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.

Changes in laws and regulation changes and new laws and regulations may adversely affect our results of operations.

We are subject to a variety of international, federal, state, and local laws and regulations, including those relating to issues such as user privacy and data protection, defamation, pricing, advertising, taxation, sweepstakes, promotions, billing, content regulation, bulk email or "spam," anti-spyware initiatives, security breaches, and consumer protection. 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, or increased enforcement activity of such laws and regulations, could significantly impact 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 FTC and certain state agencies have investigated Internet companies, including us, in connection with consumer protection and privacy matters. The federal government has also enacted

consumer protection laws, including laws protecting the privacy of consumers' nonpublic personal information. Our failure to comply with existing laws, including those of foreign countries in which we operate, the adoption of new laws or regulations or changes in enforcement policies and procedures could increase the costs of operating our business. To the extent that our services and business practices change as a result of changes in regulations or claims or actions by governmental agencies, such as the FTC, or claims or actions by private parties, our business, financial position, results of operations and cash flows could be materially adversely affected.

Currently, ISPs are considered "information service" providers and regulations that apply to telephone companies and other telecommunications common carriers do not apply to our Internet access services. However, our Internet access services could become subject to Federal Communications Commission and state regulation as Internet access services and telecommunications services converge. If the regulatory status of ISPs changes, our business may be adversely affected. The Internet Tax Freedom Act, which placed a moratorium on new state and local taxes on Internet commerce, is in effect through November 2014. However, future laws imposing taxes or other regulations on the provision of goods and services over the Internet could make it substantially more expensive to operate our business.

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

Our computer equipment and the telecommunications infrastructure of our third-party network providers are vulnerable to damage from fires, earthquakes, floods, power loss, telecommunications failures, terrorism, and similar events. We have experienced situations where power loss and telecommunications failures have adversely impacted our services, although to date such failures have not been material to our operations. Despite our implementation of network security measures, our servers are also vulnerable to computer viruses, worms, physical and electronic break-ins, sabotage, and similar disruptions from unauthorized tampering of our computer systems. In addition, a significant portion of CMC's critical computer equipment, including data centers, is located in areas of the states of California and Washington that are particularly susceptible to earthquakes, and a significant portion of our Classmates Online subsidiary's computer equipment and data centers are also located in a flood plain. While we maintain redundant capabilities for our data centers, a disaster 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 or shut down our business. We do not carry earthquake or flood insurance, 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.

Our business could be severely impacted due to political instability or other factors in India or the Philippines.

We have a significant number of employees located in our India office. In addition, a significant portion of our customer support is handled by a third-party vendor with customer support agents located in call centers in India and the Philippines. Our internal product development, customer support and quality assurance operations as well as our third-party vendor's customer support operations would be severely disrupted if telecommunications issues, political instability, labor strife or other factors adversely impacted these operations or the ability to communicate with these operations. Any disruption that continued for an extended period of time would likely have a material adverse effect on our ability to service our customers and develop our products and services. If we or our customer support vendor were to cease operations in India or the Philippines and transfer these operations to another geographic area, such change could result in increased overhead and customer service costs which could materially and adversely impact our results of operations.

There are risks associated with our strategy of an initial public offering of Classmates Media Corporation.

In 2007, we commenced the process for an IPO of our wholly-owned subsidiary, CMC, which filed a Form S-1 registration statement relating to the IPO. The registration statement was withdrawn in December of 2007. While it remains our strategy to complete a CMC IPO, we do not believe it would be completed before 2009 and there can be no assurance that it will ever be completed.

If the CMC IPO is completed, CMC would be a new public company and cash flows associated with CMC would likely remain with CMC and would no longer be available for our use. Additionally, Mark R. Goldston, our chairman, president and chief executive officer, has an employment agreement to serve as the chairman and chief executive officer of CMC. Although we also have an employment agreement with Mr. Goldston, he will not be dedicated to our business on a full-time basis and the loss of his full-time services could harm our business. We cannot assure you that a CMC IPO, if completed, will produce any increase in value for our stockholders or will not adversely impact United Online.

We cannot predict our future capital needs and we may not be able to secure additional financing.

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 anticipate incurring substantial indebtedness in connection with the Acquisition. The terms of such indebtedness in addition to the degree to which we are leveraged will adversely affect our ability to obtain additional financing. If adequate funds are not available or not available when required and in sufficient amounts or on acceptable terms, our business and future prospects may suffer.

