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Article by DailyStocks_admin    (08-08-08 03:50 AM)

Filed with the SEC from July 24 to July 30:

Greenfield Online (SRVY)
Springhouse Capital Master cut its stake in the Internet research firm by about 1.31 million shares (4.96%), from the 2.1 million (8%) reported on June 24.

BUSINESS OVERVIEW

Overview

Our company collects consumer attitudes about products and services, enabling consumers to reach informed purchasing decisions about products and services they want to buy and helping companies to better understand their customers in order to formulate effective marketing strategies. Proprietary, innovative technology enables us to collect thousands of consumer opinions quickly and accurately, and to organize them into actionable form. We currently do this in two lines of business:


• Internet Survey Solutions: Through our Greenfield Online and Ciao Surveys websites and affiliate networks, we collect, organize and sell consumer opinions in the form of survey responses to marketing research companies and end-users on a global basis.

• Comparison Shopping: Through our Ciao comparison shopping portals we gather unique and valuable user-generated content in the form of product and merchant reviews. Visitors to our Ciao portals use these reviews to help make purchasing decisions and we derive revenue from this Internet traffic via e-commerce merchants and advertising sales.

Internet Survey Solutions

We are a leading independent provider of Internet survey solutions to the global marketing research industry. Through our proprietary Internet panels, our Real-Time Sampling capability and our international partner network we are able to supply our clients with diverse, demographically representative survey research data.

We target our Internet survey solutions to approximately 2,500 full service marketing research and consulting firms and large international marketing research companies throughout the world. Our clients use the Internet survey data that we provide to enable companies throughout the world to make critical business decisions. We partner with our clients to leverage their global sales forces, which incorporate our Internet survey solutions into their product offerings. We do not compete with our clients for custom marketing research business. This cooperative marketing strategy provides us with access to broad distribution channels without the need to expand our own sales and marketing resources.

Internet survey solutions are faster, more efficient and more cost-effective for collecting high quality marketing research data than traditional, labor-intensive methods such as telephone, direct-mail and mall-based surveying. The Internet allows our panelists and Internet users to participate 24 hours-a-day in a more convenient and less intrusive environment than traditional data collection methods. Our Internet-based technology interactively engages respondents through the use of images, sound and video, enabling us to collect richer data for our clients. We believe Internet-based survey solutions speed survey completion, allow for significantly larger survey sample sizes over a given time period and provide marketing researchers with a cost-effective means of reaching niche segments of the population.

Comparison Shopping

Through our Ciao subsidiary we are a leading provider of online comparison shopping services in Europe including the United Kingdom via our group of Ciao websites. We operate in-language comparison shopping portals in Germany, France, the United Kingdom, Spain, Italy, Sweden and the Netherlands. Through our comparison shopping business we aggregate and display information on a vast array of consumer products in such categories as consumer electronics, motor vehicles, computers, travel services and telecommunications. In addition, we have developed a community of registered members who post reviews on consumer products in order to assist others in making purchasing decisions. Since our inception we have collected several million product reviews. This information, together with product data, price and store information, is used by visitors to the Ciao shopping portals to compare product features, attributes and prices at various online retailers, in order to make informed purchasing decisions. We generate revenues from e-commerce merchants that pay us lead referral fees when consumers click through to merchant websites from our shopping portals and from advertisers displaying ads on our shopping portals.

Segment Information

Our reportable segments are consistent with how we manage our business and view the markets we serve. We view the two major geographic areas in which we operate, North America and Europe (including the rest of the world), as separate markets. Both the North American and European operations derive revenues from Internet survey solutions and, in addition, the European operations include an online comparison shopping business. Therefore, we have three reportable segments: North American Internet survey solutions, which operates through Greenfield Online, Inc. and its consolidated subsidiaries, Ciao Internet survey solutions, which operates through Ciao Surveys GmbH and its consolidated subsidiaries, and Ciao comparison shopping, which operates through Ciao GmbH and its consolidated subsidiaries. Prior to the acquisition of Ciao in April 2005, all of our revenue was derived through our North American segment, with various satellite offices globally. With the acquisition of Ciao, we expanded significantly into Europe. Revenue transactions between segments are recorded at amounts similar to those charged to our large clients. These inter-segment transactions are eliminated in consolidation. We manage our businesses separately in North America and Europe, and prior to the separation of the two European businesses, we allocated our European business between the Internet survey solutions and comparison shopping businesses, as components of an enterprise about which separate information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and assess performance.

