WEB.COM GROUP, INC. (Form: 10-Q, Received: 08/04/2010 16:15:44)

Net subscribers decreased by 454 customers during the three months ended June 30, 2010 as compared to an increase of 1,937 during the three months ended June 30, 2009. The average monthly turnover decreased to 2.9% during the three months ended June 30, 2010 from 3.7% during the three months ended June 30, 2009. The average revenue per subscriber was $28.70 during the three months ended June 30, 2010 from $31.85 during the three months ended June 30, 2009. Due to the current economic conditions and lower marketing spend, gross subscriber additions were down to 25,877 in the three months ended June 30, 2010 from 35,274 in the three months ended June 30, 2009.

Professional Services Revenue. Professional services revenue decreased 21% to $820 thousand in the three months ended June 30, 2010 from $1.0 million in the three months ended June 30, 2009. Professional services revenue decreased $185 thousand and $91 thousand in eCommerce store design services and search engine optimization services, respectively, which was offset by an increase of $45 thousand in other custom design services.

Cost of Revenue

	Three months ended June 30,
	2010		2009
	(unaudited)
Cost of revenue
Subscription	$	9,652	$	9,413
Professional services		485		575
Total cost of revenue	$	10,137	$	9,988

Cost of Subscription Revenue. Cost of subscription revenue increased 3% to $9.7 million in the three months ended June 30, 2010 from $9.4 million in the three months ended June 30, 2009. During the three months ended June 30, 2010, we had incremental expenses of $255 thousand associated with the additional revenue derived from our most recent acquisition of Solid Cactus. Our gross margin on subscription revenue decreased from 63% during the three months ended June 30, 2009 to 60% during the three months ended June 30, 2010. The decrease in gross margin was principally driven by the shift in the subscription revenue mix to lower margin products. Furthermore, as we anticipate revenue growth in the future, we have chosen to maintain a certain level of capacity and not to reduce costs in proportion to the decrease in revenue.

Cost of Professional Services Revenue. Cost of professional services revenue decreased 16% to $485 thousand in the three months ended June 30, 2010 from $575 thousand in the three months ended June 30, 2009. The decrease was primarily the result of a decrease of $108 thousand in employee compensation and benefits.

Operating Expenses

	Three months ended June 30,
	2010			2009
	(unaudited)
Operating expenses:
Sales and marketing	$	5,185		$	5,881
Research and development		2,225			2,086
General and administrative		5,572			4,789
Restructuring charges		(6	)		—
Depreciation and amortization		3,313			3,441
Total operating expenses	$	16,289		$	16,197

Sales and Marketing Expenses. Sales and marketing expenses decreased 12% to $5.1 million, or 21% of total revenue, during the three months ended June 30, 2010 from $5.9 million, or 22% of total revenue, during the three months ended June 30, 2009. The decrease in sales and marketing expenses was primarily the result of a reduction in employee compensation and benefits expense of $865 thousand, which was offset by an $184 thousand increase in the advertising budget to promote our products and services.

Research and Development Expenses. Research and development expenses increased 7% to $2.2 million, or 9% of total revenue, during the three months ended June 30, 2010 from $2.1 million, or 8% of total revenue, during the three months ended June 30, 2009. The increase in research and development expense was due to $42 thousand of additional expenses associated with our recent acquisition and an increase of $119 thousand in contract labor, employee compensation and benefits, collectively.

General and Administrative Expenses. General and administrative expenses increased 16% to $5.6 million, or 22% of total revenue, during the three months ended June 30, 2010 from $4.8 million, or 18% of total revenue, during the three months ended June 30, 2009. During the three months ended June 30, 2010, we incurred $909 thousand of professional fees to assist us in performing due diligence procedures for the expected acquisition of Register.com in July 2010. In addition, we had increases of general and administrative expenses of $176 thousand associated with our recent acquisition and $128 thousand in employee compensation and benefits. Also during the three months ended June 30, 2010, we had reductions in professional fees of $252 thousand, which primarily consisted of a reduction in legal fees associated with the sale of a perpetual license during the three months ended June 30, 2009 and a reduction in subcontractor labor. In addition, the number of bad debt claims decreased during the three months ended June 30, 2010 which resulted in savings of $119 thousand.

Restructuring charges (credits). There was a credit related to restructuring charges of $6 thousand, or less than 1% of total revenue, during the three months ended June 30, 2010. We were able to negotiate more favorable terms than anticipated to terminate the lease in Norton, Virginia.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased 4% to $3.3 million, or 13% of total revenue, during the three months ended June 30, 2010 from $3.4 million, or 13% of total revenue, during the three months ended June 30, 2009. Amortization and depreciation expenses are predominantly a result of tangible and intangible assets purchased and acquired. The slight decrease in expense is due to certain intangible assets becoming fully amortized.

Net Interest Income. Net interest income increased 35% to $58 thousand, or less than 1% of total revenue, during the three months ended June 30, 2010 from $43 thousand, or less than 1% of total revenue, during the three months ended June 30, 2009.

Income tax expense. We recorded income tax expense of $217 thousand and $26 thousand in the three months ended June 30, 2010 and 2009, respectively, based upon our estimated annual effective tax rate. The Company’s effective rate exceeds the statutory rate primarily due to non-deductible expenses associated with incentive stock options and awards.

Discontinued operations. On May 26, 2009, we sold our NetObjects Fusion software business for approximately $4.0 million. During the three months ended June 30, 2010, we recorded a net gain of $125 thousand in proceeds received based on the terms in the NetObjects Fusion sales agreement. For the three months ended June 30, 2009, the revenue generated by the NetObjects Fusion software was $162 thousand and the net income was $95 thousand. There were no such revenues generated in the three months ended June 30, 2010.

Comparison of the Results for the Six Months Ended June 30, 2010 to the Results for the Six Months Ended June 30, 2009

Revenue

	Six months ended June 30,
	2010		2009
	(unaudited)
Revenue:
Subscription	$	48,438	$	51,456
Professional services		1,468		1,590
Other		—		1,000
Total revenue	$	49,906	$	54,046

Total revenue for the six months ended June 30, 2010 decreased $4.1 million, or 8%, over the six months ended June 30, 2009. Total revenue during the six months ended June 30, 2010 declined primarily due to the decreases in our average revenue per subscriber and sale of a perpetual license in 2009, which was offset slightly by additional revenue from our recent acquisition and increase in our average customers.

Subscription Revenue . Subscription revenue decreased 6% to $48.4 million in the six months ended June 30, 2010 from $51.5 million in the six months ended June 30, 2009. Subscription revenue decreased approximately $6.7 million primarily due to decreases in our average revenue per subscriber as compared to the prior year, which was slightly offset by approximately $1.8 million from the increase in our number of average customers. There was also an additional $1.8 million of subscription revenue from our recent acquisition. The decrease in average revenue per subscriber was mainly due to the addition of lower revenue subscribers from our Do-It-Yourself website building and hosting products.

Net subscribers increased by 3,177 customers during the six months ended June 30, 2010 as compared to an increase of 1,764 during the six months ended June 30, 2009. The average monthly turnover decreased to 3.0% during the six months ended June 30, 2010 from 3.8% during the six months ended June 30, 2009. The average revenue per subscriber was $29.10 during the six months ended June 30, 2010 from $32.27 during the six months ended June 30, 2009. Due to the current economic conditions and lower marketing spend, gross subscriber additions were down to 58,319 in the six months ended June 30, 2010 from 70,421 in the six months ended June 30, 2009.

Professional Services Revenue. Professional services revenue decreased 8% to $1.5 million in the six months ended June 30, 2010 from $1.6 million in the six months ended June 30, 2009. Professional services revenue increased $258 thousand due to the additional service offerings of eCommerce store design that associated with our recent acquisition, which was offset by a decrease of $218 thousand and $171 thousand in search engine optimization services and custom design services, respectively.

Other Revenue. Other revenue totaled $1.0 million in the six months ended June 30, 2009. This revenue was earned by the sale of a perpetual license for the use of our patents. The Company did not have other revenue during the six months ended June 30, 2010.

Cost of Revenue

	Six months ended June 30,
	2010		2009
	(unaudited)
Cost of revenue
Subscription	$	19,686	$	18,721
Professional services		963		876
Total cost of revenue	$	20,649	$	19,597

Cost of Subscription Revenue. Cost of subscription revenue increased 5% to $19.7 million in the six months ended June 30, 2010 from $18.7 million in the six months ended June 30, 2009. During the six months ended June 30, 2010, we had incremental costs of $1.1 million associated with the additional revenue derived from our most recent acquisition. This was slightly offset by a reduction of costs totaling approximately $177 thousand driven by the decline of our subscription revenue. Our gross margin on subscription revenue decreased from 64% during the six months ended June 30, 2009 to 59% during the six months ended June 30, 2010. The decrease in gross margin was principally driven by the shift in the subscription revenue mix to lower margin products. Furthermore, as we anticipate revenue growth in the future, we have chosen to maintain a certain level of capacity and not to reduce costs in proportion to the decrease in revenue.

Cost of Professional Services Revenue. Cost of professional services revenue increased 10% to $963 thousand in the six months ended June 30, 2010 from $876 thousand in the six months ended June 30, 2009. The increase was primarily the result of the additional costs of approximately $341 thousand related to eCommerce store design revenue, which was offset by a decrease of $234 thousand in employee compensation and benefits.