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

Commencing with the second quarter of 2005, we have declared and paid a quarterly cash dividend of $0.20 per share of 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. Our future cash flows may significantly decline due to, among other things, declines in our dial-up Internet access business and other factors. Our cash balances will also decline if we use our cash to acquire businesses, services or technologies, including our proposed acquisition of FTD; repurchase our common stock; or for other purposes. To fund the Acquisition, we intend to use a substantial portion of our cash balances and to incur significant indebtedness. The terms of such financing impose certain restrictions on our ability to pay dividends following the closing of the Acquisition and, as a result of the financing limitations, the cash flows of FTD will, in general, not be available to us (except for FTD and its subsidiaries). In addition, it remains our strategy to complete an IPO of CMC and, if such offering were consummated, we would no longer receive the cash flow from CMC that we historically received. These and other 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 reduce, the dividend in the future. Following the closing of the Acquisition, we expect to decrease our regular quarterly cash dividend from $0.20 per share of common stock to $0.10 per share of common stock. 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. In addition, 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.

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, where most publicly-held Internet companies are traded, 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 could suffer significant declines in the market price of our common stock.

The Acquisition may not be completed within the expected timeframe or at all, which may adversely affect our financial results and operations and the market price of our common stock.

The Acquisition is subject to a number of conditions, some of which may prevent, delay or otherwise materially adversely affect its completion. We cannot predict whether or when these conditions will be satisfied. Failure to complete, the Acquisition would, and any delay in completing the Acquisition could, prevent us from realizing the anticipated benefits of the Acquisition. In addition, if the Acquisition is not completed, or is delayed, we may experience negative reactions from the financial markets and our collaborative partners, customers and employees. Each of these factors may adversely affect the trading price of our common stock and our financial results and operations.

We will incur substantial costs in connection with the Acquisition that may adversely affect our financial results, operations and financial condition and the market price of our common stock.

We have incurred, and expect to continue to incur, substantial costs associated with the Acquisition. These costs are primarily associated with the fees of attorneys, accountants and our financial advisors, as well as financing for the Acquisition, and if the Acquisition is completed, debt repayment and employee benefits, though additional unanticipated costs may also be incurred. In addition, we have diverted significant management resources in an effort to complete the Acquisition and we are subject to restrictions contained in the merger agreement with FTD on the conduct of our business. In addition, if the Acquisition is not completed, we will have incurred significant costs relating to the diversion of management resources, for which we will have received little or no benefit. Moreover, substantial unanticipated costs may be incurred in connection with the integration of the business of FTD with our business. If the Acquisition is not completed, the above risks and liabilities may adversely affect our business, financial results, financial condition, cash flows and stock price.

We are subject to business uncertainties and contractual restrictions while the Acquisition is pending.

Uncertainty about the Acquisition and diversion of management attention could harm the Company, whether or not the Acquisition is completed. In addition, as a result of the Acquisition, current and prospective employees could experience uncertainty about their future with the Company. The success of the Acquisition will depend in part on the retention of personnel critical to the business and operation of the Company and the uncertainties discussed above may impair the Company's ability to retain, recruit or motivate key personnel. The closing of the Acquisition will also require a significant amount of time and attention from management. In addition, the pendency of the Acquisition could exacerbate the diversion of management resources from other transactions or activities that the Company may undertake. The diversion of management attention away from ongoing operations could adversely affect ongoing operations and business relationships. The merger agreement

with FTD also restricts the Company from making certain acquisitions and taking other specified actions until the Acquisition occurs. These restrictions may prevent the Company from pursuing attractive business opportunities that may arise prior to the closing of the Acquisition.

The substantial leverage of the Company following the Acquisition could adversely affect its ability to raise additional capital to fund operations, limit its flexibility in operating its business and its ability to react to changes in the economy or its industry and prevent it from satisfying its debt obligations.

Following the Acquisition, the Company will have a substantial amount of indebtedness. The Company's substantial indebtedness could have important consequences on its business and financial condition. For example:

Under the terms of the financing for the Acquisition, the Company will be permitted to incur additional indebtedness subject to certain conditions, and the risks described above may be increased if the Company incurs additional indebtedness.

A substantial number of the Company's shares of common stock will become eligible for future resale in the public market after the Acquisition which will have a negative impact on the earnings per share of the Company and could result in dilution and an adverse effect on the market price of those shares.