During the second quarter of 2007, we completed the separation of the two European businesses, the Ciao Internet survey solutions business and the Ciao comparison shopping business. Prior to the separation of the Ciao Internet survey solutions and the Ciao comparison shopping businesses, the Ciao comparison shopping segment had no inter-segment revenues. Effective with the legal separation, the Ciao comparison shopping segment records inter-segment revenues for panelists it refers to the Ciao Internet survey solutions segment. Financial information about our reportable segments is included in Note 14 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K. Furthermore, during the third quarter of 2007, we began exploring organic development opportunities for Ciao comparison shopping in the U.S. No revenues were generated from these activities during 2007; however, we incurred operating expenses, which are included in the Ciao comparison shopping segment. In addition, in November of 2007 we implemented a global management structure for our Internet survey solutions segment.

Recent Developments

In February 2008, we announced the launch of the Ciao comparison shopping portal in the United States. This launch brings the Ciao comparison shopping portal and community to the large but highly competitive U.S market, and entails risks including:


• the diversion of management attention from the core Ciao comparison shopping business in Europe;

• the ability to attract members to the Ciao comparison shopping portal who will generate content in the form of product and merchant reviews;

• the ability to generate economically feasible Internet traffic in the United States; and

• our ability to develop product catalogues and merchant relationships in the United States.

During the second quarter of 2007, we completed the separation of our Internet survey solutions and comparison shopping businesses previously operated through our Ciao subsidiary into separate legal and operational entities. This reorganization involved many complex issues including, but not limited to, the following:


• division and apportionment of intellectual property including trademarks and Internet domain names;

• division and apportionment of the intertwined Ciao Internet panel member and Ciao shopping member databases;

• division and apportionment of technology including licensed and internally developed software, hardware and operating systems;

• allocation of personnel to each entity;

• division and apportionment of real estate; and

• potential tax implications relating to the separation of the businesses.

Our Market Opportunity

Internet Survey Solutions

Businesses rely on feedback from consumers to make decisions about their products and services. Heightened competition, consolidation, globalization of product markets, acceleration of product launch schedules, shortened product life and rapidly changing consumer preferences define today’s business environment. Marketing research is a critical tool for gathering the information that businesses need to make decisions regarding product, pricing, promotion and distribution.

Factors Affecting the Growth of Internet-Based Marketing Research

Benefits of Internet-Based Marketing Research. We believe Internet survey solutions allow the marketing research industry to be more responsive to the challenges posed by today’s business environment.


• Benefits to the Marketing Research Industry

Speed. Using the Internet, marketing researchers can rapidly access, collect and process large amounts of data from diverse groups across multiple countries and languages simultaneously. Our proprietary technology allows us to identify respondents, direct them to surveys for which they may qualify, and collect survey responses from them over the Internet. Survey response time on the Internet is measured in hours and days rather than weeks and months. Our technology and expertise allow us to administer thousands of Internet surveys simultaneously.

Cost Effectiveness. We believe that Internet survey solutions helps to reduce the cost of marketing research by decreasing data collection costs. Once qualified respondents have been identified and directed to appropriate surveys, the cost of data collection through the Internet is significantly less than through traditional methods.

Improved Results. Internet users are able to complete surveys in the privacy of their own homes, without interacting with interviewers. As a result, we believe interviewer bias is eliminated. Because the Internet provides respondents with a degree of anonymity and privacy not found in telephone or mall-based surveys, we believe Internet survey solutions generate more honest responses, even to sensitive subject matter questions, such as income, personal health, political affiliations and sexual orientation. Internet-based surveys can accommodate a variety of new media as well, including images, sound and video, which cannot be integrated into telephone or mail surveys. We believe that integrating these media allows researchers to capture feedback needed by marketers to assess new product offerings and test new advertising messages more accurately.

