Forward-Looking Statements

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

Overview

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

Acquisition of FTD Group, Inc.

On August 26, 2008, we completed the acquisition of 100% of the capital stock of FTD Group, Inc., a leading provider of floral and related products and services. The consideration consisted of (i) $10.15 in cash and (ii) 0.4087 of a share of United Online common stock for each outstanding share of FTD common stock. The total merger consideration was approximately $307 million in cash and approximately 12.3 million shares of United Online common stock.

The FTD acquisition was financed, in part, with the net proceeds of term loan borrowings under a $425 million credit facility, which includes a $50 million revolving credit facility that was undrawn at the closing of the transaction, with Wells Fargo Bank, National Association, as lead arranger, and a $60 million credit facility with Silicon Valley Bank. The remaining cash consideration in the transaction was paid from United Online's and FTD's existing cash on hand.

As a result of the FTD acquisition, the results of operations of FTD have been included in the consolidated statements of operations and cash flows from August 26, 2008, the date of the acquisition.

Segment Definitions

    We report our businesses in three reportable segments:

         Segment                       Products and Services
         FTD                Floral and related products and services for
                            consumers, retail florists and other retail
                            locations
         Classmates Media   Online social networking and online loyalty
                            marketing
         Communications     Internet access, email, Internet security,
                            and Web hosting

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 key measures are:

FTD Segment Metrics

Consumer Orders. We monitor the number of consumer orders for floral and gift products received during a given period. Consumer orders are orders delivered that originated from FTD consumers in the U.S. and Canada (through the www.ftd.com Web site and the 1-800-SEND-FTD telephone number) as well as orders originated from Interflora consumers in the U.K. and The Republic of Ireland (through the www.interflora.co.uk Web site and a toll-free telephone number). Orders originating with a florist or other retail location for delivery to consumers are not included. The number of consumer orders received may fluctuate significantly from period to period due to seasonality resulting from: the timing of key holidays; fluctuations in marketing expenditures on initiatives designed to attract new and retain existing customers; changes in pricing for our floral and gift products or competitive offerings; changing consumer preferences; and general economic conditions, among other factors.

Average Order Value. We monitor the average value for consumer orders received in a given period, which we refer to as the average order value. Average order value represents the average U.S. Dollar amount paid to us for consumer orders delivered during a period. This average U.S. Dollar amount is determined after translating the British Pound amounts received for orders delivered in the U.K. into U.S. Dollars. Average order value includes merchandise revenue, and shipping and service fees, less discounts, payable by the consumer. Average order values may fluctuate from period to period based on:
changes in merchandise pricing; product mix; shipping and service fees; discounts; and the foreign currency exchange rate between the U.S. Dollar and the British Pound, among other factors.

Classmates Media and Communications Segments Metrics

Pay Accounts. We generate a significant portion of our revenues from our pay accounts and they 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 Classmates Media or Communications services, and whose subscription has not expired. Pay accounts also include, at any given measurement date, a number of members who are receiving pay services free of charge for a limited period of time on a promotional basis. In general, the key metrics that affect our 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 ("ARPU"). ARPU is calculated by dividing Classmates Media and Communications services revenues for a period (after translation into U.S. Dollars) 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, the timing of pay accounts being added or removed during a period, and the foreign currency exchange rates between the U.S. Dollar and the Euro and between the U.S. Dollar and the Swedish Krona.

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. For our Communications segment 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 canceling any particular service.

Active Accounts. We monitor the number of active accounts among our membership base. Classmates Media segment active accounts are defined as the sum of the following: 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 our 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. Communications segment active accounts include all segment pay accounts as of the date presented and the number of free Internet access and email accounts that logged on to our 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 consolidated revenues, pay accounts (at the end of the period), segment revenues, consumer orders, average order value, churn (monthly average for the period), ARPU (monthly average for the period) and active accounts (monthly average for the period).

Revenues and operating results from our FTD segment are impacted by seasonal variations and fluctuations in foreign currency exchange rates. We believe that comparisons of the FTD segment's revenues and operating results for any period with those of the immediately preceding period, or in

some instances, the same period of the preceding fiscal year, may be of limited relevance in evaluating its historical performance and predicting its future financial performance.