If the Acquisition is consummated, shares of the Company's common stock issued as merger consideration will be immediately saleable. Specifically, the Company and FTD expect that approximately 12.3 million shares of the Company's common stock will be issued to FTD stockholders (based on the number of outstanding shares of FTD common stock on July 21, 2008, and issuable pursuant to the exercise of all outstanding options to purchase shares of FTD common stock on July 21, 2008). Consequently, after the closing of the Acquisition, a substantial number of additional shares of the Company's common stock will be eligible for resale in the public market. We expect that the Acquisition will initially result in lower earnings per share than would have been earned by the Company in the absence of the Acquisition. Based on the expected number of shares of the Company's common stock to be issued to FTD stockholders in the Acquisition, FTD stockholders will own approximately 15% of the then outstanding shares of the Company's common stock immediately after the Acquisition. There can be no assurance that our stockholders will realize a benefit from the Acquisition commensurate with the ownership dilution they will experience in connection with the Acquisition. Following the Acquisition, our stockholders will own interests in a Company operating an expanded business with more assets and a different mix of, and aggregate total of, liabilities. Current stockholders of the Company may not wish to continue to invest in the additional operations of the Company, or for other reasons may wish to dispose of some or all of their interests in the Company. Sales of substantial numbers of shares of the Company's common stock in the public market following the Acquisition could adversely affect the market price of our common stock.

In May 2001, our 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. From time to time, our Board of Directors has increased the amount authorized for repurchase under this program and has extended the program. In April 2004, our 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 January 2008, our Board again further extended the program through December 31, 2008. At June 30, 2008, we had repurchased $139.2 million of our common stock under the program, leaving $60.8 million of authorization remaining under the program.

Shares withheld upon vesting of restricted stock units and 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 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. We then pay the applicable withholding taxes in cash.

Common stock repurchases through June 30, 2008 were as follows (in thousands, except per share amounts):

Period			Average Price Paid per Share			Maximum Approximate Dollar Value that May Yet be Purchased Under the Program

2001-2005		10,932	$	12.72	10,932	$	60,782
February 15, 2006		129	$	12.77	—	$	60,782
May 15, 2006		26	$	11.87	—	$	60,782
August 15, 2006		38	$	10.92	—	$	60,782
November 15, 2006		22	$	13.88	—	$	60,782
February 15, 2007		194	$	13.72	—	$	60,782
May 15, 2007		71	$	15.89	—	$	60,782
August 15, 2007		69	$	12.82	—	$	60,782
November 15, 2007		56	$	16.66	—	$	60,782
January 27, 2008		142	$	10.71	—	$	60,782
February 15, 2008		404	$	11.49	—	$	60,782
May 15, 2008		81	$	11.81	—	$	60,782

	Total	12,164	$	12.71	10,932

The annual meeting of our stockholders was held on June 12, 2008. Two nominees to the Board of Directors, Mark R. Goldston and Carol A. Scott, were elected to serve for terms expiring at the third annual meeting following their election or until their successors are duly elected and qualified. The appointment of PricewaterhouseCoopers LLP as our independent auditors for the fiscal year ending December 31, 2008 was also ratified at the meeting.

The results of voting for the election of Mr. Goldston were as follows: 56,681,202 votes for and 3,927,771 votes withheld. The results of voting for the election of Ms. Scott were as follows: 57,962,585 votes for and 2,646,388 votes withheld. The remaining members of the Board of Directors who continued in office after the meeting are James T. Armstrong, Robert Berglass, Kenneth L. Coleman, and Dennis Holt. The terms of Mr. Armstrong and Mr. Holt will expire at our next annual stockholders meeting and the terms of Mr. Berglass and Mr. Coleman will expire at the following annual stockholders meeting.

The results of voting for the ratification of the appointment of PricewaterhouseCoopers LLP as our independent auditors were as follows: 59,028,078 votes for, 1,557,273 votes against and 23,622 abstentions.

