According to 10-Q advertising accounts for less than 11% of revenues:
Other revenues are generated primarily from the sale of merchandise, data
network services, transaction fees and advertising. The growth of other revenues
is important to the Company's business objectives. In the first quarter of
fiscal 1997, other revenues represented approximately 11% of total revenues.
While such other revenues currently represent a relatively small percentage of
total revenues, a substantial portion of the Company's margins are associated
with these revenues. Among the Company's business objectives are increasing the
subscriber base and continuing to accelerate the change in its business model
into one in which increasingly more revenues and profits are generated from
sources other than online service subscription revenues, such as merchandise
sales, the provision of data network services, transaction fees and advertising,
which generally carry higher margins than online service revenues. The Company
expects that the growth in other revenues, assuming such growth continues, will
be the primary source of future profit growth, and will provide the Company with
the opportunity and flexibility to fund programs designed to grow the subscriber
base and meet other business objectives.
The online services and Internet markets are highly competitive. The
Company believes that existing competitors, which include, among others,
commercial Internet-based online services such as CompuServe, Prodigy and the
Microsoft Network, and Internet service providers, including various national
and local independent Internet service providers as well as long distance and
regional telephone companies, are likely to enhance and more aggressively market
their service offerings. In addition, new competitors, including Internet
directory services and various media and telecommunication companies, have
entered or announced plans to enter the online services and Internet markets,
resulting in greater competition for the Company. The competitive environment
could have the following effects: require additional pricing programs and
increased spending on marketing, network capacity, content procurement and
product development; limit the Company's opportunities to enter into and/or
renew agreements with content providers and distribution partners; limit the
Company's ability to grow its subscriber base; and result in increased attrition
in the Company's subscriber base. Any of the foregoing events could have an
impact on revenues and result in an increase in costs as a percentage of
revenues. These factors may have a material adverse effect on the Company's
financial condition and operating results. |