                                                                        Quarter Ending
                                        December 31,     September 30,      June 30,        March 31,     December 31,
                                            2008             2008             2008            2008            2007
Consolidated:
   Revenues (in thousands)              $     256,162    $      169,157   $     122,273   $     121,811   $     125,410
FTD:
   Basis of presentation(a)                                                    Pre-            Pre-            Pre-
                                                             Combined       Acquisition     Acquisition     Acquisition
   Revenues(a) (in thousands)           $     133,685    $      121,427   $     174,904   $     191,987   $     155,489
           % of Total revenues(a)                52.2 %             N/A             N/A             N/A             N/A
   Consumer orders(a) (in thousands)            1,467             1,154           1,993           1,994           1,540
   Average order value(a)               $       58.80    $        64.37   $       62.67   $       65.59   $       65.48
   Currency exchange rate: GBP to
   USD                                           1.56              1.90            1.97            1.98            2.04
Classmates Media:
   Segment revenues (in thousands)      $      62,592    $       58,746   $      57,013   $      51,884   $      53,273
           % of Total revenues                   24.4 %            34.7 %          46.6 %          42.6 %          42.5 %
   Pay accounts (in thousands)                  4,319             4,087           3,809           3,521           3,199
   Segment churn                                  4.4 %             4.1 %           4.2 %           4.3 %           4.7 %
   ARPU                                 $        2.98    $         3.07   $        3.10   $        3.10   $        3.26
   Segment active accounts (in
   millions)                                     16.0              15.5            15.1            13.9            12.6
Communications:
   Segment revenues (in thousands)      $      60,120    $       62,131   $      65,260   $      69,927   $      72,137
                 % of Total revenues             23.5 %            36.7 %          53.4 %          57.4 %          57.5 %
   Pay accounts (in thousands):
           Access                               1,388             1,468           1,560           1,682           1,786
           Other                                  347               353             356             361             364

                 Total pay accounts             1,735             1,821           1,916           2,043           2,150
   Segment churn                                  4.3 %             4.4 %           4.5 %           4.8 %           4.4 %
   ARPU                                 $        9.31    $         9.49   $        9.45   $        9.45   $        9.28
   Segment active accounts (in
   millions)                                      2.7               2.8             2.9             3.1             3.3


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   º (a)

Critical Accounting Policies, Estimates and Assumptions

General

Our discussion and analysis of our financial condition and results of operations is based upon our audited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and with the instructions for Form 10-K and Article 10 of Regulation S-X issued by the SEC. 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 those estimates and assumptions. The results of operations for interim or transition periods are not necessarily indicative of the operating results for a full year. We apply the following critical accounting policies in the preparation of our consolidated financial statements:

Revenue Recognition

FTD Segment Revenue Recognition-Products revenues and related cost of revenues are generally recognized when products are delivered to the customers. Shipping and service fees charged to customers are recognized at the time the product revenue is recognized and are included in products revenue. Shipping and delivery costs are included in cost of revenues. FTD's consumer businesses generally recognize revenue on a gross basis as FTD bears the risks and rewards associated with the revenue generating activities by: (1) acting as a principal in the transaction; (2) establishing prices; (3) being responsible for fulfillment of the order; (4) taking the risk of loss for collection, delivery and returns; and (5) marketing the products and services.

FTD also sells computer systems to its florist members and recognizes revenue in accordance with Statement of Position ("SOP") 97-2, Software Revenue Recognition, as amended by SOP 98-9, Modification of SOP 97-2, "Software Revenue Recognition, with Respect to Certain Transactions". FTD recognizes revenue on hardware which is sold without software at the time of delivery. For hardware sales that include software, revenue is recognized when delivery, installation and customer acceptance have all occurred.

Services revenues based on enabling the delivery of orders by FTD florist members are recognized in the period in which the orders are delivered. Monthly, recurring fees and other florist network service-based fees are recognized in the period in which the service has been provided.

Classmates Media Segment and Communications Segment Revenue Recognition-Revenues are comprised of services revenues, which are derived primarily from fees charged to pay accounts, and advertising revenues. We apply the provisions of SEC Staff Accounting Bulletin ("SAB") No. 104, Revenue Recognition in Financial Statements, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. SAB No. 104 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable, no significant Company obligations remain, and collectibility is reasonably assured. We also apply the provisions of Emerging Issues Task Force ("EITF") Issue No. 00-21, Revenue Arrangements with Multiple Deliverables.

