Use these links to rapidly review the documentUNITED ONLINE, INC. INDEX TO FORM 10-Q For the Quarter Ended March 31, 2008



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
|For the Quarterly Period Ended March 31, 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

Commission file number 000-33367

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UNITED ONLINE, INC.(Exact Name of Registrant as Specified in Its Charter)

|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)

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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):

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

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 68,855,265 shares of the Registrant's common stock outstanding at May 2, 2008.



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UNITED ONLINE, INC.  INDEX TO FORM 10-Q  For the Quarter Ended March 31, 2008



|PART I.    |          | FINANCIAL INFORMATION                                                                                              |  | Page
|---------- | -------- | ------------------------------------------------------------------------------------------------------------------ |  | ----
|           | Item 1.  | Unaudited Condensed Consolidated Balance Sheets at March 31, 2008 and December 31, 2007                            |  | 3   
|           |          | Unaudited Condensed Consolidated Statements of Operations for the Quarters Ended March 31, 2008 and 2007           |  | 4   
|           |          | Unaudited Condensed Consolidated Statements of Comprehensive Income for the Quarters Ended March 31, 2008 and 2007 |  | 5   
|           |          | Unaudited Condensed Consolidated Statement of Stockholders' Equity for the Quarter Ended March 31, 2008            |  | 6   
|           |          | Unaudited Condensed Consolidated Statements of Cash Flows for the Quarters Ended March 31, 2008 and 2007           |  | 7   
|           |          | Notes to Unaudited Condensed Consolidated Financial Statements                                                     |  | 8   
|           | Item 2.  | Management's Discussion and Analysis of Financial Condition and Results of Operations                              |  | 18  
|           | Item 3.  | Quantitative and Qualitative Disclosures About Market Risk                                                         |  | 35  
|           | Item 4.  | Controls and Procedures                                                                                            |  | 36  
|PART II.   |          | OTHER INFORMATION                                                                                                  |  |     
|           | Item 1.  | Legal Proceedings                                                                                                  |  | 37  
|           | Item 1A. | Risk Factors                                                                                                       |  | 38  
|           | Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds                                                        |  | 52  
|           | Item 6.  | Exhibits                                                                                                           |  | 53  
|SIGNATURES |          | 55                                                                                                                

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

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 proposed 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. Such statements are not guarantees of future performance 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.

2

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PART IFINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

UNITED ONLINE, INC.        UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS        (in thousands)

|                                     |                                                                                                                                        | March 31,
2008                             |         | December 31,
2007 |        
|------------------------------------ | -------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ----------------- | -------
|Assets                               |                                                                                                                                        |                                            |         |                   |        
|Current assets:                      |                                                                                                                                        |                                            |         |                   |        
|                                     | Cash and cash equivalents                                                                                                              |                                            | $       | 118,097           |        
|                                     | Short-term investments                                                                                                                 |                                            |         | 105,918           |        
|                                     | Accounts receivable, net of allowance for doubtful accounts of $2,594 and $2,378 at March 31, 2008 and December 31, 2007, respectively |                                            |         | 25,228            |        
|                                     | Deferred tax assets, net                                                                                                               |                                            |         | 6,389             |        
|                                     | Other current assets                                                                                                                   |                                            |         | 14,186            |        
|                                     |                                                                                                                                        |                                            |         |                   |        
|                                     |                                                                                                                                        | Total current assets                       |         |                   | 269,818
|Property and equipment, net          |                                                                                                                                        |                                            | 37,129  |                   |        
|Deferred tax assets, net             |                                                                                                                                        |                                            | 58,575  |                   |        
|Goodwill                             |                                                                                                                                        |                                            | 132,240 |                   |        
|Intangible assets, net               |                                                                                                                                        |                                            | 38,129  |                   |        
|Other assets                         |                                                                                                                                        |                                            | 9,967   |                   |        
|                                     |                                                                                                                                        |                                            |         |                   |        
|                                     |                                                                                                                                        | Total assets                               |         | $                 | 545,858
|                                     |                                                                                                                                        |                                            |         |                   |        
|Liabilities and Stockholders' Equity |                                                                                                                                        |                                            |         |                   |        
|Current liabilities:                 |                                                                                                                                        |                                            |         |                   |        
|                                     | Accounts payable                                                                                                                       |                                            | $       | 36,642            |        
|                                     | Accrued liabilities                                                                                                                    |                                            |         | 17,992            |        
|                                     | Member redemption liability                                                                                                            |                                            |         | 18,837            |        
|                                     | Deferred revenue                                                                                                                       |                                            |         | 68,028            |        
|                                     | Capital leases                                                                                                                         |                                            |         | 9                 |        
|                                     |                                                                                                                                        |                                            |         |                   |        
|                                     |                                                                                                                                        | Total current liabilities                  |         |                   | 141,508
|Member redemption liability          |                                                                                                                                        |                                            | 4,918   |                   |        
|Deferred revenue                     |                                                                                                                                        |                                            | 4,785   |                   |        
|Other liabilities                    |                                                                                                                                        |                                            | 10,845  |                   |        
|                                     |                                                                                                                                        |                                            |         |                   |        
|                                     |                                                                                                                                        | Total liabilities                          |         |                   | 162,056
|                                     |                                                                                                                                        |                                            |         |                   |        
|Commitments and contingencies        |                                                                                                                                        |                                            |         |                   |        
|Stockholders' equity:                |                                                                                                                                        |                                            |         |                   |        
|                                     | Common stock                                                                                                                           |                                            |         | 7                 |        
|                                     | Additional paid-in capital                                                                                                             |                                            |         | 404,891           |        
|                                     | Accumulated other comprehensive income                                                                                                 |                                            |         | 304               |        
|                                     | Accumulated deficit                                                                                                                    |                                            |         | (21,400           | )      
|                                     |                                                                                                                                        |                                            |         |                   |        
|                                     |                                                                                                                                        | Total stockholders' equity                 |         |                   | 383,802
|                                     |                                                                                                                                        |                                            |         |                   |        
|                                     |                                                                                                                                        | Total liabilities and stockholders' equity |         | $                 | 545,858
|                                     |                                                                                                                                        |                                            |         |                   |        

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

3

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UNITED ONLINE, INC.    UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS    (in thousands, except per share amounts)

|                                                      |                                                                             | Quarter Ended March 31,  |        
|----------------------------------------------------- | --------------------------------------------------------------------------- | ------------------------ | -------
|
|Revenues                                              |                                                                             | $                        | 121,811
|Operating expenses:                                   |                                                                             |                          |        
|                                                      | Cost of revenues (including stock-based compensation, see Note 5)           |                          |        
|                                                      | Sales and marketing (including stock-based compensation, see Note 5)        |                          |        
|                                                      | Product development (including stock-based compensation, see Note 5)        |                          |        
|                                                      | General and administrative (including stock-based compensation, see Note 5) |                          |        
|                                                      | Amortization of intangible assets                                           |                          |        
|                                                      | Restructuring charges                                                       |                          |        
|                                                      |                                                                             |                          |        
|                                                      |                                                                             | Total operating expenses |        
|                                                      |                                                                             |                          |        
|Operating income                                      |                                                                             |                          | 20,363 
|Interest and other income, net                        |                                                                             |                          | 1,808  
|Interest expense                                      |                                                                             |                          | (166   
|                                                      |                                                                             |                          |        
|Income before income taxes                            |                                                                             |                          | 22,005 
|Provision for income taxes                            |                                                                             |                          | 9,003  
|                                                      |                                                                             |                          |        
|Net income                                            |                                                                             | $                        | 13,002 
|                                                      |                                                                             |                          |        
|Basic net income per share                            |                                                                             | $                        | 0.19   
|                                                      |                                                                             |                          |        
|Diluted net income per share                          |                                                                             | $                        | 0.19   
|                                                      |                                                                             |                          |        
|Shares used to calculate basic net income per share   |                                                                             |                          | 68,145 
|                                                      |                                                                             |                          |        
|Shares used to calculate diluted net income per share |                                                                             |                          | 69,727 
|                                                      |                                                                             |                          |        

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

4

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UNITED ONLINE, INC.        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME        (in thousands)

|           |                                                                                                                                             | Quarter Ended
March 31,
|---------- | ------------------------------------------------------------------------------------------------------------------------------------------- | -----------------------
|
|Net income |                                                                                                                                             | $                      
|           | Change in unrealized gain on short-term investments, net of tax of $97 and $42 for the quarters ended March 31, 2008 and 2007, respectively |                        
|           | Foreign currency translation                                                                                                                |                        
|           |                                                                                                                                             |                        
|           |                                                                                                                                             | Comprehensive income   
|           |                                                                                                                                             |                        