New Opportunities. We believe that Internet-based marketing research offers new options not previously available to research professionals. Internet survey solutions allow research professionals more design flexibility because they are not limited to what can be communicated by an interviewer over the telephone, or detailed on paper. Our Internet survey solutions increase the research options available to our clients by allowing them to embed images, sound and video within their surveys.


• Benefits to Survey Respondents

Less Intrusive and More Convenient. Our Internet survey solutions are less intrusive than telephone surveys. The Internet expands the amount of data collection time available because respondents can complete surveys at their convenience at any time. In contrast, telephone surveys can only be conducted during limited hours and are often attempted at times of the day, such as dinner time, which many respondents find intrusive and inconvenient.

More Engaging. Our Internet survey solutions are more engaging than telephone and direct mail surveys because they integrate images, sound and video, and often include advance previews of potential new products, movie trailers and commercials. We believe this advance preview feature makes our Internet survey solutions more compelling and enjoyable for our respondents than surveys administered through traditional methods.


• Growth in Internet Penetration. Studies reflect that the percentage of the U.S. and European population using the Internet is growing. As Internet penetration increases, and in particular as broadband penetration climbs, we believe the migration from traditional data collection methods to Internet-based data collection will continue. As the population of Internet users increases, a larger and more diverse group of people become accessible to us as potential panelists and potential Real-Time Sampling participants, and the quality of our Internet survey responses will likely improve.

Comparison Shopping

Consumer online shopping has developed into a large and rapidly growing channel for consumers to research products and offers from numerous merchants simultaneously and for merchants to display their offers to sell these products to a broad range of potential customers at the moment when they are contemplating a purchase.

Factors Affecting the Growth of Comparison Shopping


• Benefits to Consumers

Centrally Located and Detailed Information. We aggregate product information on several million consumer products together with thousands of merchant offers at one location so that online shoppers can compare and evaluate different brands and offers. We believe that this centrally located, detailed and organized information allows online shoppers to make informed purchasing decisions more easily and efficiently, as opposed to searching for and visiting individual merchant websites.

Ciao Community Reviews. Since our inception, members of the Ciao community have posted several million product and store reviews on our shopping portals. These reviews may be written in any of seven languages, either as a quick review, or as a full review with a minimum word count of 120 words per review. We believe that this searchable database of consumer reviews helps consumers make informed decisions regarding products and online merchants.


• Benefits for Merchants

Qualified Consumer Audience. We allow online merchants the opportunity to present their offers and products to consumers who have used our online catalog and large database of consumer reviews to research products at the moment when they are pre-disposed to make a purchase.

Our Competitive Position

Internet Survey Solutions

We believe we are positioned for continued growth in our target market for Internet survey solutions and that the following strengths differentiate us from our competitors:


• Internet Based Survey Respondents. We supply our customers survey based marketing research data, which we collect from respondents over the Internet, in two primary ways:


• Our Internet Panels. As of December 31, 2007, our Internet panels consisted of millions of individuals that had double opted-in to participate in our surveys. We continue to actively expand the breadth and demographics of our panels to address the needs of our clients. We now have proprietary panels in over 20 countries around the world. We have a process of qualifying our panelists, which allows us to offer our clients the ability to quickly reach appropriate target audiences within our panel for a wide range of client requests, including respondents in the healthcare, automotive, Hispanic, business-to-business, information technology and international segments. We have developed panel management techniques and technology designed to maximize the efficiency and productivity of our Internet panels. We maintain a fresh and active panel by continually adding new members and seeking additional information from our panelists. These management techniques and technologies allow us to invite panelists to participate in surveys for which they are likely to qualify. Additionally, we maintain policies to protect the confidentiality of our panelists’ personal information and prohibit marketing to our panelists using information obtained through their survey participation. We believe that these policies have enabled us to develop a relationship of trust with our panelists and foster a climate that encourages their continued participation in our surveys.


• Real-Time Sampling. In 2007, our Real-Time Sampling capability supplied a significant portion of the survey responses we collected for our customers. Real-Time Sampling allows us to invite Internet users at third party websites to participate in surveys, without the requirement that they join our panels. Internet users that accept this invitation are then directed to a proprietary software that collects certain demographic information and routes the participant to an active survey project for which he or she is likely to qualify. We believe Real-Time Sampling allows us to access the portion of the population using the Internet who are less likely to join our panels, but are willing to provide opinions about topics important or relevant to them.