Operating Expenses

	Six months ended June 30,
	2010		2009
	(unaudited)
Operating expenses:
Sales and marketing	$	10,731	$	11,645
Research and development		4,496		4,128
General and administrative		9,347		10,851
Restructuring charges		54		—
Depreciation and amortization		6,593		6,790
Total operating expenses	$	31,221	$	33,414

Sales and Marketing Expenses. Sales and marketing expenses decreased 8% to $10.7 million, or 22% of total revenue, during the six months ended June 30, 2010 from $11.6 million, or 22% of total revenue, during the six months ended June 30, 2009. The decrease in sales and marketing expenses was primarily the result of a reduction in employee compensation and benefits expense of $1.3 million, which was offset by a $568 thousand increase in the advertising budget to promote our products and services.

Research and Development Expenses. Research and development expenses increased 9% to $4.5 million, or 9% of total revenue, during the six months ended June 30, 2010 from $4.1 million, or 8% of total revenue, during the six months ended June 30, 2009. The increase in research and development expense was due to $134 thousand of additional expenses associated with our recent acquisition and increases of $255 thousand in contract labor, employee compensation and benefits, collectively.

General and Administrative Expenses. General and administrative expenses decreased 14% to $9.3 million, or 19% of total revenue, during the six months ended June 30, 2010 from $10.9 million, or 20% of total revenue, during the six months ended June 30, 2009. During the six months ended June 30, 2010, we incurred $909 thousand of professional fees to assist us in performing due diligence procedures for the expected acquisition of Register.com in July 2010 and we had an increase in general and administrative expenses of $547 thousand associated with our recent acquisition. In addition, we had reductions in employee compensation and legal expenses of $1.2 million and $1.2 million, respectively. The reduction in legal fees was primarily associated with the sale of a perpetual license during the six months ended June 30, 2009. General and administrative expenses were reduced by reserve adjustments of $163 thousand that the Company determined are no longer probable due to the expiration of the respective statute of limitations in the likely jurisdictions. In addition, the number of bad debt claims decreased during the six months ended June 30, 2010 which resulted in savings of $177 thousand.

Restructuring charges. Restructuring charges increased to $54 thousand, or less than 1% of total revenue, during the six months ended June 30, 2010. During the six months ended June 30, 2010, we closed our office in Norton, Virginia and terminated employees in Virginia and Texas. We recorded facility exit costs of $24 thousand and employee termination benefits of $30 thousand due to this restructuring.

Depreciation and Amortization Expense. Depreciation and amortization expense decreased 3% to $6.6 million, or 13% of total revenue, during the six months ended June 30, 2010 from $6.8 million, or 13% of total revenue, during the six months ended June 30, 2009. Amortization and depreciation expenses are predominantly a result of tangible and intangible assets purchased and acquired. The slight decrease in expense is due to certain intangible assets becoming fully amortized.

Net Interest Income. Net interest income decreased 7% to $98 thousand, or less than 1% of total revenue, during the six months ended June 30, 2010 from $105 thousand, or less than 1% of total revenue, during the six months ended June 30, 2009.

Income tax expense. We recorded income tax expense of $687 thousand and $43 thousand in the six months ended June 30, 2010 and 2009, respectively, based upon our estimated annual effective tax rate. The Company’s effective rate exceeds the statutory rate primarily due to non-deductible expenses associated with incentive stock options and awards.

Discontinued operations. On May 26, 2009, we sold our NetObjects Fusion software business for approximately $4.0 million. During the six months ended June 30, 2010, we recorded a net gain of $125 thousand in proceeds received based on the terms in the NetObjects Fusion sales agreement. For the six months ended June 30, 2009, the revenue generated by the NetObjects Fusion software was $428 thousand and the net income was $228 thousand. There were no such revenues generated in the six months ended June 30, 2010 and a net loss of $9 thousand.

Liquidity and Capital Resources

As of June 30, 2010, we had $42.8 million of unrestricted cash and cash equivalents and $36.3 million in working capital, as compared to $39.4 million of cash and cash equivalents and $32.2 million in working capital as of December 31, 2009.

Net cash provided by operations for the six months ended June 30, 2010 was $5.5 million as compared to the net cash provided by operations of $8.1 million for the six months ended June 30, 2009. The decrease of net cash provided by operations over the prior year was primarily the result of the decrease in net income from continuing operations of $3.6 million and offset by reductions in account receivable and prepaid expense balances. In addition, we paid $305 thousand for professional services to assist us in performing due diligence procedures for the expected acquisition of Register.com in July 2010.

Net cash used in investing activities in the six months ended June 30, 2010 was $2.0 million as compared to $3.2 million during the six months ended June 30, 2009. During the six months ended June 30, 2010, we acquired approximately 5,700 customers at a cost of $1.5 million, which included a $91 thousand liability for future service to be provided to the acquired customers. In addition, we invested $777 thousand in property and equipment and received proceeds of $125 thousand based on the terms in the NetObjects Fusion sales agreement. During the six months ended June 30, 2009, we acquired substantially all the assets and select liabilities of Solid Cactus for approximately $3.3 million. Additionally, we sold our NetObjects Fusion software business and recorded net proceeds of $822 thousand in connection with the initial payment. We also invested approximately $513 thousand in property and equipment and intangible assets.

Net cash used in financing activities in the six months ended June 30, 2010 was $89 thousand as compared to $3.5 million during the six months ended June 30, 2009. During the six months ended June 30, 2010, we received proceeds from the exercise of stock options of $99 thousand, paid $128 thousand to satisfy debt obligations, and purchased 11,134 shares of common stock for $53 thousand for required tax withholding upon the vesting of restricted shares. These shares were not repurchased under the repurchase plan dated September 4, 2008. During the six months ended June 30, 2009, we repurchased approximately one million shares of our common stock for $3.5 million and paid $165 thousand for debt obligations we assumed as part of the Solid Cactus acquisition. In addition, we received proceeds from the exercise of stock options totaling $215 thousand.

We have been authorized to repurchase up to $20 million of our outstanding common shares through March 3, 2011. The timing, price and volume of repurchases will be based on market conditions, liquidity, relevant securities laws and other factors. As of June 30, 2010, the remaining maximum dollar value that may yet be purchased under the plan is $7.8 million. We may repurchase common shares throughout the plan period which may affect our liquidity.

Non-GAAP Financial Measures

In addition to our financial information presented in accordance with U.S. GAAP, management uses certain “non-GAAP financial measures” within the meaning of the SEC Regulation G, to clarify and enhance understanding of past performance and prospects for the future. Generally, a non-GAAP financial measure is a numerical measure of a company’s operating performance, financial position or cash flows that excludes or includes amounts that are included in or excluded from the most directly comparable measure calculated and presented in accordance with GAAP. We monitor non-GAAP financial measures because it describes the operating performance of the company, excluding some recurring charges that are included in the most directly comparable measures calculated and presented in accordance with GAAP. Relative to each of the non-GAAP financial measures, we further set forth our rationale as follows:

Non-GAAP Operating Income. We exclude from non-GAAP operating income amortization of intangibles, fair value adjustment to deferred revenue, restructuring charges, corporate development expenses and stock-based compensation charges. We believe that excluding these items assist investors in evaluating period-over-period changes in our operating income without the impact of items that are not a result of our day-to-day business and operations.

Non-GAAP Net Income and Non-GAAP Net Income per Diluted Share . We exclude from non-GAAP net income and non-GAAP net income per diluted share amortization of intangibles, income tax expense, fair value adjustment to deferred revenue, restructuring charges, corporate development expenses and stock-based compensation, and include cash income tax expense, because we believe that excluding such measures helps management and investors better understand our operating activities.

Adjusted EBITDA . We exclude from Adjusted EBITDA depreciation expense, amortization of intangibles, income tax, interest expense, interest income, stock-based compensation, corporate development expenses, and restructuring charges, because we believe that excluding such items helps management and investors better understand operating activities.

The following table presents our non-GAAP measures for the periods indicated (in thousands):

Web.com Group, Inc.

Reconciliation of GAAP to Non-GAAP Results

(in thousands except per share data)

(unaudited)

	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009
Reconciliation of GAAP net (loss) income to non-GAAP net income

GAAP net (loss) income	$	(1,683	)	$	1,224		$	(2,437	)	$	2,147
Amortization of intangibles		2,664			2,687			5,283			5,301
Stock based compensation		1,200			1,196			2,205			2,519
Income tax expense		217			26			687			43
Restructuring charges		(6	)		—			54			—
Corporate development		909			—			909			—
Cash income tax expense		(44	)		(91	)		(109	)		(183	)
Fair value adjustment to deferred revenue		5			17			16			50
Non-GAAP net income		3,262			5,059			6,608			9,877

Reconciliation of GAAP basic net (loss) income per share to non-GAAP basic net income per share

Basic GAAP net (loss) income per share	$	(0.07	)	$	0.05		$	(0.10	)	$	0.08
Amortization of intangibles per share		0.10			0.11			0.20			0.21
Stock based compensation per share		0.05			0.04			0.09			0.11
Income tax expense per share		0.01			—			0.03			—
Restructuring charges per share		—			—			—			—
Corporate development per share		0.04			—			0.04			—
Cash income tax expense per share		—			—			—			(0.01	)
Fair value adjustment to deferred revenue per share		—			—			—			—
Basic Non-GAAP net income per share	$	0.13		$	0.20		$	0.26		$	0.39

Reconciliation of GAAP diluted net (loss) income per share to non-GAAP basic net income per share

Fully diluted shares:
Common stock		25,457			25,130			25,433			25,365
Diluted stock options		1,091			1,450			1,259			1,190
Diluted restricted stock		258			321			316			45
Warrants		—			2			—			3
Total		26,806			26,903			27,008			26,603

Diluted GAAP net (loss) income per share	$	(0.07	)	$	0.05		$	(0.10	)	$	0.08
Amortization of intangibles per share		0.10			0.10			0.20			0.20
Stock based compensation per share		0.04			0.04			0.08			0.10
Income tax expense per share		0.01			—			0.03			(0.01	)
Restructuring charges per share		—			—			—			—
Corporate development per share		0.04			—			0.03			—
Cash income tax expense per share		—			—			—			—
Fair value adjustment to deferred revenue per share		—			—			—			—
Diluted Non-GAAP net income per share	$	0.12		$	0.19		$	0.24		$	0.37

Web.com Group, Inc.

