Analysis: How classmates.com got its 1.5 million paying members

This week's E-Business Secrets continues my report on the secrets I learned from my private conversations with speakers at the Global eSubscription Symposium, sponsored by the Sandlot Corporation in Salt Lake City on May 15.

Undoubtedly the largest pure-play Internet e-business represented at the Global eSubscription Symposium in Salt Lake City last month was Classmates.com. It's almost impossible to surf the Web for long without seeing at least one ad for the service, which helps members make contact with former schoolmates as well as people who've worked for the same company or served in the same branch of the military.

In an interview at his headquarters in Renton, Wash., (a suburb of Seattle), Classmates' CEO Michael Schutzler said the e-business currently has 29.1 million free enrollees who've typed in their contact information. Of those, 1.575 million pay to subscribe to some level of service, which typically enables them to initiate contact with other subscribers.

Schutzler says Classmates spent $25 million on advertising in calendar year 2001 to achieve such a high number of registrations. This ad budget means Classmates delivers ad impressions to 7 million persons online each month.

Classmates hasn't found that any advertising medium other than online has worked. "The experience we had with offline advertising is that it doesn't convert well," Schutzler says. "If you're reading a magazine, you're not at your terminal. The same if you're watching TV or listening to the radio." He says people are much more likely to register at Classmates.com if they're already surfing the Internet and then click an online ad that takes them to the site.

Graphical buttons tend not to work well to attract people, Schutzler says, although the new, larger ad sizes can work. "Again and again," he says, "contextually relevant text links work the best." Classmates.com currently advertises, among other places, at Yahoo Search and at Switchboard.com, where users often browse when attempting to locate aspecific person.

The company's goal is to grow from today's 29.1 million registrants to 100 million by 2005, 10 percent of whom would be paying some amount to subscribe. In addition, Schutzler says, "40 percent of our gold [paying] members buy something else from us." He says 15 percent of Classmates' revenue already derives from its partners in areas such as travel, dating, and dieting.

Classmates has been profitable since October 2001, the company says. It is currently adding 1.5 million free registrants and 150,000 paid subscribers per month. So I'd say the company will have enough money on hand to show you a few more ads in the coming years. Not that that's a BAD thing...

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