				Incorporated by Reference to

			Filed with this Form 10-Q	Incorporated by Reference to
No.		Exhibit Description	Filed with this Form 10-Q	Form		File No.		Date Filed
	2.1	Stock Purchase Agreement, dated as of April 9, 2006, by and between United Online, Inc. and UAL Corporation			8-K		000-33367		4/13/2006
	2.2	Agreement and Plan of Merger, dated April 30, 2008, among United Online, Inc., UNOLA Corp. and FTD Group, Inc.			S-4/A		333-151998		7/22/2008
	2.3	Amendment No. 1 to Agreement and Plan of Merger, dated July 16, 2008, among United Online, Inc., UNOLA Corp. and FTD Group, Inc.			S-4/A		333-151998		7/22/2008
	3.1	Amended and Restated Certificate of Incorporation			10-K		000-33367		3/1/2007
	3.2	Amended and Restated Bylaws			10-K		000-33367		3/1/2007
	3.3	Certificate of Designation for Series A Junior Participating Preferred Stock (included in Exhibit 4.1 below)			10-K		000-33367		3/1/2007
	4.1	Rights Agreement, dated as of November 15, 2001, between the Company and U.S. Stock Transfer Corporation, which includes the form of Certificate of Designation for the Series A junior participating preferred stock as Exhibit A, and the form of Rights Certificate as Exhibit B			10-K		000-33367		3/1/2007
	4.2	Amendment No. 1 to Rights Agreement, dated as of April 29, 2003, between the Registrant and U.S. Stock Transfer Corporation			10-Q		000-33367		5/1/2003
	4.3	Form of Indenture Governing 13% Senior Secured Notes			S-4/A		333-151998		7/22/2008
	4.4	Form of 13% Senior Secured Notes due 2013			S-4/A		333-151998		7/22/2008
	10.1	2001 Amended and Restated Employee Stock Purchase Plan			10-Q		000-33367		5/3/2004

				Incorporated by Reference to

			Filed with this Form 10-Q	Incorporated by Reference to
No.		Exhibit Description	Filed with this Form 10-Q	Form		File No.		Date Filed
	10.2	2001 Stock Incentive Plan			10-Q		000-33367		8/9/2007
	10.3	Form of Option Agreement for 2001 Stock Incentive Plan			10-Q		000-33367		10/27/2004
	10.4	Form of Restricted Stock Unit Issuance Agreement for 2001 StockIncentive Plan and 2001 Supplemental Stock Incentive Plan			10-Q		000-33367		8/8/2005
	10.5	2001 Supplemental Stock Incentive Plan			10-Q		000-33367		8/9/2007
	10.6	Form of Option Agreement for 2001 Supplemental Stock Incentive Plan			10-Q		000-33367		10/27/2004
	10.7	Classmates Online, Inc. Amended and Restated 1999 Stock Plan			S-8		333-121217		2/11/2005
	10.8	Classmates Online, Inc. 2004 Stock Plan			10-Q		000-33367		5/10/2005
	10.9	Form of Option Agreement for Classmates Online, Inc. 2004 Stock Plan			10-Q		000-33367		5/10/2005
	10.10	Employment Agreement between the Registrant and Mark R. Goldston			10-Q		000-33367		5/3/2007
	10.11	First Amendment to Employment Agreement between the Registrant and Mark R. Goldston			10-Q		000-33367		10/30/2007
	10.12	Employment Agreement between Classmates Media Corporation and Mark R. Goldston			10-Q		000-33367		10/30/2007
	10.13	Employment Agreement between the Registrant and Jeremy E. Helfand			10-Q		000-33367		10/30/2007
	10.14	Amended and Restated Employment Agreement between the Registrant and Paul E. Jordan			10-Q		000-33367		10/30/2007
	10.15	Employment Agreement between Classmates Media Corporation and Steven B. McArthur			10-K		000-33367		2/20/2008
	10.16	Employment Agreement between the Registrant and Frederic A. Randall, Jr.			10-Q		000-33367		10/30/2007
	10.17	Employment Agreement between the Registrant and Scott H. Ray			10-Q		000-33367		10/30/2007
	10.18	Employment Agreement between the Registrant and Gerald J. Popek			10-Q		000-33367		10/30/2007
	10.19	Employment Agreement between the Registrant and Robert J. Taragan			10-Q		000-33367		10/30/2007
	10.20	Employment Agreement between the Registrant and Matthew J. Wisk			10-Q		000-33367		10/30/2007
	10.21	Office Lease between LNR Warner Center, LLC and NetZero, Inc.			10-Q		000-33367		5/3/2004
	10.22	Commitment Letter, dated April 30, 2008, from Wells Fargo Bank, National Association, to United Online, Inc.			8-K		000-33367		5/6/2008