Reconciliation of GAAP to Non-GAAP Results

(in thousands except per share data)

(unaudited)

(continued)

	Three months ended June 30,						Six months ended June 30,
	2010			2009			2010			2009

Reconciliation of GAAP operating (loss) income to non-GAAP operating income

GAAP operating (loss) income	$	(1,649	)	$	290		$	(1,964	)	$	1,035
Amortization of intangibles		2,664			2,687			5,283			5,301
Stock based compensation		1,200			1,196			2,205			2,519
Restructuring charges		(6	)		—			54			—
Corporate development		909			—			909			—
Fair value adjustment to deferred revenue		5			17			16			50
Non-GAAP operating income	$	3,123		$	4,190		$	6,503		$	8,905

Reconciliation of GAAP operating margin to non-GAAP operating margin

GAAP operating margin		-7	%		1	%		-4	%		2	%
Amortization of intangibles		11	%		10	%		11	%		10	%
Stock based compensation		5	%		5	%		4	%		4	%
Restructuring charges		0	%		0	%		0	%		0	%
Corporate development		4	%		0	%		2	%		0	%
Fair value adjustment to deferred revenue		0	%		0	%		0	%		0	%
Non-GAAP operating margin		13	%		16	%		13	%		16	%

Reconciliation of GAAP operating (loss) income to adjusted EBITDA

GAAP operating (loss) income	$	(1,649	)	$	290		$	(1,964	)	$	1,035
Depreciation and amortization		3,313			3,441			6,593			6,790
Stock based compensation		1,200			1,196			2,205			2,519
Restructuring charges		(6	)		—			54			—
Corporate development		909			—			909			—
Adjusted EBITDA	$	3,767		$	4,927		$	7,797		$	10,344

Off-Balance Sheet Arrangements

As of June 30, 2010 and June 30, 2009, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Summary

Our future capital uses and requirements depend on numerous forward-looking factors. These factors include but are not limited to the following:

•

the costs involved in the expansion of our customer base;

•

the costs associated with the principal and interest payments of future debt service;

•

the costs involved with investment in our servers, storage and network capacity;

•

the costs associated with the expansion of our domestic and international activities;

•

the costs associated with the repurchase of our common stock;

•

the costs involved with our research and development activities to upgrade and expand our service offerings; and

•

the extent to which we acquire or invest in other technologies and businesses.

We believe that our existing cash and cash equivalents will be sufficient to meet our projected operating requirements for at least the next 12 months, including our sales and marketing expenses, research and development expenses, and capital expenditures.

We believe that there has been no change in our financial condition since December 31, 2009.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Canadian Dollar. The majority of our subscription agreements are denominated in U.S. dollars. The majority of our expenses are denominated in U.S. dollars; however, with the acquisition of Register.com, we will have more significant expenses denominated in the Canadian dollar. To date, we have not entered into any hedging contracts since exchange rate fluctuations have had little impact on our operating results and cash flows. We will analyze our exposure to currency fluctuations and may engage in financial hedging techniques in the future to reduce the effect of these potential fluctuations.

Interest Rate Sensitivity

We had unrestricted cash and cash equivalents totaling $42.8 million and $39.4 million at June 30, 2010 and December 31, 2009, respectively. These amounts were invested primarily in money market funds. The unrestricted cash, cash equivalents and short-term marketable securities are held for working capital purposes. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these investments, we do not anticipate that the interest rates will materially fluctuate therefore; we believe we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, will reduce future investment income.

As a result of the acquisition of Register.com, we have entered into debt financing arrangements totaling $115 million. During the next quarter, we expect to enter into debt financing arrangements using a floating interest rate based on LIBOR plus 4.5%. We have an exposure to market risk for changes in interest rates related to these borrowings. In the future, we expect to evaluate the use of interest rate hedging to mitigate the risk of fluctuating interest rates.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.

Based on their evaluation as of June 30, 2010, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective at the reasonable assurance level to ensure that the information required to be disclosed by us in this quarterly report on Form 10-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules, and that such information is accumulated and communicated to us to allow timely decisions regarding required disclosures.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

Changes in Internal Controls Over Financial Reporting.

There have been no changes in our internal controls over financial reporting during the three months ended June 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

We and our subsidiaries are named from time to time as defendants in various legal actions that are incidental to our business and arise out of or are related to claims made in connection with our customer and vender contracts and employment related disputes. We believe that the resolution of these legal actions will not have a material adverse effect on our financial position or results of operations.

Item 1A. Risk Factors.

Factors That May Affect Future Operating Results

In addition to the risks discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” our business is subject to the risks set forth below.

Depressed general economic conditions or adverse changes in general economic conditions could adversely affect our operating results. If economic or other factors negatively affect the small business sector, our customers may become unwilling or unable to purchase our Web services and products, which could cause our revenue to decline and impair our ability to operate profitably.

We have become increasingly subject to the risks arising from adverse changes in domestic and global economic conditions. Uncertainty about future economic conditions makes it difficult for us to forecast operating results and to make decisions about future investments. For example, the direction and relative strength of the global economy has recently been increasingly uncertain due to softness in the residential real estate and mortgage markets, volatility in fuel and other energy costs, difficulties in the financial services sector and credit markets, continuing geopolitical uncertainties and other macroeconomic factors affecting spending behavior. If economic growth in the United States is slowed, or if other adverse general economic changes occur or continue, many customers may delay or reduce technology purchases or marketing spending. This could result in reductions in sales of our Web services and products, longer sales cycles, and increased price competition.

Our existing and target customers are small businesses. We believe these businesses are more likely to be significantly affected by economic downturns than larger, more established businesses. For instance, the current global financial crisis affecting the banking system and financial markets and the possibility that financial institutions may consolidate or go out of business have resulted in a tightening in the credit markets, which could limit our customers’ access to credit. Additionally, these customers often have limited discretionary funds, which they may choose to spend on items other than our Web services and products. If small businesses experience economic hardship, or if they behave more conservatively in light of the general economic environment, they may be unwilling or unable to expend resources to develop their online presences, which would negatively affect the overall demand for our services and products and could cause our revenue to decline.

We may find it difficult to integrate recent and potential future business combinations, which could disrupt our business, dilute stockholder value, and adversely affect our operating results.

During the course of our history, we have completed several acquisitions of other businesses, and a key element of our strategy is to continue to acquire other businesses in the future. Most recently, we completed the acquisition of Register.com in July 2010, our largest acquisition to date. Integrating Register.com, or any businesses or assets we may acquire in the future could add significant complexity to our business and additional burdens to the substantial tasks already performed by our management team. In the future, we may not be able to identify suitable acquisition candidates, and if we do, we may not be able to complete these acquisitions on acceptable terms or at all. In connection with our recent and possible future acquisitions, we may need to integrate operations that have different and unfamiliar corporate cultures. Likewise, we may need to integrate disparate technologies and Web service and product offerings, as well as multiple direct and indirect sales channels. The key personnel of the acquired company may decide not to continue to work for us. These integration efforts may not succeed or may distract our management’s attention from existing business operations. Our failure to successfully manage and integrate these current acquisitions, or any future acquisitions could seriously harm our business.

We may not realize the anticipated benefits from an acquisition.

Acquisitions involve the integration of companies that have previously operated independently. We expect that acquisitions may result in financial and operational benefits, including increased revenue, cost savings and other financial and operating benefits. We cannot be certain, however, that we will be able to realize increased revenue, cost savings or other benefits from any acquisition, or, to the extent such benefits are realized, that they are realized timely. Integration may also be difficult, unpredictable, and subject to delay because of possible cultural conflicts and different opinions on product roadmaps or other strategic matters. We may integrate or, in some cases, replace, numerous systems, including those involving management information, purchasing, accounting and finance, sales, billing, employee benefits, payroll and regulatory compliance, many of which may be dissimilar. Difficulties associated with integrating an acquisition’s service and product offering into ours, or with integrating an acquisition’s operations into ours, could have a material adverse effect on the combined company and the market price of our common stock.

In the future, we may be unable to generate sufficient cash flow to satisfy our debt service obligations.

In July 2010, we secured debt financing totaling $110 million, all of the proceeds of which were used to complete the acquisition of Register.com. Our ability to generate cash flow from operations to make principal and interest payments on our debt will depend on our future performance, which will be affected by a range of economic, competitive and business factors. If our operations do not generate sufficient cash flow from operations to satisfy our debt service obligations, we may need to seek additional capital to make these payments or undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets or reducing or delaying capital investments and acquisitions. We cannot assure you that such additional capital or alternative financing will be available on favorable terms, if at all. Our inability to generate sufficient cash flow from operations or obtain additional capital or alternative financing on acceptable terms could have a material adverse effect on our business, financial condition and results of operations.

Most of our Web services are sold on a month-to-month basis, and if our customers are unable or choose not to subscribe to our Web services, our revenue may decrease.

Typically, our Web service offerings are sold pursuant to month-to-month subscription agreements, and our customers can generally cancel their subscriptions to our Web services at any time with little or no penalty.

Historically, we have experienced a high turnover rate in our customer base. For the years ended December 31, 2009 and 2008, 39% and 46%, respectively, of our subscribers who were customers at the beginning of the respective year were no longer subscribers at the end of the respective year. For the six months ended June 30, 2010 and 2009, 9% and 22%, respectively, of our subscribers who were customers at the beginning of the respective period were no longer subscribers at the end of the period. The turnover rate calculations do not include any acquisition related customer activity.

