TechJournal

Classmates.com has been there for more than a decade.  They survived the dot-com bubble burst and have made pretty good revenues since 2001.  In 2007, Classmates had gained over 50 million registered members.

A couple of months ago, Classmates was rumored to be prepping up to go public and sure enough they filed a formal request with the SEC to do so.  This has been widely covered in the blogosphere since Classmates was going to be the first social network to go public.

Even with a $500-600million valuation (a tiny fraction of Facebook's valuation of $15Billion), United Online Inc., owner of Classmates Media Inc, decided to push through with the IPO . 

The company (United Online and Classmates Media) were confident that their business model could generate revenue enough to go public.  Classmates.com has a different business model compared to Facebook and Myspace and most of the big social networks.   Classmates has two kinds of memberships, free and paid.  The free membership allows its users to view, post and share with other members.  On the other hand, the paid membership allows a little more tools aside from the free services.

As the date of the IPO approached, Classmates came under fire from researchers, investors, and the public.  It turns out that Classmates has not been doing so well.

The rise of  free social networks like MySpace and Facebook have significantly reduced the time Classmates users spend on the website.  With the average visitor spending 8 minutes on Classmates as compared to about 200 minutes on Facebook and Myspace, Classmates was losing its members' loyalty fast.

Moreover, Renaissance Capital, an IPO research firm came to the conclusion that with other social networks offering all services for free, the paid subscription revenue stream of Clssmates was not sustainable.  This was evident too with the number of paying subscribers of Classmates which has plataeued at 3 million.   Furthermore, the automatic renewal system of Classmates for their paid subscription came also came under fire with the FTC .  With the impending ruling that the auto subscriptions be prohibited, Classmates subscription revenue stream will suffer.

Another issue with Classmates is with their acquired sister company, MyPoints , a targeted advertising service.  The company plans to integrate MyPoints with Classmates.com and open up a new revenue stream.  Unfortunately with the negative reaction of Facebook users to Beacon (similar to MyPoints) which ended up on Zuck pullin gthe plug on the targeted ad service, the Classmates and MyPoints marriage most probably would not work too.

All these issues and controversies have lead United Online Inc. and Classmates Media Inc. to pull the plug on the IPO they've been planning.  However, they have not given a public statementa s to why they pulled the plug, it doesn't take a rocket scientist to see through their situation.

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