Classmates takes financial hit after ending controversial deals |
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Just how much was Classmates.com benefiting from post-transaction marketing deals? The latest financial results from the Seattle-based social network's parent company, United Online, show that the decision to end those controversial arrangements reduced the Classmates unit's revenue by $3.4 million in the company's most recent quarter, contributing to an overall decline of $8 million in revenue in the unit for the quarter.
Classmates ended agreements with post-transaction marketing firms last year, as it and others were targeted for the practice in a U.S. Senate subcommittee report in November. The tactic has been roundly criticized by consumer advocates for getting users to pay for additional products when, in many cases, they don’t read the fine print and think they’re simply completing the purchase of what they originally intended to buy.
Separately, Classmates.com's vice president of marketing, Marston Gould -- who took the job in December, following the post-transaction marketing dustup -- has left the company. Marketing employees inside the company were informed of his departure late last week. We've contacted a United Online spokesman for more information.
To sum it up, these are certainly interesting times at the venerable social network. Classmates remains solidly profitable -- a bragging point for United Online CEO Mark Goldston -- but the unit's revenue fell 14 percent in the first quarter, to $50.5 million. In addition to the effect of ending the post-transaction marketing deals, the company said the result was affected by a decline in average revenue per paid account.
On the other hand, Classmates has been boosting its number of paid accounts, reaching 5 million as of March 31, up 9 percent from the same point last year. But it has been achieving those gains in large part through discounts. The company said in its earnings release that the drop in average revenue per account "more than offset the year-over-year increase in segment pay accounts."
Operating income for Classmates was $10.1 million in the quarter, down 17 percent.
Previously: Classmates to pay up to $9.5 million to settle suit over phantom friends ... Old-school Classmates.com forced to face up to Facebook ... Classmates.com joins Facebook, reminds the rest of us why we did
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