While we cannot determine with certainty why our subscription renewal rates are not higher, we believe there are a variety of factors, which have in the past led, and may in the future lead, to a decline in our subscription renewal rates. These factors include the cessation of our customers’ businesses, the overall economic environment in the United States and its impact on small businesses, the services and prices offered by us and our competitors, and the evolving use of the Internet by small businesses. If our renewal rates are low or decline for any reason, or if customers demand renewal terms less favorable to us, our revenue may decrease, which could adversely affect our stock price.

Our growth will be adversely affected if we cannot continue to successfully retain, hire, train, and manage our key employees, particularly in the telesales and customer service areas.

Our ability to successfully pursue our growth strategy will depend on our ability to attract, retain, and motivate key employees across our business. We have many key employees throughout our organization that do not have non-competition agreements and may leave to work for a competitor at any time. In particular, we are substantially dependent on our telesales and customer service employees to obtain and service new customers. Competition for such personnel and others can be intense, and there can be no assurance that we will be able to attract, integrate, or retain additional highly qualified personnel in the future. In addition, our ability to achieve significant growth in revenue will depend, in large part, on our success in effectively training sufficient personnel in these two areas. New hires require significant training and in some cases may take several months before they achieve full productivity, if they ever do. Our recent hires and planned hires may not become as productive as we would like, and we may be unable to hire sufficient numbers of qualified individuals in the future in the markets where we have our facilities. If we are not successful in retaining our existing employees, or hiring, training and integrating new employees, or if our current or future employees perform poorly, growth in the sales of our services and products may not materialize and our business will suffer.

Charges to earnings resulting from acquisitions may adversely affect our operating results.

Under purchase accounting, we allocate the total purchase price to an acquired company’s net tangible assets, intangible assets based on their fair values as of the date of the acquisition and record the excess of the purchase price over those fair values as goodwill. Our management’s estimates of fair value are based upon assumptions believed to be reasonable but are inherently uncertain. Going forward, the following factors could result in material charges that would adversely affect our results:

•

impairment of goodwill;

•

charges for the amortization of identifiable intangible assets and for stock-based compensation;

•

accrual of newly identified pre-merger contingent liabilities that are identified subsequent to the finalization of the purchase price allocation; and

•

charges to income to eliminate certain of our pre-merger activities that duplicate those of the acquired company or to reduce our cost structure.

Additional costs may include costs of employee redeployment, relocation and retention, including salary increases or bonuses, accelerated amortization of deferred equity compensation and severance payments, reorganization or closure of facilities, taxes and termination of contracts that provide redundant or conflicting services. Some of these costs may have to be accounted for as expenses that would decrease our net income and earnings per share for the periods in which those adjustments are made.

Though we were profitable for the years ended December 31, 2005, 2006, 2007 and 2009, we were not profitable for the year ended December 31, 2008 and we may not become or stay profitable in the future.

Although we generated net income for the years ended December 31, 2005, 2006, and 2007 and 2009, we have not historically been profitable, were not profitable for the year ended December 31, 2008, and may not be profitable in future periods. As of June 30, 2010, we had an accumulated deficit of approximately $153.8 million. We expect that our expenses relating to the sale and marketing of our Web services, technology improvements and general and administrative functions, as well as the costs of operating and maintaining our technology infrastructure, will increase in the future. Accordingly, we will need to increase our revenue to be able to again achieve and, if achieved, to later maintain profitability. We may not be able to reduce in a timely manner or maintain our expenses in response to any decrease in our revenue, and our failure to do so would adversely affect our operating results and our level of profitability.

We may expand through acquisitions of, or investments in, other companies or technologies, which may result in additional dilution to our stockholders and consume resources that may be necessary to sustain our business.

One of our business strategies is to acquire complementary services, technologies or businesses. In connection with one or more of those transactions, we may:

•

issue additional equity securities that would dilute our stockholders;

•

use cash that we may need in the future to operate our business; and

•

incur debt that could have terms unfavorable to us or that we might be unable to repay.

Business acquisitions also involve the risk of unknown liabilities associated with the acquired business. In addition, we may not realize the anticipated benefits of any acquisition, including securing the services of key employees. Incurring unknown liabilities or the failure to realize the anticipated benefits of an acquisition could seriously harm our business.

We depend on our strategic marketing relationships to identify prospective customers. The loss of several of our strategic marketing relationships, or a reduction in the referrals and leads they generate, would significantly reduce our future revenue and increase our expenses.

As a key part of our strategy, we have entered into agreements with a number of companies pursuant to which these parties provide us with access to their customer lists and allow us to use their names in marketing our Web services and products. Approximately 10% of our new customers in the year ended December 31, 2009 and approximately 19% of our new customers in the six months ended June 30, 2010, were identified through our strategic marketing relationships. We believe these strategic marketing relationships are critical to our business because they enable us to penetrate our target market with a minimum expenditure of resources. If these strategic marketing relationships are terminated or otherwise fail, our revenue would likely decline significantly and we could be required to devote additional resources to the sale and marketing of our Web services and products. We have no long-term contracts with these organizations, and these organizations are generally not restricted from working with our competitors. Accordingly, our success will depend upon the willingness of these organizations to continue these strategic marketing relationships.

To successfully execute our business plan, we must also establish new strategic marketing relationships with additional organizations that have strong relationships with small businesses that would enable us to identify additional prospective customers. If we are unable to diversify and extend our strategic marketing relationships, our ability to grow our business may be compromised.

Our operating results are difficult to predict and fluctuations in our performance may result in volatility in the market price of our common stock.

Due to our limited operating history, our evolving business model, and the unpredictability of our emerging industry, our operating results are difficult to predict. We expect to experience fluctuations in our operating and financial results due to a number of factors, such as:

•

our ability to retain and increase sales to existing customers, attract new customers, and satisfy our customers’ requirements;

•

the renewal rates for our services;

•

changes in our pricing policies;

•

the introduction of new services and products by us or our competitors;

•

our ability to hire, train and retain members of our sales force;

•

the rate of expansion and effectiveness of our sales force;

•

technical difficulties or interruptions in our services;

•

general economic conditions;

•

additional investment in our services or operations;

•

ability to successfully integrate acquired businesses and technologies; and

•

our success in maintaining and adding strategic marketing relationships.

These factors and others all tend to make the timing and amount of our revenue unpredictable and may lead to greater period-to-period fluctuations in revenue than we have experienced historically.

As a result of these factors, and in light of current global and U.S. economic conditions, we believe that our quarterly revenue and results of operations are likely to vary significantly in the future and that period-to-period comparisons of our operating results may not be meaningful. The results of one quarter may not be relied on as an indication of future performance. If our quarterly revenue or results of operations fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.

Our business depends in part on our ability to continue to provide value-added Web services and products, many of which we provide through agreements with third parties, and our business will be harmed if we are unable to provide these Web services and products in a cost-effective manner.

A key element of our strategy is to combine a variety of functionalities in our Web service offerings to provide our customers with comprehensive solutions to their online presence needs, such as Internet search optimization, local yellow pages listings, and eCommerce capability. We provide many of these services through arrangements with third parties, and our continued ability to obtain and provide these services at a low cost is central to the success of our business. For example, we currently have agreements with several service providers that enable us to provide, at a low cost, Internet yellow pages advertising. However, these agreements may be terminated on short notice, typically 60 to 90 days, and without penalty. If any of these third parties were to terminate their relationships with us, or to modify the economic terms of these arrangements, we could lose our ability to provide these services at a cost-effective price to our customers, which could cause our revenue to decline or our costs to increase.

We have a risk of system and Internet failures, which could harm our reputation, cause our customers to seek reimbursement for services paid for and not received, and cause our customers to seek another provider for services.

We must be able to operate the systems that manage our network around the clock without interruption. Its operations will depend upon our ability to protect its network infrastructure, equipment, and customer files against damage from human error, fire, earthquakes, hurricanes, floods, power loss, telecommunications failures, sabotage, intentional acts of vandalism and similar events. Our networks are currently subject to various points of failure. For example, a problem with one of our routers (devices that move information from one computer network to another) or switches could cause an interruption in the services that we provide to some or all of our customers. In the past, we have experienced periodic interruptions in service. We have also experienced, and in the future we may continue to experience, delays or interruptions in service as a result of the accidental or intentional actions of Internet users, current and former employees, or others. Any future interruptions could:

Cause customers or end users to seek damages for losses incurred;

Require the Company to replace existing equipment or add redundant facilities;

Damage the Company’s reputation for reliable service;

Cause existing customers to cancel their contracts; or

Make it more difficult for the Company to attract new customers.

Our data centers are maintained by third parties. A disruption in the ability of one of these service providers to provide service to us could cause a disruption in service to our customers.

A substantial portion of the network services and computer servers we utilize in the provision of services to customers are housed in data centers owned by other service providers. In particular, a significant number of our servers are housed in data centers in Atlanta, Georgia, Jacksonville, Florida, and Ontario, Canada. We obtain Internet connectivity for those servers, and for the customers who rely on those servers, in part through direct arrangements with network service providers and in part indirectly through the owners of those data centers. We also utilize other third-party data centers in other locations. In the future, we may house other servers and hardware items in facilities owned or operated by other service providers.