• Complete Internet Survey Solutions. We offer a wide range of Internet survey solutions that enable the global marketing research industry to conduct Internet-based research. Our complete range of survey solutions facilitates the migration from traditional survey methods to Internet-based methods and eliminates the need for our clients to develop their own Internet research capabilities.

• Focused Sales Strategy. Our focused sales strategy seeks to incorporate our Internet survey solutions into our clients’ research proposals that they present to the end-users of the data we collect. Our client relationships are strengthened by this cooperative sales strategy which allows us to leverage their global sales forces as a distribution channel for our products and services. We do not compete with our clients for custom marketing research business from end-users.

• Well-Established Brands and Commitment to Customer Service. Greenfield Online was founded in 1994 and we conducted our first North American Internet-based marketing research project in 1995. Ciao was founded in 1999 and conducted its first European Internet-based marketing research project in 2001. Since our inception, we have built and refined our ability to conduct Internet surveys, and maintained a commitment to industry-leading customer service. Our early entry into the Internet-based survey marketing research industry, the quality and global reach of our Internet survey solutions and our commitment to technology and customer service have enabled us to develop strong brands within the marketing research industry in North America and Europe.

Comparison Shopping

We believe we are positioned for continued growth in our target market for comparison shopping services in Europe and that the following strengths differentiate us from our competitors:


• The Ciao Community. The Ciao community is comprised of consumers from all walks of life who have chosen to become members of one of our localized Ciao shopping portals in order to contribute product and store reviews and to take advantage of a number of interactive community features such as guest books, buddy lists and personal profiles. As of December 31, 2007, our Ciao shopping portals had over 1 million registered members. We believe that our strong community of review writers is an important asset as it creates a constant inflow of fresh, original content that positively differentiates us from our competitors and helps us attract additional visitors to our websites.


• Our Product Reviews. We believe that the product and store reviews posted by members of the Ciao community are valuable content that helps consumers make informed purchasing decisions. Since our inception, members of the Ciao community have posted several million product and store reviews on our shopping portals. These reviews may be written in any of seven languages, either as a quick review, or as a full review with a minimum word count of 120 words per review. We believe that this makes our product review database one of the largest in the world, giving us an advantage over many of our competitors.

• Our Pan-European Presence. We operate Ciao shopping portals in Germany, France, the United Kingdom, Spain, Italy, Sweden and the Netherlands. Many of our competitors are operating websites in their respective home markets only. We believe that our pan-European reach provides a competitive advantage as it enables us to transfer experiences learned from one country to another, increases our brand recognition with larger advertisers and retailers and diversifies our revenue risk in the comparison shopping business.

Our Strategy

Our strategy is to build upon our position as a world leader in the collection, organization, distribution and sale of consumer opinions. In addition to the strategies listed below for our Internet survey solutions business and our comparison shopping portals, we intend to achieve this goal through the development and acquisition of technologies, products and services which complement and enhance our ability to collect consumer opinions and which expand our addressable market.


• Expand Internet Survey Solutions. Our goal is to maintain and build upon our leadership position within the global Internet survey solutions market. In order to achieve this goal, our strategy is to:


• Provide High Quality Internet Survey Solutions. We have introduced a quality improvement program that has raised our customer satisfaction scores to their highest levels since we began tracking them. We will endeavor to maintain this level of customer satisfaction and strive to increase it through attention to customer service, process automation, and high quality research data sourced through our Internet respondent traffic.

• Provide Our Clients High Value. We believe we can continue to improve the value of our Internet sample through our cost effective supply chain management, our use of technology to automate our business processes and our continued use of low-cost production facilities.

• Diversify our Sources of Survey Respondents. We will continue to develop the technology that allows us to direct Internet survey respondents to appropriate surveys, whether sourced from our Internet panels or via our Real-Time Sampling capability.

• Expand the Range of Respondents we can Reach. We intend to expand the demographic, industry and geographic range of Internet survey respondents we can reach by expanding our Internet survey solutions into such demographic areas as business-to-business decision makers and healthcare professionals as well as extending our geographic reach by enhancing our ability to deliver respondents from markets such as the Asia-Pacific region.