				Incorporated by Reference to

			Filed with this Form 10-Q	Incorporated by Reference to
No.		Exhibit Description	Filed with this Form 10-Q	Form		File No.		Date Filed
	10.23	Form of Restricted Stock Unit Issuance Agreement for 2001 Stock Incentive Plan			10-Q		000-33367		5/12/2008
	10.24	Commitment Letter, dated July 2, 2008, from Silicon Valley Bank to United Online, Inc.			8-K		000-33367		7/17/2008
	10.25	Voting and Support Agreement, dated as of April 30, 2008, by and among Green Equity Investors IV L.P., FTD Co-Investment, LLC and United Online, Inc.			S-4/A		333-151998		7/22/2008
	10.26	United Online, Inc. 2008 Management Bonus Plan	X				000-33367		8/8/2008
	31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X				000-33367		8/8/2008
	31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X				000-33367		8/8/2008
	32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X				000-33367		8/8/2008
	32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X				000-33367		8/8/2008

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

				Incorporated by Reference to

			Filed with this Form 10-Q	Incorporated by Reference to
No.		Exhibit Description	Filed with this Form 10-Q	Form		File No.		Date Filed
	2.1	Stock Purchase Agreement, dated as of April 9, 2006, by and between United Online, Inc. and UAL Corporation			8-K		000-33367		4/13/2006
	2.2	Agreement and Plan of Merger, dated April 30, 2008, among United Online, Inc., UNOLA Corp. and FTD Group, Inc.			S-4/A		333-151998		7/22/2008
	2.3	Amendment No. 1 to Agreement and Plan of Merger, dated July 16, 2008, among United Online, Inc., UNOLA Corp. and FTD Group, Inc.			S-4/A		333-151998		7/22/2008
	3.1	Amended and Restated Certificate of Incorporation			10-K		000-33367		3/1/2007
	3.2	Amended and Restated Bylaws			10-K		000-33367		3/1/2007
	3.3	Certificate of Designation for Series A Junior Participating Preferred Stock (included in Exhibit 4.1 below)			10-K		000-33367		3/1/2007
	4.1	Rights Agreement, dated as of November 15, 2001, between the Company and U.S. Stock Transfer Corporation, which includes the form of Certificate of Designation for the Series A junior participating preferred stock as Exhibit A, and the form of Rights Certificate as Exhibit B			10-K		000-33367		3/1/2007
	4.2	Amendment No. 1 to Rights Agreement, dated as of April 29, 2003, between the Registrant and U.S. Stock Transfer Corporation			10-Q		000-33367		5/1/2003
	4.3	Form of Indenture Governing 13% Senior Secured Notes			S-4/A		333-151998		7/22/2008
	4.4	Form of 13% Senior Secured Notes due 2013			S-4/A		333-151998		7/22/2008
	10.1	2001 Amended and Restated Employee Stock Purchase Plan			10-Q		000-33367		5/3/2004
	10.2	2001 Stock Incentive Plan			10-Q		000-33367		8/9/2007
	10.3	Form of Option Agreement for 2001 Stock Incentive Plan			10-Q		000-33367		10/27/2004
	10.4	Form of Restricted Stock Unit Issuance Agreement for 2001 StockIncentive Plan and 2001 Supplemental Stock Incentive Plan			10-Q		000-33367		8/8/2005
	10.5	2001 Supplemental Stock Incentive Plan			10-Q		000-33367		8/9/2007
	10.6	Form of Option Agreement for 2001 Supplemental Stock Incentive Plan			10-Q		000-33367		10/27/2004
	10.7	Classmates Online, Inc. Amended and Restated 1999 Stock Plan			S-8		333-121217		2/11/2005
	10.8	Classmates Online, Inc. 2004 Stock Plan			10-Q		000-33367		5/10/2005