A disruption in the ability of one of these service providers to provide service to us could cause a disruption in service to our customers. A service provider could be disrupted in its operations through a number of contingencies, including unauthorized access, computer viruses, accidental or intentional actions, electrical disruptions, and other extreme conditions. Although we believe we have taken adequate steps to protect our business through contractual arrangements with our service providers, we cannot eliminate the risk of a disruption in service resulting from the accidental or intentional disruption in service by a service provider. Any significant disruption could cause significant harm to us, including a significant loss of customers. In addition, a service provider could raise its prices or otherwise change its terms and conditions in a way that adversely affects our ability to support our customers or could result in a decrease in our financial performance.

We rely heavily on the reliability, security, and performance of our internally developed systems and operations, and any difficulties in maintaining these systems may result in service interruptions, decreased customer service, or increased expenditures.

The software and workflow processes that underlie our ability to deliver our Web services and products have been developed primarily by our own employees. The reliability and continuous availability of these internal systems are critical to our business, and any interruptions that result in our inability to timely deliver our Web services or products, or that materially impact the efficiency or cost with which we provide these Web services and products, would harm our reputation, profitability, and ability to conduct business. In addition, many of the software systems we currently use will need to be enhanced over time or replaced with equivalent commercial products, either of which could entail considerable effort and expense. If we fail to develop and execute reliable policies, procedures, and tools to operate our infrastructure, we could face a substantial decrease in workflow efficiency and increased costs, as well as a decline in our revenue.

Our failure to build brand awareness quickly could compromise our ability to compete and to grow our business.

As a result of the anticipated increase in competition in our market, and the likelihood that some of this competition will come from companies with established brands, we believe brand name recognition and reputation will become increasingly important. Our strategy of relying significantly on third-party strategic marketing relationships to find new customers may impede our ability to build brand awareness, as our customers may wrongly believe our Web services and products are those of the parties with which we have strategic marketing relationships. If we do not continue to build brand awareness quickly, we could be placed at a competitive disadvantage to companies whose brands are more recognizable than ours.

We face intense and growing competition. If we are unable to compete successfully, our business will be seriously harmed.

The market for our Web services and products is competitive and has relatively low barriers to entry. Our competitors vary in size and in the variety of services they offer. We encounter competition from a wide variety of company types, including:

•

Website design and development service and software companies;

•

Internet service providers and application service providers;

•

Internet search engine providers;

•

Local business directory providers; and

•

Website domain name providers and hosting companies

•

eCommerce platform and service providers.

In addition, due to relatively low barriers to entry in our industry, we expect the intensity of competition to increase in the future from other established and emerging companies. Increased competition may result in price reductions, reduced gross margins, and loss of market share, any one of which could seriously harm our business. We also expect that competition will increase as a result of industry consolidations and formations of alliances among industry participants.

Many of our current and potential competitors have longer operating histories, significantly greater financial, technical, marketing and other resources, greater brand recognition and, we believe, a larger installed base of customers. These competitors may be able to adapt more quickly to new or emerging technologies and changes in customer requirements. They may also be able to devote greater resources to the promotion and sale of their services and products than we can. If we fail to compete successfully against current or future competitors, our revenue could increase less than anticipated or decline, and our business could be harmed.

If our security measures are breached, our services may be perceived as not being secure, and our business and reputation could suffer.

Our Web services involve the storage and transmission of our customers’ proprietary information. Although we employ data encryption processes, an intrusion detection system, and other internal control procedures to assure the security of our customers’ data, we cannot guarantee that these measures will be sufficient for this purpose. If our security measures are breached as a result of third-party action, employee error or otherwise, and as a result our customers’ data becomes available to unauthorized parties, we could incur liability and our reputation would be damaged, which could lead to the loss of current and potential customers. If we experience any breaches of our network security or sabotage, we might be required to expend significant capital and other resources to remedy, protect against or alleviate these and related problems, and we may not be able to remedy these problems in a timely manner, or at all. Because techniques used by outsiders to obtain unauthorized network access or to sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.

If we cannot adapt to technological advances, our Web services and products may become obsolete and our ability to compete would be impaired.

Changes in our industry occur very rapidly, including changes in the way the Internet operates or is used by small businesses and their customers. As a result, our Web services and products could become obsolete quickly. The introduction of competing products employing new technologies and the evolution of new industry standards could render our existing products or services obsolete and unmarketable. To be successful, our Web services and products must keep pace with technological developments and evolving industry standards, address the ever-changing and increasingly sophisticated needs of our customers, and achieve market acceptance. If we are unable to develop new Web services or products, or enhancements to our Web services or products, on a timely and cost-effective basis, or if new Web services or products or enhancements do not achieve market acceptance, our business would be seriously harmed.

Providing Web services and products to small businesses designed to allow them to Internet-enable their businesses is a new and emerging market; if this market fails to develop, we will not be able to grow our business.

Our success depends on a significant number of small business outsourcing website design, hosting, and management as well as adopting other online business solutions. The market for our Web services and products is relatively new and untested. Custom website development has been the predominant method of Internet enablement, and small businesses may be slow to adopt our template-based Web services and products. Further, if small businesses determine that having an online presence is not giving their businesses an advantage, they would be less likely to purchase our Web services and products. If the market for our Web services and products fails to grow or grows more slowly than we currently anticipate, or if our Web services and products fail to achieve widespread customer acceptance, our business would be seriously harmed.

We are dependent on our executive officers, and the loss of any key member of this team may compromise our ability to successfully manage our business and pursue our growth strategy.

Our future performance depends largely on the continuing service of our executive officers and senior management team, especially those of David Brown, our Chief Executive Officer. Our executives are not contractually obligated to remain employed by us. Accordingly, any of our key employees could terminate their employment with us at any time without penalty and may go to work for one or more of our competitors after the expiration of their non-compete period. The loss of one or more of our executive officers could make it more difficult for us to pursue our business goals and could seriously harm our business.

Any growth could strain our resources and our business may suffer if we fail to implement appropriate controls and procedures to manage our growth.

Growth in our business may place a strain on our management, administrative, and sales and marketing infrastructure. If we fail to successfully manage our growth, our business could be disrupted, and our ability to operate our business profitably could suffer. Growth in our employee base may be required to expand our customer base and to continue to develop and enhance our Web service and product offerings. To manage growth of our operations and personnel, we would need to enhance our operational, financial, and management controls and our reporting systems and procedures. This would require additional personnel and capital investments, which would increase our cost base. The growth in our fixed cost base may make it more difficult for us to reduce expenses in the short term to offset any shortfalls in revenue.

We may be unable to protect our intellectual property adequately or cost-effectively, which may cause us to lose market share or force us to reduce our prices.

Our success depends, in part, on our ability to protect and preserve the proprietary aspects of our technology, Web services, and products. If we are unable to protect our intellectual property, our competitors could use our intellectual property to market services and products similar to those offered by us, which could decrease demand for our Web services and products. We may be unable to prevent third parties from using our proprietary assets without our authorization. While we do rely on patents acquired from the Web.com acquisition, we do not currently rely on patents to protect all of our core intellectual property. To protect, control access to, and limit distribution of our intellectual property, we generally enter into confidentiality and proprietary inventions agreements with our employees, and confidentiality or license agreements with consultants, third-party developers, and customers. We also rely on copyright, trademark, and trade secret protection. However, these measures afford only limited protection and may be inadequate. Enforcing our rights to our technology could be costly, time-consuming and distracting. Additionally, others may develop non-infringing technologies that are similar or superior to ours. Any significant failure or inability to adequately protect our proprietary assets will harm our business and reduce our ability to compete.

If we fail to maintain an effective system of internal controls, we may not be able to accurately or timely report our financial results, which could cause our stock price to fall or result in our stock being delisted.

Effective internal controls are necessary for us to provide reliable and accurate financial reports. We will need to devote significant resources and time to comply with the requirements of Sarbanes-Oxley with respect to internal control over financial reporting. In addition, Section 404 under Sarbanes-Oxley requires that we assess and our auditors attest to the design and operating effectiveness of our controls over financial reporting. Our ability to comply with the annual internal control report requirement for our fiscal year ending on December 31, 2010 will depend on the effectiveness of our financial reporting and data systems and controls across our company and our operating subsidiaries. We expect these systems and controls to become increasingly complex to the extent that we integrate acquisitions and our business grows. To effectively manage this complexity, we will need to continue to improve our operational, financial, and management controls and our reporting systems and procedures. Any failure to implement required new or improved controls, or difficulties encountered in the implementation or operation of these controls, could harm our operating results or cause us to fail to meet our financial reporting obligations, which could adversely affect our business and jeopardize our listing on the NASDAQ Global Market, either of which would harm our stock price.

We might require additional capital to support business growth, and this capital might not be available on acceptable terms, or at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new services and products or enhance our existing Web services, enhance our operating infrastructure and acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. For example, as a result of the acquisition of Register.com, we have entered into debt arrangements for a total of $115 million. Financial market disruption and general economic conditions in which the credit markets are severely constrained and the depressed equity markets may make it difficult for us to obtain additional financing on terms favorable to us, if at all . If we raise additional funds through further issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing secured by us in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired.

Provisions in our amended and restated certificate of incorporation and bylaws or under Delaware law might discourage, delay, or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Our amended and restated certificate of incorporation and bylaws contain provisions that could depress the trading price of our common stock by acting to discourage, delay, or prevent a change of control of our company or changes in our management that the stockholders of our company may deem advantageous. These provisions:

•

establish a classified board of directors so that not all members of our board are elected at one time;

•

provide that directors may only be removed for cause and only with the approval of 66 2 /3% of our stockholders;

•

require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and bylaws;

•

authorize the issuance of blank check preferred stock that our board of directors could issue to increase the number of outstanding shares to discourage a takeover attempt;

•

prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

•

provide that the board of directors is expressly authorized to make, alter, or repeal our bylaws; and

•

establish advance notice requirements for nominations for elections to our board or for proposing matters that can be acted upon by stockholders at stockholder meetings.