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

5

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UNITED ONLINE, INC.        UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY        (in thousands)

|                                                                |  | Common Stock |  | Additional
Paid-In |   | Accumulated
Other
Comprehensive |   | Accumulated |   | Total
Stockholders' |    
|--------------------------------------------------------------- |  | ------------ |  | ------------------ | - | ------------------------------- | - | ----------- | - | ------------------- | ---
|
|Balance at January 1, 2008                                      |  | 68,019       |  | $                  | 7 |                                 | $ | 414,841     |   | $                   | 182
|Exercises of stock options                                      |  | 82           |  |                    |  |                                 |   | 694         |   |                     |   
|Vesting of restricted stock units                               |  | 462          |  |                    |  |                                 |   |            |   |                     |   
|Repurchases of common stock                                     |  |             |  |                    |  |                                 |   | (6,162      | ) |                     |   
|Dividends paid on shares outstanding and restricted stock units |  |             |  |                    |  |                                 |   | (14,569     | ) |                     |   
|Stock-based compensation                                        |  |             |  |                    |  |                                 |   | 10,010      |   |                     |   
|Change in unrealized gain on short-term investments, net of tax |  |             |  |                    |  |                                 |   |            |   |                     | 167
|Foreign currency translation                                    |  |             |  |                    |  |                                 |   |            |   |                     | (45
|Tax benefits from equity awards                                 |  |             |  |                    |  |                                 |   | 77          |   |                     |   
|Net income                                                      |  |             |  |                    |  |                                 |   |            |   |                     |   
|                                                                |  |              |  |                    |   |                                 |   |             |   |                     |    
|Balance at March 31, 2008                                       |  | 68,563       |  | $                  | 7 |                                 | $ | 404,891     |   | $                   | 304
|                                                                |  |              |  |                    |   |                                 |   |             |   |                     |    

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

6

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UNITED ONLINE, INC.        UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (in thousands)

|                                                             |                                                                                   | Quarter Ended March 31,                                   |                                          
|------------------------------------------------------------ | --------------------------------------------------------------------------------- | --------------------------------------------------------- | -----------------------------------------
|
|Cash flows from operating activities:                        |                                                                                   |                                                           |                                          
|                                                             | Net income                                                                        |                                                           | $                                        
|                                                             | Adjustments to reconcile net income to net cash provided by operating activities: |                                                           |                                          
|                                                             |                                                                                   | Depreciation and amortization                             |                                          
|                                                             |                                                                                   | Stock-based compensation                                  |                                          
|                                                             |                                                                                   | Provision for (benefit from) doubtful accounts receivable |                                          
|                                                             |                                                                                   | Deferred taxes, net                                       |                                          
|                                                             |                                                                                   | Tax benefits from equity awards                           |                                          
|                                                             |                                                                                   | Excess tax benefits from equity awards                    |                                          
|                                                             |                                                                                   | Other                                                     |                                          
|                                                             | Changes in operating assets and liabilities:                                      |                                                           |                                          
|                                                             |                                                                                   | Accounts receivable                                       |                                          
|                                                             |                                                                                   | Other assets                                              |                                          
|                                                             |                                                                                   | Accounts payable and accrued liabilities                  |                                          
|                                                             |                                                                                   | Member redemption liability                               |                                          
|                                                             |                                                                                   | Deferred revenue                                          |                                          
|                                                             |                                                                                   | Other liabilities                                         |                                          
|                                                             |                                                                                   |                                                           |                                          
|                                                             |                                                                                   |                                                           | Net cash provided by operating activities
|                                                             |                                                                                   |                                                           |                                          
|Cash flows from investing activities:                        |                                                                                   |                                                           |                                          
|                                                             | Purchases of property and equipment                                               |                                                           |                                          
|                                                             | Purchases of short-term investments                                               |                                                           |                                          
|                                                             | Proceeds from maturities of short-term investments                                |                                                           |                                          
|                                                             | Proceeds from sales of short-term investments                                     |                                                           |                                          
|                                                             | Cash paid for proposed acquisition                                                |                                                           |                                          
|                                                             | Proceeds from sales of assets, net                                                |                                                           |                                          
|                                                             |                                                                                   |                                                           |                                          
|                                                             |                                                                                   |                                                           | Net cash used for investing activities   
|                                                             |                                                                                   |                                                           |                                          
|Cash flows from financing activities:                        |                                                                                   |                                                           |                                          
|                                                             | Payments on capital leases                                                        |                                                           |                                          
|                                                             | Proceeds from exercises of stock options                                          |                                                           |                                          
|                                                             | Repurchases of common stock                                                       |                                                           |                                          
|                                                             | Payments for dividends                                                            |                                                           |                                          
|                                                             | Excess tax benefits from equity awards                                            |                                                           |                                          
|                                                             |                                                                                   |                                                           |                                          
|                                                             |                                                                                   |                                                           | Net cash used for financing activities   
|                                                             |                                                                                   |                                                           |                                          
|Effect of exchange rate changes on cash and cash equivalents |                                                                                   |                                                           | (112                                     
|Change in cash and cash equivalents                          |                                                                                   |                                                           | (31,410                                  
|Cash and cash equivalents, beginning of period               |                                                                                   |                                                           | 149,507                                  
|                                                             |                                                                                   |                                                           |                                          
|Cash and cash equivalents, end of period                     |                                                                                   | $                                                         | 118,097                                  
|                                                             |                                                                                   |                                                           |                                          

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

7

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UNITED ONLINE, INC.  NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Description of Business

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.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements for the quarters ended March 31, 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.

8

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Recent Accounting Pronouncements

Business Combinations

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. The Company has not yet determined the effect on its consolidated
financial statements, if any, upon adoption of SFAS No. 141(R).

Noncontrolling Interests in Consolidated Financial Statements

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.

2.     BALANCE SHEET COMPONENTS

Short-Term Investments

Short-term investments consisted of the following (in thousands):

March 31, 2008Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair ValueMunicipal securities

$
64,163

$
498

$
(6
)
$
64,655Government agencies


41,237


26





41,263Total

$
105,400

$
524

$
(6
)
$
105,918


|
|

December 31, 2007Amortized Cost

Gross Unrealized Gains

Gross Unrealized Losses

Estimated Fair ValueMunicipal securities

$
68,546

$
254

$


$
68,800Total

$
68,546

$
254

$


$
68,800


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 ended March 31, 2008 and 2007.

9

---



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 March 31, 2008
(in thousands):

|                     |       | March 31, 2008 |  
|-------------------- | ----- | -------------- | -
|
|
|Municipal securities |       | $              | 
|                     |       |                |  
|                     | Total |                | $
|                     |       |                |  

Maturities
of short-term investments were as follows (in thousands):

March 31, 2008Amortized Cost

Estimated Fair ValueMaturing within 1 year

$
58,247

$
58,311Maturing between 1 year and 4 years


47,153


47,607Total

$
105,400

$
105,918


Accounts Receivable

At March 31, 2008, two individual customers comprised 11% and 12% of the consolidated accounts receivable balance, respectively. For the quarters ended
March 31, 2008 and 2007, the Company did not have any individual customers that comprised more than 10% of consolidated total revenues.

Other Current Assets

Other current assets consisted of the following (in thousands):

March 31, 2008

December 31, 2007Prepaid expenses

$
7,135

$
8,198Income taxes receivable





4,878Gift cards related to member redemption liability


3,443


3,653Interest receivable


994


1,448Other


2,614


1,815Total

$
14,186

$
19,992


10

---



Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

March 31, 2008

December 31, 2007Employee compensation and related expenses

$
13,726

$
25,902Income taxes payable


59


767Other


4,207


3,917Total

$
17,992

$
30,586


3.     FAIR VALUE MEASUREMENTS

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. 157and 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 March 31, 2008 (in thousands):

Description

Fair Value Measurements at
March 31, 2008 Using Quoted Prices (Unadjusted) in Active Markets for Identical Assets
(Level 1)Cash equivalents

$
94,848Available-for-sale securities


105,918Total

$
200,766


4.     STOCKHOLDERS' EQUITY

Common Stock Subject to Repurchase Rights

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.

11

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Common Stock Repurchases

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 March 31, 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
March 31, 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 quarters ended March 31, 2008 and 2007, 546,000 and 194,000 shares, respectively, were withheld from restricted
stock units and restricted stock awards that vested in order to pay the applicable employee withholding taxes.