				Incorporated by Reference to

			Filed with this Form 10-Q	Incorporated by Reference to
No.		Exhibit Description	Filed with this Form 10-Q	Form		File No.		Date Filed
	10.9	Form of Option Agreement for Classmates Online, Inc. 2004 Stock Plan			10-Q		000-33367		5/10/2005
	10.10	Employment Agreement between the Registrant and Mark R. Goldston			10-Q		000-33367		5/3/2007
	10.11	First Amendment to Employment Agreement between the Registrant and Mark R. Goldston			10-Q		000-33367		10/30/2007
	10.12	Employment Agreement between Classmates Media Corporation and Mark R. Goldston			10-Q		000-33367		10/30/2007
	10.13	Employment Agreement between the Registrant and Jeremy E. Helfand			10-Q		000-33367		10/30/2007
	10.14	Amended and Restated Employment Agreement between the Registrant and Paul E. Jordan			10-Q		000-33367		10/30/2007
	10.15	Employment Agreement between Classmates Media Corporation and Steven B. McArthur			10-K		000-33367		2/20/2008
	10.16	Employment Agreement between the Registrant and Frederic A. Randall, Jr.			10-Q		000-33367		10/30/2007
	10.17	Employment Agreement between the Registrant and Scott H. Ray			10-Q		000-33367		10/30/2007
	10.18	Employment Agreement between the Registrant and Gerald J. Popek			10-Q		000-33367		10/30/2007
	10.19	Employment Agreement between the Registrant and Robert J. Taragan			10-Q		000-33367		10/30/2007
	10.20	Employment Agreement between the Registrant and Matthew J. Wisk			10-Q		000-33367		10/30/2007
	10.21	Office Lease between LNR Warner Center, LLC and NetZero, Inc.			10-Q		000-33367		5/3/2004
	10.22	Commitment Letter, dated April 30, 2008, from Wells Fargo Bank, National Association, to United Online, Inc.			8-K		000-33367		5/6/2008
	10.23	Form of Restricted Stock Unit Issuance Agreement for 2001 Stock Incentive Plan			10-Q		000-33367		5/12/2008
	10.24	Commitment Letter, dated July 2, 2008, from Silicon Valley Bank to United Online, Inc.			8-K		000-33367		7/17/2008
	10.25	Voting and Support Agreement, dated as of April 30, 2008, by and among Green Equity Investors IV L.P., FTD Co-Investment, LLC and United Online, Inc.			S-4/A		333-151998		7/22/2008
	10.26	United Online, Inc. 2008 Management Bonus Plan	X				000-33367		8/8/2008
	31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X				000-33367		8/8/2008
	31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X				000-33367		8/8/2008


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2008
Or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to


Delaware (State or other Jurisdiction of Incorporation or Organization)		77-0575839 (I.R.S. Employer Identification No.)
21301 Burbank Boulevard, Woodland Hills, California (Address of Principal Executive Office)		91367 (Zip Code)
(818) 287-3000 (Registrant's Telephone Number, Including Area Code)
Not applicable (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

		June 30, 2008

		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Municipal securities		$	69,170	$	422	$	(21	)	$	69,571
Government agencies			52,811		1		(21	)		52,791
U.S. corporate notes			3,961		—		—			3,961

	Total	$	125,942	$	423	$	(42	)	$	126,323

		December 31, 2007

		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Municipal securities		$	68,546	$	254	$	—	$	68,800

	Total	$	68,546	$	254	$	—	$	68,800

		June 30, 2008

		Less than 12 Months					12 Months or Greater					Total
		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
Municipal securities		$	6,118	$	(9	)	$	16,273	$	(12	)	$	22,391	$	(21	)
Government agencies			39,809		(21	)		—		—			39,809		(21	)

	Total	$	45,927	$	(30	)	$	16,273	$	(12	)	$	62,200	$	(42	)

		June 30, 2008

		Amortized Cost		Estimated Fair Value
Maturing within 1 year		$	71,018	$	71,001
Maturing between 1 year and 4 years			54,924		55,322

	Total	$	125,942	$	126,323

		June 30, 2008		December 31, 2007

Prepaid expenses		$	7,641	$	8,198
Income taxes receivable			1,644		4,878
Gift cards related to member redemption liability			4,135		3,653
Interest receivable			1,243		1,448
Other			2,549		1,815

	Total	$	17,212	$	19,992

		June 30, 2008		December 31, 2007

Employee compensation and related expenses		$	15,669	$	25,902
Income taxes payable			—		767
Other			4,203		3,917

	Total	$	19,872	$	30,586

Description		Fair Value Measurements at June 30, 2008 Using Quoted Prices (Unadjusted) in Active Markets for Identical Assets (Level 1)

Cash equivalents		$	94,245
Available-for-sale securities			126,323

	Total	$	220,568

		Total		Less than 1 Year		1 Year to Less than 3 Years		3 Years to Less than 5 Years		More than 5 Years

Capital leases		$	5	$	5	$	—	$	—	$	—
Operating leases(1)			41,340		11,763		15,050		8,977		5,550
Telecommunications purchases			4,968		3,493		1,475		—		—
Media purchases			3,151		3,018		133		—		—
Member redemption liability, long-term			5,181		—		5,181		—		—

	Total	$	54,645	$	18,279	$	21,839	$	8,977	$	5,550


Date: August 8, 2008	UNITED ONLINE, INC. (Registrant)
	By:	/s/ SCOTT H. RAY Scott H. Ray Executive Vice President and Chief Financial Officer
	By:	/s/ NEIL P. EDWARDS Neil P. Edwards Senior Vice President, Finance, Treasurer and Chief Accounting Officer