Additionally, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder and which may discourage, delay, or prevent a change of control of our company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Issuer Purchases of Equity Securities

On September 4, 2008, we announced that our Board of Directors authorized the repurchase of up to $20 million of the Company’s outstanding common shares over the next eighteen months. On March 3, 2010, the Board of Directors extended the repurchase program for an additional twelve months. The timing, price and volume of repurchases will be based on market conditions, liquidity, relevant securities laws and other factors. The Company may terminate the repurchase program at any time without notice. During the quarter ended June 30, 2010, the Company did not repurchase any shares.

Item 3.

Defaults Upon Senior Securities.

Not applicable.

Item 4.

(Removed and Reserved).

Item 5.

Other Information.

Not applicable.

Item 6.

Exhibits.

Exhibit No.		Description of Document
2.2		Purchase Agreement, among the Company, Register.com GP (Cayman) Ltd., each seller named therein and Register.com (Cayman) Limited Partnership, dated June 17, 2010 (pursuant to Item 601(b)(2) of Regulation S-K, schedules to the Purchase Agreement have been omitted; they will be supplementally provided to the SEC upon request).

3.1		Amended and Restated Certificate of Incorporation of Web.com Group, Inc. (1)

3.2		Amended and Restated Bylaws of Web.com Group, Inc. (2)

3.3		Certificate of Ownership and Merger of Registration (3)

4.1		Reference is made to Exhibits 3.1 and 3.2

4.2		Specimen Stock Certificate. (3)

31.1		CEO Certification required by Rule 13a-14(a) or Rule 15d-14(a).

31.2		CFO Certification required by Rule 13a-14(a) or Rule 15d-14(a).

32.1		Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350). (5)

(1)	Filed as an Exhibit to the Registrant’s registration statement on Form S-1 (No. 333-124349), filed with the SEC on April 27, 2005, as amended, and incorporated herein by reference.

(2)	Filed as an Exhibit to the Registrant’s current report on Form 8-K (000-51595), filed with the SEC on February 10, 2009, and incorporated herein by reference.

(3)	Filed as an Exhibit to the Registrant’s current report on Form 8-K (000-51595), filed with the SEC on October 30, 2008, and incorporated herein by reference.

(4)

The certification attached as Exhibit 32.1 accompanying this Quarterly Report on Form 10-Q, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Web.com Group, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Web.com Group, Inc.
		(Registrant)

August 4, 2010		/s/ K evin M. C arney
Date		Kevin M. Carney Chief Financial Officer (Principal Financial and Accounting Officer)

I NDEX OF E XHIBITS

Exhibit No.		Description of Document
2.2		Purchase Agreement, among the Company, Register.com GP (Cayman) Ltd., each seller named therein and Register.com (Cayman) Limited Partnership, dated June 17, 2010 (pursuant to Item 601(b)(2) of Regulation S-K, schedules to the Purchase Agreement have been omitted; they will be supplementally provided to the SEC upon request).

3.1		Amended and Restated Certificate of Incorporation of Web.com Group, Inc. (1)

3.2		Amended and Restated Bylaws of Web.com Group, Inc. (2)

3.3		Certificate of ownership and Merger of Registrant. (3)

4.1		Reference is made to Exhibits 3.1 and 3.2

4.2		Specimen Stock Certificate. (3)

31.1		CEO Certification required by Rule 13a-14(a) or Rule 15d-14(a).

31.2		CFO Certification required by Rule 13a-14(a) or Rule 15d-14(a).

32.1		Certification required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350). (5)

+ Indicates management contract or compensatory plan.

(1)	Filed as an Exhibit to the Registrant’s registration statement on Form S-1 (No. 333-124349), filed with the SEC on April 27, 2005, as amended, and incorporated herein by reference.

(2)	Filed as an Exhibit to the Registrant’s current report on Form 8-K (000-51595), filed with the SEC on February 10, 2009, and incorporated herein by reference.

(3)	Filed as an Exhibit to the Registrant’s current report on Form 8-K (000-51595), filed with the SEC on October 30, 2008, and incorporated herein by reference.

(4)

The certification attached as Exhibits 32.1 accompanying this Quarterly Report on Form 10-Q, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Web.com Group, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

Delaware		94-3327894
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12808 Gran Bay Parkway, West, Jacksonville, FL		32258
(Address of principal executive offices)		(Zip Code)

Large accelerated filer ¨		Accelerated filer x
Non-accelerated filer ¨		Smaller reporting company ¨
(Do not check if a smaller reporting company)

	June 30, 2010			December 31, 2009
	(unaudited)			(audited)
Assets
Current assets:
Cash and cash equivalents	$	42,809		$	39,427
Restricted investments		546			545
Accounts receivable, net of allowance of $344 and $428, respectively		3,435			4,561
Prepaid expenses		1,490			1,780
Prepaid marketing fees		487			535
Deferred taxes		961			1,482
Other current assets		90			95
Total current assets		49,818			48,425
Restricted investments		928			927
Property and equipment, net		6,895			7,388
Goodwill		12,881			12,895
Intangible assets, net		49,262			53,059
Other assets		110			191
Total assets	$	119,894		$	122,885

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,182		$	1,306
Accrued expenses		5,714			6,931
Accrued restructuring costs and other reserves		271			1,064
Deferred revenue		5,762			6,172
Accrued marketing fees		243			259
Capital lease obligations		160			223
Other liabilities		192			299
Total current liabilities		13,524			16,254
Accrued rent expense		758			676
Deferred revenue		139			159
Capital lease obligations		133			198
Deferred tax liabilities		1,429			1,429
Other long-term liabilities		408			473
Total liabilities		16,391			19,189

Stockholders’ equity:
Common stock, $0.001 par value; 150,000,000 shares authorized, 27,758,690 and 27,796,824 shares issued and 26,621,105 and 26,176,967 outstanding at June 30, 2010 and December 31, 2009, respectively		27			26
Additional paid-in capital		261,557			260,552
Treasury Stock, 1,137,585 and 1,619,857 shares at June 30, 2010 and December 31, 2009, respectively		(4,239	)		(5,477	)
Accumulated deficit		(153,842	)		(151,405	)
Total stockholders’ equity		103,503			103,696
Total liabilities and stockholders’ equity	$	119,894		$	122,885

	Six months ended June 30,
	2010			2009
Cash flows from operating activities
Net (loss) income	$	(2,437	)	$	2,147
Adjustments to reconcile net income to net cash provided by operating activities:
Gain on sale of discontinued operations, net of cash		(125	)		(822	)
Depreciation and amortization		6,593			6,790
Stock-based compensation expense		2,205			2,519
Restructuring costs		54			—
Deferred income taxes		521			36
Changes in operating assets and liabilities:
Accounts receivable		1,121			565
Prepaid expenses and other assets		425			(259	)
Accounts payable, accrued expenses and other liabilities		(2,326	)		(1,976	)
Deferred revenue		(511	)		(900	)
Net cash provided by operating activities		5,520			8,100

Cash flows from investing activities
Business acquisitions		—			(3,490	)
Proceeds from gain on sale of discontinued operations		125			822
Change in restricted investments		(1	)		—
Purchase of property and equipment		(777	)		(510	)
Investment in intangible assets		(1,396	)		(3	)
Net cash used in investing activities		(2,049	)		(3,181	)

Cash flows from financing activities
Stock issuance costs		(7	)		(8	)
Common stock repurchased		(53	)		(3,534	)
Payments of debt obligations		(128	)		(165	)
Proceeds from exercise of stock options and other		99			215
Net cash used in financing activities		(89	)		(3,492	)

Net increase in cash and cash equivalents		3,382			1,427
Cash and cash equivalents, beginning of period		39,427			34,127
Cash and cash equivalents, end of period	$	42,809		$	35,554

Supplemental cash flow information
Interest paid	$	18		$	13
Income taxes paid	$	98		$	226

Tangible current assets	$	618
Tangible non-current assets		946
Developed technology		331
Customer relationships		277
Non-compete		71
Domain name		748
Goodwill		3,656
Current liabilities		(1,992	)
Non-current liabilities		(667	)
Net assets acquired	$	3,988

Part I	Financial Information	3

Item 1.	Financial Statements (unaudited)	3

	Consolidated Statements of Operations	3

	Consolidated Balance Sheets	5

	Consolidated Statements of Cash Flows	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

Part II	Other Information	33

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40

Item 3.	Defaults Upon Senior Securities	41

Item 4.	(Removed and Reserved)	41

Item 5.	Other Information	41

Item 6.	Exhibits	42

Signatures		43

	Three months ended						Six months ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Revenue:
Subscription	$	23,957		$	25,438		$	48,438		$	51,456
Professional services		820			1,037			1,468			1,590
Other		—			—			—			1,000
Total revenue		24,777			26,475			49,906			54,046
Cost of revenue (excluding depreciation and amortization shown separately below):
Subscription		9,652			9,413			19,686			18,721
Professional services		485			575			963			876
Total cost of revenue		10,137			9,988			20,649			19,597
Gross profit		14,640			16,487			29,257			34,449
Operating expenses:
Sales and marketing		5,185			5,881			10,731			11,645
Research and development		2,225			2,086			4,496			4,128
General and administrative		5,572			4,789			9,347			10,851
Restructuring charges (credits)		(6	)		—			54			—
Depreciation and amortization		3,313			3,441			6,593			6,790
Total operating expenses		16,289			16,197			31,221			33,414
(Loss) income from operations		(1,649	)		290			(1,964	)		1,035
Interest income, net		58			43			98			105
(Loss) income before income taxes from continuing operations		(1,591	)		333			(1,866	)		1,140
Income tax expense		(217	)		(26	)		(687	)		(43	)
Net (loss) income from continuing operations		(1,808	)		307			(2,553	)		1,097
Discontinued operations
Income (loss) from discontinued operations, net of tax		—			95			(9	)		228
Gain on sale of discontinued operations, net of tax		125			822			125			822
Income from discontinued operations, net of tax		125			917			116			1,050
Net (loss) income	$	(1,683	)	$	1,224		$	(2,437	)	$	2,147

