In yet another blow to the social networking sector,
says the IPO of its Classmates Media unit will be held back this year.
United Online, formerly known as NetZero, says that the public offering of Classmates stock would not be in the best interests of its stockholders "under current market conditions."
Classmates is probably best known for its online banner ads featuring school photos. The company offers a paid membership service allowing people to locate former schoolmates.
The site has been called a poor man's Facebook. And recently Classmates was voted the
IPO least likely to succeed by
Kevin Kelleher, due to its flimsy business plan.
So-called social networking sites have surged in popularity in the past three years as people find them useful tools to spread connections between friends and acquaintances. Classmates attempts to capitalize on that trend by charging between $15 for three months and $59 for two years for subscriptions.
Other sites like Facebook have explored a variety of methods to monetize its vast user base. And occasionally these efforts have triggered the ire of its users.
Last month, Facebook irked its members with a controversial advertising scheme named Beacon that alerted users when friends were viewing and making purchases from certain Web sites.
Facebook rivals the giant in the field, MySpace, a social networking site acquired two years ago by
. Industry observers say Facebook is looking for a sustainable business model with an eye toward attracting a big buyout or an IPO.
But squeezing money out of the networking trend hasn't been easy. Classmates says it has 50 million registered users and only about 3 million paying subscribers. The company did turn a profit of $1.6 million for the first nine months of this year. That meager profit however won't come close to covering the $5 million charge United Online expects to take for the thwarted IPO.
United Online shares fell 84 cents, or 7%, to $11.48 in early trading Wednesday.