Dividends

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

In
January 2008, the Company's Board of Directors declared a quarterly cash dividend of $0.20 per share of common stock. The dividend was paid on February 29, 2008 and totaled
$14.6 million.

In
April 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 May 14, 2008 and the
dividend is payable on May 30, 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. 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. In April 2008, the Company
entered into a definitive merger agreement with FTD Group, Inc. ("FTD"), providing for the acquisition of FTD by
the Company. See Note 9"Subsequent Event" of these notes to unaudited condensed consolidated financial statements. Following the closing of that proposed 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.

12

---



5.     STOCK-BASED COMPENSATION PLANS

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):

Quarter Ended
March 31,2008

2007Operating expenses:Cost of revenues

$
220

$
194Sales and marketing


1,588


892Product development


1,288


1,245General and administrative


6,914


1,716Total stock-based compensation

$
10,010

$
4,047


Classmates Media Corporation Equity Awards

In connection with the preparation for the potential initial public offering ("IPO") by the Company's Classmates Media Corporation ("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 March
2008 quarter, one of the employment agreements with a guaranteed value of $4.0 million in restricted stock units in CMC was canceled and $0.4 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 ended March 31, 2008.

Recent Awards

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

13

---



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.

6.     NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share for the quarters ended March 31, 2008 and 2007 (in thousands,
except per share amounts):

Quarter Ended March 31,2008

2007Numerator:Net income

$
13,002

$
13,028Denominator:Weighted-average common sharesbasic


68,245


66,102Less: weighted-average common shares subject to repurchase rights


(100
)

(475
)Shares used to calculate basic net income per share


68,145


65,627Add: Dilutive effect of stock options, restricted stock and employee stock purchase plan shares


1,582


2,453Shares used to calculate diluted net income per share


69,727


68,080Basic net income per share

$
0.19

$
0.20Diluted net income per share

$
0.19

$
019


The
diluted net income per share computations exclude stock options and restricted stock units which are antidilutive. The number of antidilutive shares at March 31, 2008 and 2007
was 3.3 million and 3.0 million, respectively.

14

---



7.     SEGMENT INFORMATION

Revenues and income from operations by segment are as follows (in thousands):

Quarter Ended March 31, 2008Classmates Media

Communications

TotalBillable services

$
31,241

$
59,421

$
90,662Advertising


20,643


10,506


31,149Total revenues

$
51,884

$
69,927

$
121,811Segment income from operations

$
7,953

$
20,485

$
28,438


|
|

Quarter Ended March 31, 2007Classmates Media

Communications

TotalBillable services

$
22,227

$
74,093

$
96,320Advertising


20,207


13,324


33,531Total revenues

$
42,434

$
87,417

$
129,851Segment income from operations

$
4,321

$
26,043

$
30,364


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):

Quarter Ended
March 31,2008

2007Segment income from operations:Classmates Media

$
7,953

$
4,321Communications


20,485


26,043Total segment income from operations


28,438


30,364Depreciation


(5,239
)

(4,745
)Amortization of intangible assets


(2,836
)

(3,495
)Consolidated operating income

$
20,363

$
22,124


International
revenues totaled $3.4 million and $1.2 million for the quarters ended March 31, 2008 and 2007, respectively.

8.     RESTRUCTURING CHARGES

In the quarter ended March 31, 2008, the Company recorded restructuring charges totaling $0.2 million associated with the closure of its Orem, Utah
facility. The Company believes these activities will result in total restructuring charges of $0.7 million during 2008, comprised largely of employee termination benefits and
facility-exit costs.

15

---



9.     SUBSEQUENT EVENT

In April 2008, the Company entered into a definitive merger agreement with 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 acquisition of FTD by the Company (the "Acquisition"). Under the terms of the merger
agreement, the Company has agreed to pay FTD stockholders a total of $7.34 in cash, 0.4087 of a share of United Online common stock and $3.31 principal amount of United Online 13% senior secured notes
due 2013 ("United Notes") for each share of FTD common stock they own. The total consideration payable by the Company to FTD stockholders is estimated to be approximately $456 million,
consisting of $222 million in cash, 12.35 million shares of Company common stock and $100 million aggregate principal amount of United Notes, based on the Company's closing share
price of $10.83 on April 29, 2008, the last trading day prior to the announcement of the transaction. The remaining portion of the approximate $800 million total purchase price consists
of repayment of FTD indebtedness and expenses incurred in connection with the transaction. Upon closing of the proposed transaction, the former FTD stockholders will own approximately 15% of the
Company.

Under
the terms of the merger agreement, the Company may elect to increase the per share cash consideration payable to FTD's stockholders by $2.81 in full substitution of the United
Notes, in which case the Company would pay FTD stockholders a total of $10.15 in cash and 0.4087 of a share of United Online common stock in exchange for each share of FTD common stock in the
Acquisition. In such case, the total consideration to FTD stockholders is estimated to be approximately $440 million, consisting of $307 million in cash and 12.34 million shares
of United Online common stock, based on the Company's closing share price of $10.83 on April 29, 2008, the last trading day prior to the announcement of the transaction. The Company will
determine the amount of cash, United Online common stock and, if applicable, United Notes consideration to be paid with respect to each share of FTD common stock in the Acquisition prior to the
mailing of the definitive proxy/prospectus materials to FTD's stockholders.

The
Company intends to finance the Acquisition with a combination of debt, equity and cash of United Online. The debt financing is expected to consist of senior secured credit facilities
(the "Credit Facilities") in an aggregate principal amount of up to $450 million, at FTD, to be provided by Wells Fargo Bank, National Association ("Wells Fargo") and the issuance by the
Company of the United Notes. Of the $450 million, it is anticipated that up to $75 million will be a revolving line of credit which cannot be used to finance the Acquisition.

The
United Notes will be secured by a pledge of the stock of CMC and guaranteed by all of the Company's domestic subsidiaries other than FTD, FTD's direct parent and FTD's subsidiaries.
The United Notes will be issued on the terms described in the Description of Notes ("Description of Notes") attached to the merger agreement.

Pursuant
to a commitment letter dated April 30, 2008 (the "Commitment Letter") with the Company, Wells Fargo has committed to provide the Credit Facilities, consisting of
(i) a term loan A facility of up to $175 million, (ii) a term loan B facility of up to $200 million, and (iii) a revolving credit facility of up to
$75 million. Loans will bear interest at either LIBOR or a base rate, in each case, plus a certain margin. The Credit Facilities will be secured by substantially all of FTD's assets. The
Company has committed to using the Credit Facilities provided by Wells Fargo and, under certain circumstances, would be liable for various fees and expenses if the Company failed to honor its
commitment.

Wells
Fargo's commitment is subject to the satisfaction of certain conditions, including, among other things, the execution of satisfactory documentation, the consummation of the equity
issuance of United Online shares 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

16

---



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 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). The Commitment
Letter terminates on the earlier to occur of (i) the closing of the Acquisition without the use of the Credit Facilities, (ii) the termination of the merger agreement or (iii) the
close of business on October 30, 2008.

At
March 31, 2008, the Company had incurred approximately $2.7 million in costs associated with the FTD transaction. 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 accompanying unaudited condensed consolidated
balance sheet at March 31, 2008.

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

17

---





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

Forward-Looking Statements

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 proposed 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. Such statements are not guarantees of future performance 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.

Overview

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 Definitions

We report our businesses in two reportable operating segments:

Segment

Internet ServicesClassmates Media

Social networking and loyalty marketingCommunications

Internet access, email, Internet security, and Web hosting


Segment Services

Classmates Media

Our Classmates Media services include online social networking under the Classmates brand and online loyalty marketing under the MyPoints brand. Our Classmates
Media services also include international social networking under the StayFriends and Trombi brands. For additional information regarding our Classmates Media segment, see
Note 7"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.

18

---



Communications

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 7"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.