	June 30, 2010			December 31, 2009
Goodwill balance at beginning of period	$	115,189		$	111,294
Accumulated impaired goodwill at beginning of period		(102,294	)		(102,294	)
Goodwill balance at beginning of period, net		12,895			9,000
Goodwill acquired during the period		—			3,895
Goodwill adjusted during the period		(14	)		—
Goodwill balance at end of period		115,175			115,189
Accumulated impaired goodwill balance at end of period		(102,294	)		(102,294	)
Goodwill balance at end of period, net	$	12,881		$	12,895

	June 30, 2010			December 31, 2009			Weighted-average Amortization period
Indefinite-lived intangible assets:
Domain/Trade names	$	13,880		$	13,880
Definite lived intangible assets:
Non-compete agreements		3,408			3,408		9 months
Customer relationships		34,507			33,021		49 months
Developed technology		29,203			29,203		38 months
Other		100			98
Accumulated amortization		(31,836	)		(26,551	)
	$	49,262		$	53,059

2010 (remainder of year)	$	5,157
2011		9,949
2012		9,621
2013		7,533
2014		3,122
Total	$	35,382

	Balance as of December 31, 2009		Additions		Cash Payments			Change in Estimates		Balance as of June 30, 2010
Restructuring costs	$	418	$	24	$	(268	)	$	—	$	174
Employee Termination Benefits		186		30		(202	)		—		14
Merger related costs		460		—		(377	)		—		83
Balance	$	1,064	$	54	$	(847	)	$	—	$	271

	Six months ended June 30,
	2010			2009
Risk-free interest rate		1.78-2.75	%		1.36-2.95	%
Dividend yield		0	%		0	%
Expected life (in years)		5			5
Volatility		60-61	%		62-64	%

	Shares Covered by Options			Exercise Price per Share	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Balance, December 31, 2009		6,747,438		$0.50 to $185.46	$	6.19

Granted		1,236,200		4.61 to 5.66		5.52
Exercised		(26,522	)	0.50 to 4.48		3.73
Forfeited		(179,318	)	3.55 to 10.98		6.17
Expired		(192,825	)	2.00 to 185.46		9.10
Balance, June 30, 2010		7,584,973		0.50 to 128.15		6.01		5.58	$	2,876
Exercisable at June 30, 2010		5,653,421		$0.50 to $128.15	$	5.97		4.45	$	2,875

	Outstanding Options						Exercisable Options
Exercise Price	Number of Options		Weighted Average Remaining Life (Years)		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
$0.50 – $2.15		1,258,746		2.87	$	1.54		1,258,746	$	1.54
$2.16 – $3.77		1,327,776		3.72		3.38		1,226,222		3.35
$3.78 – $6.87		1,913,817		8.68		5.32		526,184		5.15
$6.88 – $9.60		2,364,764		5.49		8.86		2,003,865		8.87
$9.61 – $16.30		706,062		5.93		10.68		624,596		10.73
$16.31 – $128.15		13,808		1.01		35.96		13,808		35.96
		7,584,973						5,653,421

Restricted Stock Activity	Shares			Weighted Average Grant–Date Fair Value
Restricted stock outstanding at December 31, 2009		909,717		$	5.58
Granted		455,750			5.37
Lapse of restriction		(61,850	)		7.15
Forfeited		(27,000	)		7.37
Restricted stock outstanding at June 30, 2010		1,276,617		$	4.95

		Page

ARTICLE I

DEFINITIONS

SECTION 1.01. Certain Defined Terms		1
SECTION 1.02. Definitions		11
SECTION 1.03. Interpretation and Rules of Construction		12

ARTICLE II

PURCHASE AND SALE

SECTION 2.01. Purchase and Sale of the Interests		13
SECTION 2.02. Purchase Price; Allocation of Purchase Price		14
SECTION 2.03. Closing		14
SECTION 2.04. Payments at Closing		14
SECTION 2.05. Closing Deliveries by the Seller Representative		16
SECTION 2.06. Closing Deliveries by the Purchaser		17
SECTION 2.07. Closing Deliveries by the Company		18
SECTION 2.08. Calculation of the Purchase Price		18
SECTION 2.09. Adjustment of the Purchase Price		19

ARTICLE III

REPRESENTATIONS AND WARRANTIES
RELATING TO THE REGISTER ENTITIES

SECTION 3.01. Organization, Authority and Qualification of the Company		21
SECTION 3.02. Subsidiaries; Capitalization		22
SECTION 3.03. No Conflict		23
SECTION 3.04. Governmental Consents and Approvals		23
SECTION 3.05. Financial Information		23
SECTION 3.06. Absence of Changes		24
SECTION 3.07. Absence of Undisclosed Material Liabilities		25
SECTION 3.08. Litigation		26
SECTION 3.09. Compliance with Laws		26
SECTION 3.10. Intellectual Property		26
SECTION 3.11. Real Property		28
SECTION 3.12. Employee Benefit Matters		28
SECTION 3.13. Taxes		31
SECTION 3.14. Material Contracts		33
SECTION 3.15. Environmental Matters		35
SECTION 3.16. Insurance		35

SECTION 3.17. Certain Business Relationships with Affiliates		36
SECTION 3.18. Brokers		36
SECTION 3.19. U.S. Persons		36
SECTION 3.20. Disclaimer of the Company.		36

ARTICLE IV

REPRESENTATIONS AND WARRANTIES
RELATING TO EACH SELLER

SECTION 4.01. Organization, Authority and Qualification of each Seller		37
SECTION 4.02. Capitalization; Ownership of Interests		38
SECTION 4.03. No Conflict		38
SECTION 4.04. Governmental Consents and Approvals		38
SECTION 4.05. Disclaimer of the Sellers.		39

ARTICLE V

REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER

SECTION 5.01. Organization and Authority of the Purchaser		40
SECTION 5.02. No Conflict		40
SECTION 5.03. Governmental Consents and Approvals		40
SECTION 5.04. Investment Purpose		40
SECTION 5.05. Financing		41
SECTION 5.06. Litigation		41
SECTION 5.07. Brokers		41
SECTION 5.08. Independent Investigation; Representations		42

ARTICLE VI

ADDITIONAL AGREEMENTS

SECTION 6.01. Conduct of Business Prior to the Closing		42
SECTION 6.02. Access to Information		44
SECTION 6.03. Confidentiality		45
SECTION 6.04. Regulatory and Other Authorizations; Notices and Consents		45
SECTION 6.05. Updates		47
SECTION 6.06. Further Action		47
SECTION 6.07. No Solicitation or Negotiation		48
SECTION 6.08. Intercompany Arrangements		48
SECTION 6.09. Indemnification; Directors’ and Officers’ Insurance		48
SECTION 6.10. Financing		49

ARTICLE VII

EMPLOYEE MATTERS

SECTION 7.01. Employee Benefits		53
SECTION 7.02. 401(k) Plan		53

ARTICLE VIII

TAX MATTERS

SECTION 8.01. Tax Refunds and Tax Benefits		54
SECTION 8.02. Tax Cooperation and Exchange of Information		54
SECTION 8.03. Conveyance Taxes		54
SECTION 8.04. Tax Covenants		54

ARTICLE IX

CONDITIONS TO CLOSING

SECTION 9.01. Conditions to Obligations of the Company and the Sellers		55
SECTION 9.02. Conditions to Obligations of the Purchaser		56

ARTICLE X

INDEMNIFICATION

SECTION 10.01. Survival of Representations, Warranties and Covenants		58
SECTION 10.02. Indemnification by the Sellers		58
SECTION 10.03. Limits on Indemnification		59
SECTION 10.04. Notice of Loss; Third Party Claims		61
SECTION 10.05. Remedies		62
SECTION 10.06. Distributions		62
SECTION 10.07. Seller Representative		63

ARTICLE XI

TERMINATION

SECTION 11.01. Termination		65
SECTION 11.02. Effect of Termination		66

ARTICLE XII

GENERAL PROVISIONS

SECTION 12.01. Expenses		66
SECTION 12.02. Notices		66

SECTION 12.03. Public Announcements		68
SECTION 12.04. Severability		68
SECTION 12.05. Entire Agreement		69
SECTION 12.06. Assignment		69
SECTION 12.07. Amendment		69
SECTION 12.08. Waiver		69
SECTION 12.09. No Third Party Beneficiaries		69
SECTION 12.10. Specific Performance		69
SECTION 12.11. Governing Law		70
SECTION 12.12. Waiver of Jury Trial		70
SECTION 12.13. Conflict of Interest		71
SECTION 12.14. Acknowledgement		71
SECTION 12.15. Counterparts		72