Services revenues for our social networking services and Communications services are recognized in the period in which fees are fixed or determinable and the related services are provided to the customer. Our pay accounts generally pay in advance for their service by credit card, and revenue is then recognized ratably over the service period. Advance payments from pay accounts are recorded on the consolidated balance sheets as deferred revenue. We offer alternative payment methods to credit cards for certain pay service plans. These alternative payment methods currently include ACH, payment

by personal check or money order, or through a local telephone company. In circumstances where payment is not received in advance, revenue is only recognized if collectibility is reasonably assured.

Advertising revenues from our social networking services and Communications services consist primarily of amounts from Internet search partners that are generated as a result of users utilizing partner Internet search services, amounts generated from the display of third-party registration offers at the end of Classmates' pay account registration process, amounts generated from other display advertisements, and amounts generated from referring members to third-party Web sites or services. We recognize such advertising revenues in the period in which the advertisement is displayed or, for performance-based arrangements, when the related performance criteria are met. In determining whether an arrangement exists, we ensure that a written contract is in place, such as a standard insertion order or a customer-specific agreement. We assess whether performance criteria have been met and whether the fees are fixed or determinable based on a reconciliation of the performance criteria and the payment terms associated with the transaction. The reconciliation of the performance criteria generally includes a comparison of internally-tracked performance data to the contractual performance obligation and, when available, to third-party or customer-provided performance data.

Advertising revenues for our loyalty marketing service consist primarily of fees generated when emails are transmitted to members, when members respond to emails and when members complete online transactions. Each of these activities is a discrete, independent activity, which generally is specified in the sales agreement for each advertising customer. As the earning activities take place, activity measurement data (examples include the number of emails delivered and the number of responses received) is accumulated and the related revenue is recorded.

Probability of collection is assessed based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. If it is determined that collection is not reasonably assured, revenue is not recognized until collection becomes reasonably assured, which is generally upon receipt of cash. Deferred revenue also represents invoiced services that have not yet been performed.

Business Combinations

All of our acquisitions have been accounted for as purchase business combinations in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations. Under the purchase method of accounting, the costs, including transaction costs, are allocated to the underlying net assets acquired, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

The judgments made in determining the estimated fair value and expected useful lives assigned to each class of assets and liabilities acquired can significantly impact net income. Consequently, to the extent an indefinite-lived, definite-lived or a longer-lived asset is ascribed greater value under the purchase method than a shorter-lived asset, there may be less amortization recorded in a given period. Definite-lived identifiable intangible assets are amortized on either a straight-line basis or an accelerated basis. We determine the appropriate amortization method by performing an analysis of expected cash flows over the estimated useful lives of the assets and match the amortization expense to the expected cash flows from those assets.

Determining the fair value of certain assets and liabilities acquired is subjective in nature and often involves the use of significant estimates and assumptions. Two areas, in particular, that require significant judgment are estimating the fair value and related useful lives of identifiable intangible assets. To assist in this process, we may obtain appraisals from valuation specialists for certain intangible assets. While there are a number of different methods used in estimating the fair value of acquired intangible assets, there are two approaches primarily used: the discounted cash flow and

market comparison approaches. Some of the more significant estimates and assumptions inherent in the two approaches include: projected future cash flows (including timing); discount rate reflecting the risk inherent in the future cash flows; terminal growth rate; subscriber churn; terminal value; determination of appropriate market comparables; and the determination of whether a premium or a discount should be applied to market comparables. Most of the above assumptions are made based on available historical and market information.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of the purchase price of an acquired entity over the fair value of the net tangible and intangible assets acquired. Indefinite-lived intangible assets acquired in a business combination are initially recorded at management's estimate of their fair values. We account for goodwill and indefinite-lived intangible assets in accordance with SFAS No. 142, Goodwill and Other Intangible Assets, which among other things, addresses financial accounting and reporting requirements for acquired goodwill and indefinite-lived intangible assets. SFAS No. 142 prohibits the amortization of goodwill and requires us to test goodwill and indefinite-lived intangible assets for impairment at least annually at the reporting unit level.

We test the goodwill of our reporting units and indefinite-lived intangible assets for impairment annually during the fourth quarter of our fiscal year and whenever events occur or circumstances change that would more likely than not indicate that the goodwill and/or indefinite-lived intangible assets might be permanently impaired. Events or circumstances which could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key management or other personnel, significant changes in the manner of our use of the acquired assets or the strategy for the acquired business or our overall business, significant negative industry or economic trends or significant underperformance relative to . . .