Key Business Metrics

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 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; 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

19

---



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.

|                  |                                          | March 31,
2008                    |                         | December 31,
2007 |       | September 30,
2007 |        | June 30,
2007 |      | March 31,
2007 |      
|----------------- | ---------------------------------------- | --------------------------------- | ----------------------- | ----------------- | ----- | ------------------ | ------ | ------------- | ---- | -------------- | -----
|Consolidated:     |                                          |                                   |                         |                   |       |                    |        |               |      |                |      
|                  | Total pay accounts(a) (in thousands)     |                                   |                         | 5,564             |       |                    | 5,349  |               |      | 5,239          |      
|                  | Churn(a)                                 |                                   |                         | 4.5               | %     |                    | 4.6    | %             |      | 4.8            | %    
|Classmates Media: |                                          |                                   |                         |                   |       |                    |        |               |      |                |      
|                  | Segment revenues (in thousands)          |                                   | $                       | 51,884            |       | $                  | 53,273 |               | $    | 49,972         |      
|                  |                                          | % of Total revenues               |                         |                   | 42.6  | %                  |        | 42.5          | %    |                | 39.4 
|                  | Pay accounts (in thousands)              |                                   |                         | 3,521             |       |                    | 3,199  |               |      | 2,983          |      
|                  |                                          |                                   | % of Total pay accounts |                   |       | 63.3               | %      |               | 59.8 | %              |      
|                  | Segment churn                            |                                   |                         | 4.3               | %     |                    | 4.7    | %             |      | 4.6            | %    
|                  | ARPU                                     |                                   | $                       | 3.10              |       | $                  | 3.26   |               | $    | 3.33           |      
|                  | Segment active accounts(b) (in millions) |                                   |                         | 13.9              |       |                    | 12.6(c | )             |      | 12.8           |      
|Communications:   |                                          |                                   |                         |                   |       |                    |        |               |      |                |      
|                  | Segment revenues (in thousands)          |                                   | $                       | 69,927            |       | $                  | 72,137 |               | $    | 76,853         |      
|                  |                                          |                                   | % of Total revenues     |                   |       | 57.4               | %      |               | 57.5 | %              |      
|                  | Pay accounts(a) (in thousands):          |                                   |                         |                   |       |                    |        |               |      |                |      
|                  |                                          | Access                            |                         |                   | 1,682 |                    |        | 1,786         |      |                | 1,886
|                  |                                          | Other                             |                         |                   | 361   |                    |        | 364           |      |                | 370  
|                  |                                          |                                   |                         |                   |       |                    |        |               |      |                |      
|                  |                                          | Total Communications pay accounts |                         |                   | 2,043 |                    |        | 2,150         |      |                | 2,256
|                  |                                          |                                   |                         |                   |       |                    |        |               |      |                |      
|                  |                                          |                                   | % of Total pay accounts |                   |       | 36.7               | %      |               | 40.2 | %              |      
|                  | Segment churn(a)                         |                                   |                         | 4.8               | %     |                    | 4.4    | %             |      | 4.9            | %    
|                  | ARPU                                     |                                   | $                       | 9.45              |       | $                  | 9.28   |               | $    | 9.45           |      
|                  | Segment active accounts (in millions)    |                                   |                         | 3.1               |       |                    | 3.3    |               |      | 3.5            |      

---

20

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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. It remains our strategy to complete an IPO of CMC. As such, certain additional IPO transaction-related costs
totaling $3.9 million have been deferred and are included in other assets on our unaudited condensed consolidated balance sheet at March 31, 2008. If we do not proceed with this
strategy, these deferred costs will be expensed and included in the Classmates Media segment operating results as well as in our consolidated statements of operations in a future period.

21

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Results of Operations

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.

Consolidated
information was as follows (in thousands):

|                               |                                   | Quarter Ended
March 31,  |       
|------------------------------ | --------------------------------- | ------------------------ | ------
|
|Billable services              |                                   | $                        | 90,662
|Advertising                    |                                   |                          | 31,149
|                               |                                   |                          |       
|                               | Total revenues                    |                          |       
|                               |                                   |                          |       
|Operating expenses:            |                                   |                          |       
|                               | Cost of revenues                  |                          |       
|                               | Sales and marketing               |                          |       
|                               | Product development               |                          |       
|                               | General and administrative        |                          |       
|                               | Amortization of intangible assets |                          |       
|                               | Restructuring charges             |                          |       
|                               |                                   |                          |       
|                               |                                   | Total operating expenses |       
|                               |                                   |                          |       
|Operating income               |                                   |                          | 20,363
|Interest and other income, net |                                   |                          | 1,808 
|Interest expense               |                                   |                          | (166  
|                               |                                   |                          |       
|Income before income taxes     |                                   |                          | 22,005
|Provision for income taxes     |                                   |                          | 9,003 
|                               |                                   |                          |       
|Net income                     |                                   | $                        | 13,002
|                               |                                   |                          |       

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

|                               |                            | Classmates Media         |        | Communications
|------------------------------ | -------------------------- | ------------------------ | ------ | --------------
|
|
|Billable services              |                            | $                        | 31,241 |               
|Advertising                    |                            |                          | 20,643 |               
|                               |                            |                          |        |               
|                               | Total revenues             |                          |        | 51,884        
|                               |                            |                          |        |               
|Operating expenses:            |                            |                          |        |               
|                               | Cost of revenues           |                          |        | 9,287         
|                               | Sales and marketing        |                          |        | 19,558        
|                               | Product development        |                          |        | 5,207         
|                               | General and administrative |                          |        | 9,879         
|                               | Restructuring charges      |                          |        |              
|                               |                            |                          |        |               
|                               |                            | Total operating expenses |        |               
|                               |                            |                          |        |               
|Segment income from operations |                            | $                        | 7,953  |               
|                               |                            |                          |        |               

22

---



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):

Quarter Ended
March 31,2008

2007Segment income from operations:Classmates Media

$
7,953

$
4,321Communications


20,485


26,043Total segment income from operations


28,438


30,364Depreciation


(5,239
)

(4,745
)Amortization of intangible assets


(2,836
)

(3,495
)Consolidated operating income

$
20,363

$
22,124


Quarter Ended March 31, 2008 compared to Quarter Ended March 31, 2007

Revenues

Billable Services Revenues

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 $5.7 million, or 6%, to
$90.7 million for the quarter ended March 31, 2008, compared to $96.3 million for the quarter ended March 31, 2007. The decrease in billable services revenues for the
quarter ended March 31, 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 34.5% and 65.5%, respectively, of our consolidated billable services revenues for the quarter ended
March 31, 2008, compared to 23.1% and 76.9%, respectively, for the quarter ended March 31, 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 $9.0 million, or
41%, to $31.2 million for the quarter ended March 31, 2008, compared to $22.2 million for the quarter ended March 31, 2007. The increase in Classmates Media billable
services revenues was due to a 46% increase in our average number of pay accounts from 2.3 million for the quarter ended March 31, 2007 to 3.4 million for the quarter ended
March 31, 2008. This increase was partially offset by a 4% decrease in ARPU from $3.22 for the quarter ended March 31, 2007 to $3.10 for the quarter ended March 31, 2008. The
decrease in ARPU was primarily attributable to limited-time promotional offerings in the fourth quarter of 2007 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 the U.S. We did not offer similar promotional discounts in the quarter ended March 31, 2008. We anticipate our Classmates Media pay accounts and billable services
revenues will continue to grow, at least in the near term.

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Communications Billable Services Revenues.Communications billable services revenues decreased by $14.7 million, or
20%, to $59.4 million for the quarter ended March 31, 2008, compared to $74.1 million for the quarter ended March 31, 2007. The decrease in Communications billable services
revenues was due to a 24% decrease in our average number of dial-up access pay accounts from 2.2 million for the quarter ended March 31, 2007 to 1.7 million for the
quarter ended March 31, 2008. In addition, the decrease in revenues was partially due to a $0.6 million decrease in revenues associated with our VoIP business, which we exited during
2007. These decreases were partially offset by an increase in revenues from our DSL services in the quarter ended March 31, 2008 compared to the quarter ended March 31, 2007. We
anticipate continued declines in our Communications pay accounts and, potentially, ARPU, which will result in continued declines in Communications billable services revenues.

Advertising Revenues

We provide advertising solutions to marketers with both brand and direct response objectives through a full suite of display, search, email, and
text-link opportunities across our various properties. We also use targeting technologies, Web site sponsorships and Web site integrations in order to provide effective solutions 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 display, email 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 $2.4 million, or 7%, to
$31.1 million for the quarter ended March 31, 2008, compared to $33.5 million for the quarter ended March 31, 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 66.3% and 33.7%, respectively, of our consolidated advertising revenues for the quarter ended March 31, 2008, compared to 60.3% and 39.7%,
respectively, for the quarter ended March 31, 2007.

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Classmates Media Advertising Revenues.Classmates Media advertising revenues increased by $0.4 million, or 2%, to
$20.6 million for the quarter ended March 31, 2008, compared to $20.2 million for the quarter ended March 31, 2007. The increase was primarily related to a
$1.4 million increase in revenues from our loyalty marketing service and, to a lesser extent, a $0.3 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 partners have not generated as much revenue as generated by the agreement with the previous advertiser. We anticipate decreased revenues from post-transaction
sales in 2008 compared to 2007.