Definition		Location

“ 280G Approval ”		6.04(d)
“ 280G Matters ”		6.04(d)
“ Alternative Financing ”		6.10(b)
“ Alternative Financing Agreements ”		6.10(b)
“ Alternative Financing Commitment Letter ”		6.10(b)
“ Amendment ”		12.14
“ Balance Sheets ”		3.05(a)
“ Closing ”		2.03
“ Closing Date ”		2.03
“ Commitment Letter ”		5.05(b)
“ Company ”		Preamble
“ Company 401(k) Plan ”		7.02
“ Company Participants ”		7.01
“ Confidentiality Agreement ”		6.03(a)
“ Continuing Employees ”		7.01
“ Covered Persons ”		6.09(a)
“ Debt Payoff Amount ”		2.04(b)(i)
“ Debt Payoff Recipient ”		2.04(b)(i)
“ Deficiency ”		2.09(e)(i)
“ Estimated Closing Net Debt ”		2.08
“ Estimated Closing Net Deferred Revenue ”		2.08
“ Estimated Closing Statement ”		2.08
“ Estimated Closing Working Capital ”		2.08
“ Excess ”		2.09(e)(ii)
“ Financial Statements ”		3.05(a)
“ Financing ”		5.05(b)

Definition		Location

“ Financing Agreements ”		6.10(a)
“ Indemnified Party ”		10.02
“ Interests ”		Recitals
“ Leased Real Property ”		3.11(b)
“ Lenders ”		5.05(b)
“ Loss ”		10.02
“ Marketing Period ”		9.02(a)
“ Marketing Period Termination Date ”		9.02(a)
“ Material Contracts ”		3.14(a)
“ Maximum Annual Premium ”		6.09(b)
“ Notice of Acceptance ”		2.09(c)
“ Notice of Disagreement ”		2.09(c)
“ Notified Transaction Expenses ”		2.04(a)(iii)
“ Owned Real Property ”		3.11(a)
“ Plans ”		3.12(a)
“ Preclosing Tax Period ”		8.04(a)
“ Purchase Price ”		2.02(A)
“ Purchase Price Allocation ”		2.04(a)(ii)
“ Purchaser ”		Preamble
“ Purchaser GP ”		2.06(e)
“ Purchaser Plans ”		7.01
“ Register Website ”		3.10(f)
“ Reporting Tail Coverage ”		6.09(b)
“ Section 280G Payments ”		6.04(d)
“ Seller Representative ”		10.07(a)
“ Shearman ”		12.13
“ Subsidiary Interests ”		3.02(b)
“ Substitute Financing ”		6.10(c)
“ Substitute Financing Agreements ”		6.10(c)
“ Substitute Financing Commitment Letter ”		6.10(c)
“ Taxing Authority ”		2.04(a)
“ Termination Date ”		11.01(a)
“ Third Party Claim ”		10.04(b)
“ Transaction Expenses ”		12.01

	WEB.COM GROUP, INC.

	By:	/s/ David L. Brown
	Name: David L. Brown
	Title: Chief Executive Officer

	REGISTER.COM (CAYMAN) LIMITED
	PARTNERSHIP

	By:	Register.com GP (Cayman), Ltd., its general partner

	By:	/s/ Alex Slusky
		Name: Alex Slusky
		Title: Managing Partner

	REGISTER.COM GP (Cayman), LTD.
	(on behalf of itself, solely for the purposes of Articles II,
	IV, IX and X and XII and Sections 6.06 and 6.07)

	By:	/s/ Alex Slusky
		Name: Alex Slusky
		Title: Managing Partner

	REGISTER.COM GP (Cayman), LTD.
	(in its capacity as the Seller Representative, solely for the
	purposes of Articles II, VIII, X and XII and Section 6.06)

	By:	/s/ Alex Slusky
		Name: Alex Slusky
		Title: Managing Partner

	VECTOR CAPITAL II, L.P.
	(solely for the purposes of Articles II, IV, IX, X and XII
	and Sections 6.06 and 6.07)

	By: Vector Capital Partners II, LLC, its general partner

	By:	/s/ Alex Slusky
		Name: Alex Slusky
		Title: Managing Member

	VECTOR CAPITAL II INTERNATIONAL, L.P.
	(solely for the purposes of Articles II, IV, IX, X and XII
	and Sections 6.06 and 6.07)

	By: Vector Capital Partners II, LLC, its general partner

	By:	/s/ Alex Slusky
		Name: Alex Slusky
		Title: Managing Member

	VECTOR MEMBER FUND II, L.P.
	(solely for the purposes of Articles II, IV, IX, X and XII
	and Sections 6.06 and 6.07)

	By: Vector Capital Partners II, LLC, its general partner

	By:	/s/ Alex Slusky
		Name: Alex Slusky
		Title: Managing Member

	VECTOR REGISTER.COM INTERNATIONAL, L.P.
	(solely for the purposes of Articles II, IV, IX, X and XII
	and Sections 6.06 and 6.07)

	By:	/s/ Alex Slusky
		Name: Alex Slusky
		Title: Managing Partner

VECTOR ENTREPRENEUR FUND II, L.P.
(solely for the purposes of Articles II, IV, IX, X and XII
and Sections 6.06 and 6.07)

By: Vector Capital Partners II, LLC, its general partner

By:	/s/ Alex Slusky
	Name: Alex Slusky
	Title: Managing Member

VECTOR CAPITAL III, International, L.P.
(solely for the purposes of Articles II, IV, IX, X and XII
and Sections 6.06 and 6.07)

By: Vector Capital Partners III, LLC, its general partner

	By: Vector Capital, LLC, its general partner

	By:	/s/ Alex Slusky
		Name: Alex Slusky
		Title: Managing Member

VECTOR ENTREPRENEUR FUND III, L.P.
(solely for the purposes of Articles II, IV, IX, X and XII
and Sections 6.06 and 6.07)

By: Vector Capital Partners III, LLC, its general partner

	By: Vector Capital, LLC, its general partner

	By:	/s/ Alex Slusky
		Name: Alex Slusky
		Title: Managing Member

LAWRENCE M. KUTSCHER
(solely for the purposes of Articles II, IV, IX, X and XII
and Sections 6.06 and 6.07)

By:	/s/ Lawrence M. Kutscher

	ROCK MENG
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By:	/s/ Rock Meng

	SAMUEL ELDER
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By:	/s/ Samuel Elder

	DOMINIC ANG
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By:	/s/ Dominic Ang

	VALHALLA PARTNERS, L.P.
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By: Valhalla GP, LLC, its general partner

	By:	/s/ Harry D’Andrea
		Name: Harry D’Andrea
		Title: Managing Member

	SONOSTAR CAPITAL PARTNERS, LLC
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By:	/s/ Gregory Kiernan
		Name: Gregory Kiernan
		Title: Managing Member

	RAMIUS VALUE AND OPPORTUNITY MASTER FUND LTD
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By:	/s/ Morgan Stark
		Name: Morgan Stark
		Title: Authorized Signatory

	RAMIUS ENTERPRISE MASTER FUND LTD
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By:	/s/ Morgan Stark
		Name: Morgan Stark
		Title: Authorized Signatory

	RAMIUS PRIVATE SELECT LTD
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By:	/s/ Morgan Stark
		Name: Morgan Stark
		Title: Authorized Signatory

	BARINGTON COMPANIES EQUITY PARTNERS, L.P.
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By: Barington Companies Investors, LLC, its general partner

	By:	/s/ Jared L. Landaw
		Name: Jared L. Landaw
		Title: Senior Managing Director & Secretary

	BARINGTON OFFSHORE ADVISORS II, LLC
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By:	/s/ Jared L. Landaw
		Name: Jared L. Landaw
		Title: Senior Managing Director & Secretary

	BARINGTON OFFSHORE ADVISORS, LLC
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By:	/s/ Jared L. Landaw
		Name: Jared L. Landaw
		Title: Senior Managing Director & Secretary


	BARINGTON CAPITAL GROUP, L.P.
	(solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	By: LNA Capital Corp., its general partner

	By:	/s/ Jared L. Landaw
		Name: Jared L. Landaw
		Title: Secretary

	KBL: SPECIAL OPPORTUNITIES INVESTING

	THE YESHIVA RABBI CHAIM BERLIN FUND

	HSH NORDBANK SECURITIES S.A.

	UNIHOLD ApS

	HARVEY A. HOFFMAN IRA ROLLOVER

	CHRISTIAN OLESON HOLDINGS A/S

	NOVELLUS LOMBARD ALTERNATIVE STRATEGY

	OPPENHEIMER & CO. INC., NATHAN GANTCHER IRA

	PREMIUM SERIES PCC LTD. ACTING FOR AND ON BEHALF OF ITS CELL C196

	V. ROSSGAARD TRADING A/S

	CITCO GLOBAL CUSTODY (NA) N.V. OBO ABSOLUTE EAGLES FUND

	THE ENDEAVOR DIVERSIFIED FUND CLASS A

	HSBC PRIVATE BANK (SUISE) SA

	THE ENDEAVOR DIVERSIFIED FUND CLASS B

	SORANA A/S

	BANQUE ET CAISSE D’EPARGNE DE L’ETAT / CLIENT ACCT

	CITCO GLOBAL CUSTODY NV – REF 15611

	BEJERNO HOLDING APS

	TD AMERITRADE, FBO JOSEPH LUDWIG IRA ACCOUNT 917-983420

	BNP PARIBAS ARIBTRAFE SNC #311

	CITCO GLOBAL CUSTODY NC REF UBS AG ZURICH

	CITCO GLOBAL CUSTODY NV JPMS
	(each solely for the purposes of Articles II, IV, IX, X and XII and Sections 6.06 and 6.07)

	Each by: /s/ Jeffrey Wald , as the BR Group Representative
	Jeffrey Wald

By:	/s / D avid L. B rown
	David L. Brown
	Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

By:	/s/ K evin M. C arney
	Kevin M. Carney
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

By:	/s/ D avid L. B rown	By:	/s/ K evin M. C arney
	David L. Brown		Kevin M. Carney
	Chief Executive Officer and Chairman of the Board		Chief Financial Officer
	(Principal Executive Officer)		(Principal Financial and Accounting Officer)