Communications Advertising Revenues.Communications advertising revenues decreased by $2.8 million, or 21%, to
$10.5 million for the quarter ended March 31, 2008, from $13.3 million for the quarter ended March 31, 2007. The decrease was primarily attributable to a decrease in "start
page" advertising revenue 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.

Cost of Revenues

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 $1.4 million, or 5%, to $27.8 million
for the quarter ended March 31, 2008, compared to $29.2 million for the quarter ended March 31, 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 $0.3 million increase in depreciation. Cost of revenues related to our Classmates
Media segment and our Communications segment constituted 36.4% and 63.6%, respectively, of our total segment cost of revenues for the quarter ended March 31, 2008, compared to 32.6% and 67.4%,
respectively, for the quarter ended March 31, 2007.

Classmates Media Cost of Revenues.Classmates Media cost of revenues increased by $0.4 million, or 4%, to
$9.3 million, or 17.9% of Classmates Media revenues, for the quarter ended March 31, 2008, compared to $8.9 million, or 21.0% of Classmates Media revenues, for the quarter ended
March 31, 2007. The increase in costs was primarily related to a $0.6 million increase in overhead, personnel and customer support-related costs associated with our social networking
services, partially offset by a $0.2 million decrease in costs associated with our loyalty marketing service, primarily associated with lower point costs in the quarter ended March 31,
2008 compared to the quarter ended March 31, 2007.

Communications Cost of Revenues.Communications cost of revenues decreased by $2.2 million, or 12%, to
$16.2 million, or 23.2% of Communications revenues, for the quarter ended March 31, 2008, compared to $18.4 million, or 21.0% of Communications revenues, for the quarter ended
March 31, 2007. The decrease in costs was primarily due to a $2.6 million decrease in telecommunications costs associated with our dial-up Internet access business due to a
decrease in the number of pay accounts, a

25

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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 $0.6 million
decrease in costs associated with our VoIP services as a result of our decision during 2007 to exit the VoIP business; a $0.6 million decrease in customer support and billing-related costs in
the quarter ended March 31, 2008 compared to the quarter ended March 31, 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; and a $0.5 million decrease in overhead costs. These decreases were partially offset by a $2.4 million increase in costs associated
with our DSL services.

Sales and Marketing

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, sponsorships, 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 $9.2 million, or
20%, to $36.8 million, or 30.2% of consolidated revenues, for the quarter ended March 31, 2008, compared to $46.0 million, or 35.4% of consolidated revenues, for the quarter ended
March 31, 2007. The declines were 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 53.3% and 46.7%, respectively, of total segment
sales and marketing expenses for the quarter ended March 31, 2008 versus 44.4% and 55.6%, respectively, for the quarter ended March 31, 2007.

Classmates Media Sales and Marketing Expenses.Classmates Media sales and marketing expenses decreased by
$0.8 million, or 4%, to $19.6 million, or 37.7% of Classmates Media revenues, for the quarter ended March 31, 2008, compared to $20.4 million, or 48.1% of Classmates Media
revenues, for the quarter ended March 31, 2007. The decrease was the result of a $0.5 million decrease in personnel- and overhead-related expenses and a $0.5 million
decrease in marketing costs related to acquiring new members.

Communications Sales and Marketing Expenses.Communications sales and marketing expenses decreased by $8.4 million, or
33%, to $17.1 million, or 24.5% of Communications revenues, for the quarter ended March 31, 2008, compared to $25.5 million, or 29.2% of Communications revenues, for the quarter
ended March 31, 2007. This decrease was attributable to a $6.8 million decline in advertising, promotion and distribution costs related to our dial-up Internet access
services and a $1.6 million decrease in personnel- and overhead-related expenses as a result of lower headcount. These decreases were partially offset by a $0.5 million increase in
stock-based compensation primarily related to new equity awards issued in 2007 and the quarter ended March 31, 2008.

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Product Development

Product 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
product 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 Product Development Expenses.Consolidated product development expenses decreased by $0.6 million, or 4%,
to $12.9 million, or 10.6% of consolidated revenues, for the quarter ended March 31, 2008, compared to $13.5 million, or 10.4% of consolidated revenues, for the quarter ended
March 31, 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. Product development expenses related to our Classmates Media segment and our Communications segment constituted 45.8% and 54.2%, respectively, of total
segment product development expenses for the quarter ended March 31, 2008, compared to 28.2% and 71.8%, respectively, for the quarter ended March 31, 2007.

Classmates Media Product Development Expenses.Classmates Media product development expenses increased by
$1.7 million, or 49%, to $5.2 million, or 10.0% of Classmates Media revenues, for the quarter ended March 31, 2008, compared to $3.5 million, or 8.3% of Classmates Media
revenues, for the quarter ended March 31, 2007. The increase was primarily due to a $1.4 million increase in personnel-related expenses due to increased headcount and, to a lesser
extent, a $0.2 million increase in overhead-related expenses.

Communications Product Development Expenses.Communications product development expenses decreased by $2.7 million, or
31%, to $6.2 million, or 8.8% of Communications revenues, for the quarter ended March 31, 2008, compared to $8.9 million, or 10.2% of Communications revenues, for the quarter
ended March 31, 2007. The declines were primarily the result of a $2.7 million decrease in personnel-related expenses as a result of lower headcount. We anticipate that Communications
product development expenses will continue to decline in 2008 when compared to 2007 as a result of a restructuring-related reduction in the number of product development employees in this segment in
October 2007.

General and Administrative

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.

We
anticipate that general and administrative expenses, in the aggregate and as a percentage of revenues, will increase significantly in 2008 when compared to 2007 at both the
consolidated and the segment levels. We anticipate the increase will be primarily a result of an increase in stock-based compensation. We expect stock-based compensation to increase as a result of
several factors, including: the likelihood that 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. The
payment of the 2008 Bonuses in

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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
$5.4 million, or 35%, to $20.9 million, or 17.1% of consolidated revenues, for the quarter ended March 31, 2008, compared to $15.5 million, or 11.9% of consolidated
revenues, for the quarter ended March 31, 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 50.3% and 49.7%, respectively, of total segment general and administrative expenses for the quarter ended March 31, 2008, compared to 38.2% and 61.8%,
respectively, for the quarter ended March 31, 2007.

Classmates Media General and Administrative Expenses.Classmates Media general and administrative expenses increased by
$4.6 million, or 86%, to $9.9 million, or 19.0% of Classmates Media revenues, for the quarter ended March 31, 2008, compared to $5.3 million, or 12.5% of Classmates Media
revenues, for the quarter ended March 31, 2007. The increases were primarily related to a $2.8 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, a $0.8 million increase in
personnel-related expenses due to increased headcount, and a $0.7 million increase in facilities and other overhead-related costs.

Communications General and Administrative Expenses.Communications general and administrative expenses increased by
$1.1 million, or 13%, to $9.8 million, or 14.0% of Communications revenues, for the quarter ended March 31, 2008, compared to $8.6 million, or 9.9% of Communications
revenues, for the quarter ended March 31, 2007. The increase was due to a $2.4 million increase in stock-based compensation primarily related to equity awards issued in 2007 and in the
quarter ended March 31, 2008. The increase was partially offset by a $0.7 million decrease in personnel-related expenses as a result of lower headcount, a $0.4 million decrease in
facilities and other overhead-related expenses and a $0.2 million decrease in recruiting and relocation costs.

Amortization of Intangible Assets

Amortization of intangible assets principally includes amortization of: acquired pay accounts and free accounts; acquired trademarks and trade names; purchased
software and technologies; 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 $0.7 million, or 19%, to $2.8 million for the quarter ended March 31, 2008, compared to
$3.5 million for the quarter ended March 31, 2007. The decrease was 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 quarter ended March 31, 2008 compared to the quarter ended March 31, 2007 as a result
of certain assets from our acquisition of our Web-hosting assets in April 2004 becoming fully amortized in March 2007.

Restructuring Charges

In the quarter ended March 31, 2008, we recorded restructuring charges totaling $0.2 million associated with the closure of our Orem, Utah facility.
We believe these activities will result in total

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restructuring
charges of $0.7 million during 2008, comprised largely of employee termination benefits and facility-exit costs, and a $0.2 million increase from our previous
estimate of $0.5 million.

Interest and Other Income, Net

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, increased by $0.1 million, or 6%, to $1.8 million for the quarter ended March 31, 2008, compared to $1.7 million for the
quarter ended March 31, 2007 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 ended March 31, 2008 and 2007.

Interest Expense

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 decreased by $0.2 million, or 54%, to $0.2 million for the quarter ended March 31, 2008, compared to $0.4 million for the quarter ended
March 31, 2007.

Provision for Income Taxes

For the quarter ended March 31, 2008, we recorded an income tax provision of $9.0 million on pre-tax income of $22.0 million,
resulting in a year-to-date effective income tax rate of 40.9%. For the quarter ended March 31, 2007, we recorded an income tax provision of $10.4 million on
pre-tax income of $23.5 million, resulting in a year-to-date effective income tax rate of 44.5%. The decrease in the effective income tax rate was primarily
due to (1) the benefits of a lower state income tax rate, net of federal benefit, 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 ended March 31, 2008 attributable to the actual utilization of certain foreign net operating loss carryforwards. These benefits were partially offset by
(1) an increase in stock-based compensation in the quarter ended March 31, 2008 compared to the prior-year comparable period 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 ended March 31, 2008 compared to the prior-year comparable period. The
quarterly effective income tax rate is subject to fluctuation due to discrete items.

Liquidity and Capital Resources

Our total cash, cash equivalent and short-term investments balances increased by $5.7 million, or 3%, to $224.0 million at
March 31, 2008, compared to $218.3 million at December 31, 2007. Our summary cash flows for the quarters ended March 31, 2008 and 2007 were as follows (in thousands):

March 31,2008

2007Net cash provided by operating activities

$
28,999

$
25,206Net cash used for investing activities

$
(40,482
)
$
(14,234
)Net cash used for financing activities

$
(19,815
)
$
(13,637
)


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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 acquisition of FTD by us. Under the terms of the merger agreement, we have agreed to pay FTD
stockholders a total of $7.34 in cash, 0.4087 of a share of United Online common stock and $3.31 principal amount of United Online 13% senior secured notes due 2013 ("United Notes") for each share of
FTD common stock they own. The total consideration payable by us to FTD stockholders is estimated to be approximately $456 million, consisting of $222 million in cash,
12.35 million shares of United Online common stock and
$100 million aggregate principal amount of United Notes, based on our closing share price of $10.83 on April 29, 2008, the last trading day prior to the announcement of the transaction.
The remaining portion of the approximate $800 million total purchase price consists of repayment of FTD indebtedness and expenses incurred in connection with the transaction. Upon closing of
the proposed transaction, the former FTD stockholders will own approximately 15% of United Online.

Under
the terms of the merger agreement, we may elect to increase the per share cash consideration payable to FTD's stockholders by $2.81 in full substitution of the United Notes, in
which case we would pay FTD stockholders a total of $10.15 in cash and 0.4087 of a share of United Online common stock in exchange for each share of FTD common stock in the Acquisition. In such case,
the total consideration to FTD stockholders is estimated to be approximately $440 million, consisting of $307 million in cash and 12.34 million shares of United Online common
stock, based on our closing share price of $10.83 on April 29, 2008, the last trading day prior to the announcement of the transaction. We will determine the amount of cash, United Online
common stock and, if applicable, United Notes consideration to be paid with respect to each share of FTD common stock in the Acquisition prior to the mailing of the definitive proxy/prospectus
materials to FTD's stockholders.

We
intend to finance the Acquisition with a combination of debt, equity and cash of United Online. The debt financing is expected to consist of senior secured credit facilities (the
"Credit Facilities") in an aggregate principal amount of up to $450 million, at FTD, to be provided by Wells Fargo Bank, National Association ("Wells Fargo") and the issuance by us of the
United Notes. Of the $450 million, it is anticipated that up to $75 million will be a revolving line of credit which cannot be used to finance the Acquisition.

The
United Notes will 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 United
Notes will be issued on the terms described in the Description of Notes ("Description of Notes") attached to the merger agreement.

Pursuant
to a commitment letter dated April 30, 2008 (the "Commitment Letter") with us, Wells Fargo has committed to provide the Credit Facilities, consisting of (i) a term
loan A facility of up to $175 million, (ii) a term loan B facility of up to $200 million, and (iii) a revolving credit facility of up to $75 million. Loans will bear
interest at either LIBOR or a base rate, in each case, plus a certain margin. The Credit Facilities will be secured by substantially all of FTD's assets. We have committed to using the Credit
Facilities provided by Wells Fargo and, under certain circumstances, would be liable for various fees and expenses if we failed to honor our commitment.

Wells
Fargo's commitment is subject to the satisfaction of certain conditions, including, among other things, the execution of satisfactory documentation, the consummation of the equity
issuance of United Online shares 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

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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). The Commitment Letter terminates on the earlier to occur of (i) the closing of the Acquisition without the use of the Credit Facilities,
(ii) the termination of the merger agreement or (iii) the close of business on October 30, 2008.

Net
cash provided by operating activities increased by $3.8 million, or 15%, for the quarter ended March 31, 2008 compared to the quarter ended March 31, 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 benefits from equity awards and changes in operating assets and
liabilities. The increase was primarily due a $6.0 million increase in non-cash items, partially offset by a $2.1 million unfavorable change in net operating assets and
liabilities.

Net
cash used for investing activities increased by $26.2 million, or 184%, for the quarter ended March 31, 2008 compared to the quarter ended March 31, 2007. The
increase was primarily the result of a $28.6 million increase in net purchases of short-term investments, partially offset by a $3.0 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 quarter ended March 31, 2008 were $2.8 million. We currently anticipate that our total capital expenditures for 2008 will be in the range of
$18 million to $23 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 $6.2 million, or 45%, for the quarter ended March 31, 2008 compared to the quarter ended March 31, 2007. The
increase was related to a $3.5 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 $1.2 million decrease in proceeds from the exercise of stock options; a $0.8 million increase in the
payment of dividends; and a $0.6 million decrease in excess tax benefits from equity awards.

In
January 2008, our Board of Directors declared a quarterly cash dividend of $0.20 per share of common stock, which was paid on February 29, 2008 and totaled
$14.6 million. In April 2008, our Board of Directors declared a quarterly cash dividend of $0.20 per share of common stock. The record date for the dividend is May 14, 2008 and the
dividend will be paid on May 30, 2008. Following the closing of the proposed Acquisition, we expect to decrease our regular quarterly cash dividend from $0.20 per share to $0.10 per share. In
addition, the United 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

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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 March 31, 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 March 31, 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 in connection with the vesting of restricted stock units as discussed below, the merger agreement for the proposed acquisition imposes restrictions on our ability to repurchase
shares of our common stock prior to the closing. Following the Acquisition closing, the United Notes 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 we award to employees. Upon vesting,
we currently do not collect the applicable employee withholding taxes for restricted stock units from employees. Instead, we automatically withhold, 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. 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 quarters ended March 31, 2008 and 2007 were $6.2 million and $2.7 million,
respectively, for which we withheld 546,000 shares and 194,000 shares of common stock, respectively, that were underlying the restricted stock units which vested. The amount we pay in future quarters
will vary based on our stock price and the number of restricted stock units vesting 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 United Notes provide that, in the event CMC completes an IPO, we must
retire $50 million of the United Notes at par and repay accrued but unpaid interest on the retired United Notes.

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 pay the employee withholding taxes due on vested restricted stock
units; and to fund future capital expenditures. To fund the acquisition of FTD, however, 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 and the United Notes, there will be significant

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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 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.

Contractual Obligations

Contractual obligations at March 31, 2008 were as follows (in thousands):

|                                       |       | 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                         |       | $     | 9      |                  | $ | 9                           |        | $                            |       |                  
|Operating leases(1)                    |       |       | 44,820 |                  |   | 12,094                      |        |                              | 16,960 |                  
|Telecommunications purchases           |       |       | 6,832  |                  |   | 5,073                       |        |                              | 1,759  |                  
|Media purchases                        |       |       | 2,426  |                  |   | 2,301                       |        |                              | 125    |                  
|Member redemption liability, long-term |       |       | 4,918  |                  |   |                            |        |                              | 4,918  |                  
|                                       |       |       |        |                  |   |                             |        |                              |        |                  
|                                       | Total |       | $      | 59,005           |   | $                           | 16,458 |                              | $      | 30,303           
|                                       |       |       |        |                  |   |                             |        |                              |        |                  

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Commitments
under standby letters of credit at March 31, 2008 are scheduled to expire as follows (in thousands):

|                          |  | Total |       | Less than
1 Year |   | 1 Year to
Less than
3 Years |  | 3 Years to
Less than
5 Years |       | More than
5 Years
|------------------------- |  | ----- | ----- | ---------------- | - | --------------------------- |  | ---------------------------- | ----- | -----------------
|Standby letters of credit |  | $     | 2,098 |                  | $ | 331                         |  | $                            | 1,387 |                  

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.

Other Commitments

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

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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 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.

Off-Balance Sheet Arrangements

At March 31, 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.

Recent Accounting Pronouncements

Business Combinations

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. We have not yet determined the effect on our consolidated financial statements, if any, upon adoption of SFAS No. 141(R).

Noncontrolling Interests in Consolidated Financial Statements

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.

Inflation

Inflation did not have a material impact during the quarters ended March 31, 2008 and 2007, respectively, and we do not currently anticipate that inflation
will have a material impact on our results of operations for 2008.

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ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

Interest Rate Risk

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 March 31, 2008 consisted of municipal securities and U.S. Government agencies securities. 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 March 31, 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 March 31, 2008, gross unrealized gains and gross unrealized losses in our short-term
investments aggregated $524,000 and $6,000, respectively.

During
the quarter ended March 31, 2008, our short-term investments portfolio yielded an annual effective interest rate of 3.48% and an annual taxable equivalent yield
of 4.45%. 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 annual decrease in our interest income related
to our short-term investments and cash and cash equivalents of approximately $1.2 million.

Foreign Currency Risk

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

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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 ended March 31, 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.

ITEM 4.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

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.

Changes in Internal Control Over Financial Reporting

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.

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PART IIOTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

In April, 2001 and in May 2001, lawsuits were filed in the United States District Court for the Southern District of New York against NetZero, Inc.
("NetZero"), certain officers and directors of NetZero and the underwriters of NetZero's initial public offering, Goldman Sachs Group, Inc., BancBoston Robertson Stephens, Inc. and
Salomon Smith Barney, Inc. A consolidated amended complaint, 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 captionRasnake v. NetZero, Inc. On June 13, 2007, Peter Chrisler was substituted as a purported class
representative. On July 13, 2007, the plaintiffs filed a consolidated amended class action complaint. A trial date has not yet been set.

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

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materially
and adversely impacted by the results of such proceedings. At March 31, 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.

ITEM 1A.    RISK FACTORS

RISKS RELATING TO OUR CLASSMATES MEDIA SEGMENT

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 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 and FatWallet. 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

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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 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

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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. Because
of 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.

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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. Our
international operations, in total, are not currently profitable. 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 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:



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

RISKS RELATING TO OUR COMMUNICATIONS SEGMENT

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

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 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

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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 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

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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.

RISKS RELATING TO OUR BUSINESS GENERALLY

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 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 pay accounts, and
we anticipate decreased advertising revenues in the Communications segment which will adversely impact our profitability.

Our business is subject to fluctuations.

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.

Our marketing activities may not be successful.

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.

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We may be unsuccessful at acquiring additional businesses, services or technologies. Even if we complete an acquisition, it may not improve our results of operations and may
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 Group, Inc. ("FTD"). Acquisitions,
including the proposed acquisition of FTD, 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
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 will materialize or that any integration attempts will be successful. Acquiring a business, service or technology involves
many risks, including:



Any
of these risks could harm our business and financial results.

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

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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.

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.

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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

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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.

Harmful software programs such as viruses could disrupt 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 failure to protect our proprietary rights could harm our business.

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 or institute legal actions, inquiries or
investigations 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

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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 $2.7 million of acquisition costs through March 31, 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 regarding the use of personal information or an investigation of our privacy practices could increase
the

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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 our critical computer equipment,
including our 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 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.

Our wholly-owned subsidiary, Classmates Media Corporation, or CMC, filed a registration statement relating to the initial public offering, or IPO, of CMC's
Class A common stock. The

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registration
statement was withdrawn in December of 2007 due to then-current market conditions. It is still our strategy to complete an IPO of CMC and we have capitalized approximately
$3.9 million of IPO-related costs at March 31, 2008 which we will have to expense in a future period if we do not proceed with an offering. There is no assurance that an IPO will be
completed in the near term, if at all. If we do not complete the IPO, the market price of our common stock could be adversely affected.

If
the IPO is completed, CMC would be a new public company and cash flows associated with CMC will remain with CMC and will no longer be available for our use. We are unable to predict
what the market price of our common stock would be after the IPO. We cannot assure you that the IPO, if completed, will produce any increase for our stockholders in the market value of their holdings
in our Company. Additionally, Mark R. Goldston, our chairman, president and chief executive officer, will continue to serve as the chairman, president and chief executive officer of CMC. Although we
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 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 proposed acquisition of FTD.
The terms of such indebtedness in addition to the degree to which we are leveraged, following the closing of the proposed acqusition, could materially and 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 proposed acquisition of FTD, 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 our proposed acquisition of FTD, we expect to decrease our regular
quarterly cash dividend from $0.20 per share to $0.10 per share. We cannot assure you that we will continue to pay quarterly cash dividends, and if we do not, 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

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stockholder
rights plan, which is an anti-takeover measure that will cause substantial dilution to a third-party who attempts to acquire our Company on terms not approved by our Board of
Directors.

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

The market price of our common stock has fluctuated significantly since our stock began trading on the Nasdaq Stock Market in September 2001 and it may continue
to be volatile with extreme trading
volume fluctuations. In addition, the Nasdaq Stock 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, and for this or other
reasons we could suffer significant declines in the market price of our common stock.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)(b)  Not applicable

(c)   Common Stock Repurchases

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 March 31, 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 to pay applicable employee withholding taxes are considered common stock repurchases, but are not counted as purchases against the
program. Upon vesting, we currently do not collect the applicable employee withholding taxes for restricted stock units from employees. Instead, we automatically withhold, 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. We then pay the applicable withholding taxes in cash.

Common
stock repurchases through March 31, 2008 were as follows (in thousands, except per share amounts):

|Period            |       | Total Number of
Shares Purchased |        | Average Price
Paid per Share |       | Total Number of
Shares Purchased as
Part of a Publicly
Announced Program |        | Maximum Approximate
Dollar Value that
May Yet be Purchased
Under the Program
|----------------- | ----- | -------------------------------- | ------ | ---------------------------- | ----- | ------------------------------------------------------------------------ | ------ | ----------------------------------------------------------------------------
|2001-2005         |       | 10,932                           |        | $                            | 12.72 |                                                                          | 10,932 |                                                                             
|February 15, 2006 |       | 129                              |        | $                            | 12.77 |                                                                          |       |                                                                             
|May 15, 2006      |       | 26                               |        | $                            | 11.87 |                                                                          |       |                                                                             
|August 15, 2006   |       | 38                               |        | $                            | 10.92 |                                                                          |       |                                                                             
|November 15, 2006 |       | 22                               |        | $                            | 13.88 |                                                                          |       |                                                                             
|February 15, 2007 |       | 194                              |        | $                            | 13.72 |                                                                          |       |                                                                             
|May 15, 2007      |       | 71                               |        | $                            | 15.89 |                                                                          |       |                                                                             
|August 15, 2007   |       | 69                               |        | $                            | 12.82 |                                                                          |       |                                                                             
|November 15, 2007 |       | 56                               |        | $                            | 16.66 |                                                                          |       |                                                                             
|January 27, 2008  |       | 142                              |        | $                            | 10.71 |                                                                          |       |                                                                             
|February 15, 2008 |       | 404                              |        | $                            | 11.49 |                                                                          |       |                                                                             
|                  |       |                                  |        |                              |       |                                                                          |        |                                                                             
|                  | Total |                                  | 12,083 |                              | $     | 12.72                                                                    |        | 10,932                                                                      
|                  |       |                                  |        |                              |       |                                                                          |        |                                                                             

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ITEM 6.    EXHIBITS

|      |  |                                                                                                                                                                                                                                                                                     |  |  |  | Incorporated by Reference to
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ----------------------------
|
|
|2.1   |  | Stock Purchase Agreement, dated as of April 9, 2006, by and between United Online, Inc. and UAL Corporation                                                                                                                                                                         |  |  |  | 8-K                         
|3.1   |  | Amended and Restated Certificate of Incorporation                                                                                                                                                                                                                                   |  |  |  | 10-K                        
|3.2   |  | Amended and Restated Bylaws                                                                                                                                                                                                                                                         |  |  |  | 10-K                        
|3.3   |  | Certificate of Designation for Series A Junior Participating Preferred Stock (included in Exhibit 4.1 below)                                                                                                                                                                        |  |  |  | 10-K                        
|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                        
|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                        
|10.1  |  | 2001 Amended and Restated Employee Stock Purchase Plan                                                                                                                                                                                                                              |  |  |  | 10-Q                        
|10.2  |  | 2001 Stock Incentive Plan                                                                                                                                                                                                                                                           |  |  |  | 10-Q                        
|10.3  |  | Form of Option Agreement for 2001 Stock Incentive Plan                                                                                                                                                                                                                              |  |  |  | 10-Q                        
|10.4  |  | Form of Restricted Stock Unit Issuance Agreement for 2001 Stock Incentive Plan and 2001 Supplemental Stock Incentive Plan                                                                                                                                                           |  |  |  | 10-Q                        
|10.5  |  | 2001 Supplemental Stock Incentive Plan                                                                                                                                                                                                                                              |  |  |  | 10-Q                        
|10.6  |  | Form of Option Agreement for 2001 Supplemental Stock Incentive Plan                                                                                                                                                                                                                 |  |  |  | 10-Q                        
|10.7  |  | Classmates Online, Inc. Amended and Restated 1999 Stock Plan                                                                                                                                                                                                                        |  |  |  | S-8                         
|10.8  |  | Classmates Online, Inc. 2004 Stock Plan                                                                                                                                                                                                                                             |  |  |  | 10-Q                        
|10.9  |  | Form of Option Agreement for Classmates Online, Inc. 2004 Stock Plan                                                                                                                                                                                                                |  |  |  | 10-Q                        
|10.10 |  | United Online, Inc. 2007 Management Bonus Plan                                                                                                                                                                                                                                      |  |  |  | 10-Q                        
|10.11 |  | Employment Agreement between the Registrant and Mark R. Goldston                                                                                                                                                                                                                    |  |  |  | 10-Q                        
|10.12 |  | First Amendment to Employment Agreement between the Registrant and Mark R. Goldston                                                                                                                                                                                                 |  |  |  | 10-Q                        

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|10.13 |  | Employment Agreement between Classmates Media Corporation and Mark R. Goldston                         |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|----- |  | ------------------------------------------------------------------------------------------------------ |  | - |  | ---- |  | --------- |  | ----------
|10.14 |  | Employment Agreement between the Registrant and Jeremy E. Helfand                                      |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.15 |  | Amended and Restated Employment Agreement between the Registrant and Paul E. Jordan                    |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.16 |  | Employment Agreement between Classmates Media Corporation and Steven B. McArthur                       |  |   |  | 10-K |  | 000-33367 |  | 2/20/2008 
|10.17 |  | Employment Agreement between the Registrant and Frederic A. Randall, Jr.                               |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.18 |  | Employment Agreement between the Registrant and Scott H. Ray                                           |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.19 |  | Employment Agreement between the Registrant and Gerald J. Popek                                        |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.20 |  | Employment Agreement between the Registrant and Robert J. Taragan                                      |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.21 |  | Employment Agreement between the Registrant and Matthew J. Wisk                                        |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.22 |  | Office Lease between LNR Warner Center, LLC and NetZero, Inc.                                          |  |   |  | 10-Q |  | 000-33367 |  | 5/3/2004  
|10.23 |  | Form of Restricted Stock Unit Issuance Agreement for 2001 Stock Incentive Plan                         |  | X |  |      |  | 000-33367 |  | 5/12/2008 
|31.1  |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  | X |  |      |  | 000-33367 |  | 5/12/2008 
|31.2  |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  | X |  |      |  | 000-33367 |  | 5/12/2008 
|32.1  |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | X |  |      |  | 000-33367 |  | 5/12/2008 
|32.2  |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | X |  |      |  | 000-33367 |  | 5/12/2008 

54

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SIGNATURES

Pursuant to the requirements of Section 13 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 on May 12, 2008.

| |  | UNITED ONLINE, INC.(Registrant)
| |  | -------------------------------
| |  | By:                            
| |  |                                
| |  | By:                            
| |  |                                

55

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EXHIBIT INDEX

|      |  |                                                                                                                                                                                                                                                                                     |  |  |  | Incorporated by Reference to
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  |  | ----------------------------
|
|
|2.1   |  | Stock Purchase Agreement, dated as of April 9, 2006, by and between United Online, Inc. and UAL Corporation                                                                                                                                                                         |  |  |  | 8-K                         
|3.1   |  | Amended and Restated Certificate of Incorporation                                                                                                                                                                                                                                   |  |  |  | 10-K                        
|3.2   |  | Amended and Restated Bylaws                                                                                                                                                                                                                                                         |  |  |  | 10-K                        
|3.3   |  | Certificate of Designation for Series A Junior Participating Preferred Stock (included in Exhibit 4.1 below)                                                                                                                                                                        |  |  |  | 10-K                        
|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                        
|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                        
|10.1  |  | 2001 Amended and Restated Employee Stock Purchase Plan                                                                                                                                                                                                                              |  |  |  | 10-Q                        
|10.2  |  | 2001 Stock Incentive Plan                                                                                                                                                                                                                                                           |  |  |  | 10-Q                        
|10.3  |  | Form of Option Agreement for 2001 Stock Incentive Plan                                                                                                                                                                                                                              |  |  |  | 10-Q                        
|10.4  |  | Form of Restricted Stock Unit Issuance Agreement for 2001 Stock Incentive Plan and 2001 Supplemental Stock Incentive Plan                                                                                                                                                           |  |  |  | 10-Q                        
|10.5  |  | 2001 Supplemental Stock Incentive Plan                                                                                                                                                                                                                                              |  |  |  | 10-Q                        
|10.6  |  | Form of Option Agreement for 2001 Supplemental Stock Incentive Plan                                                                                                                                                                                                                 |  |  |  | 10-Q                        
|10.7  |  | Classmates Online, Inc. Amended and Restated 1999 Stock Plan                                                                                                                                                                                                                        |  |  |  | S-8                         
|10.8  |  | Classmates Online, Inc. 2004 Stock Plan                                                                                                                                                                                                                                             |  |  |  | 10-Q                        
|10.9  |  | Form of Option Agreement for Classmates Online, Inc. 2004 Stock Plan                                                                                                                                                                                                                |  |  |  | 10-Q                        
|10.10 |  | United Online, Inc. 2007 Management Bonus Plan                                                                                                                                                                                                                                      |  |  |  | 10-Q                        
|10.11 |  | Employment Agreement between the Registrant and Mark R. Goldston                                                                                                                                                                                                                    |  |  |  | 10-Q                        
|10.12 |  | First Amendment to Employment Agreement between the Registrant and Mark R. Goldston                                                                                                                                                                                                 |  |  |  | 10-Q                        

56

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|10.13 |  | Employment Agreement between Classmates Media Corporation and Mark R. Goldston                         |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|----- |  | ------------------------------------------------------------------------------------------------------ |  | - |  | ---- |  | --------- |  | ----------
|10.14 |  | Employment Agreement between the Registrant and Jeremy E. Helfand                                      |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.15 |  | Amended and Restated Employment Agreement between the Registrant and Paul E. Jordan                    |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.16 |  | Employment Agreement between Classmates Media Corporation and Steven B. McArthur                       |  |   |  | 10-K |  | 000-33367 |  | 5/9/2008  
|10.17 |  | Employment Agreement between the Registrant and Frederic A. Randall, Jr.                               |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.18 |  | Employment Agreement between the Registrant and Scott H. Ray                                           |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.19 |  | Employment Agreement between the Registrant and Gerald J. Popek                                        |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.20 |  | Employment Agreement between the Registrant and Robert J. Taragan                                      |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.21 |  | Employment Agreement between the Registrant and Matthew J. Wisk                                        |  |   |  | 10-Q |  | 000-33367 |  | 10/30/2007
|10.22 |  | Office Lease between LNR Warner Center, LLC and NetZero, Inc.                                          |  |   |  | 10-Q |  | 000-33367 |  | 5/3/2004  
|10.23 |  | Form of Restricted Stock Unit Issuance Agreement for 2001 Stock Incentive Plan                         |  | X |  |      |  | 000-33367 |  | 5/12/2008 
|31.1  |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  | X |  |      |  | 000-33367 |  | 5/12/2008 
|31.2  |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  | X |  |      |  | 000-33367 |  | 5/12/2008 
|32.1  |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | X |  |      |  | 000-33367 |  | 5/12/2008 
|32.2  |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | X |  |      |  | 000-33367 |  | 5/12/2008 

57

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