• Develop New and Innovative Internet-Based Survey Solutions. New solutions, such as our media testing capabilities, integrate images, sound, video and other media directly into our surveys and provide a more interactive and engaging process than current methods.

• Provide Faster and Better Service than Traditional Data Collection Methods. Our clients seek suppliers that can provide high-quality Internet survey respondents and fast and accurate bid-turnaround and survey programming, allowing them more time to analyze survey data and provide timely, quality research for their customers. To achieve this strategy, we leverage our automated bidding and respondent access technology, skilled project management staff and our continuous survey programming capability.


• Expand Comparison Shopping. Our strategies to grow our comparison shopping business are as follows:


• Improve and Enhance Product and Technology. We believe that our comparison shopping product and technology are not yet optimized to take full advantage of the market opportunity. As we believe that technology and improved user experience are critical to our success, we intend to improve and enhance our existing product and technology to make our Ciao comparison shopping portals more efficient, thereby improving our visitors’ experience, and our users’ loyalty.

• Improve the Community Experience on our Sites to Promote User Generated Content. We believe that a better community experience on our comparison shopping portals will encourage users of our sites to generate content that other visitors will find valuable, thereby leading to improved traffic.

• Increase Number of Categories, Products and Offers. We believe that the traffic to our comparison shopping portals would benefit from the display of a broader range of products and associated offers in our existing categories and the expansion of a broader range of categories. We therefore intend to re-launch a number of categories, enhance existing categories and add more categories, products and merchant offers to our online catalog.

• Expand Geographically. We believe that our service can be further extended to cover additional countries and geographic regions. We are already present with localized shopping portals in Germany, France, the United Kingdom, Spain, Italy, Sweden and the Netherlands, and are considering the launch of our service in additional countries inside and outside of Europe. In February 2008, we announced the launch of the Ciao.com comparison shopping portal in the United States.

• Increase Online Marketing Efforts. We believe that heightened awareness of our Ciao brand and service would lead to additional traffic to our comparison shopping portals.

• Broaden Merchant and Advertiser Base. We believe that the number of merchant and advertising customers featured on our shopping portals is related to the conversion rate of website visits to paid click-throughs. We therefore intend to expand our partnerships with online retailers, advertising agencies and direct advertising customers and to cement our existing relationships within these customer groups.

CEO BACKGROUND

LISE J. BUYER

Lise J. Buyer has served as a member of our board of directors since April 2004. Since August 2006, Ms. Buyer has served as principal of Class V Group LLC a consultancy advising companies on initial public offerings and other market strategies. From August 2005 to August 2006, Ms. Buyer served as Vice President of Tellme Networks, Inc., a private Internet telephony business. Between April 2003 and August 2005, Ms. Buyer served as the Director of Business Optimization at Google Inc., a publicly traded technology company focused on search services. From September 2002 to March 2003, she served as a consultant and the Director of Research for Vista Research LLC, an independent equity research firm in New York, New York. From May 2000 to July 2002 she was a General Partner at Technology Partners, a Palo Alto, California venture capital firm. Ms. Buyer was the Director of Internet/New Media Research at Credit Suisse First Boston from July 1998 to May 2000. Prior to that, she spent 15 years as an institutional equity investor and analyst of both the technology and media industries. Ms. Buyer holds a B.A. from Wellesley College and an M.B.A. from the Owen Graduate School of Management at Vanderbilt University.

CHARLES W. STRYKER

Dr. Charles W. Stryker has served as a member of our board of directors since May 2005. Dr. Stryker is President of Venture Development Center, Inc. a consulting company specializing in the development of new products for information services companies which he founded in 1992. From January 1998 to September 1999, Dr. Stryker served as President of IQ2.net, a division of Intelliquest, Inc. Dr. Stryker served as Chairman and Chief Executive Officer of Naviant, Inc. from September 1999 to July 2001, and chairman of Naviant, Inc. from July 2001 to August 2002. Dr. Stryker currently holds director positions for a number of non-publicly traded companies. Dr. Stryker holds a B.S. and M.S. in Electrical Engineering, and a Ph.D. specializing in Computer Sciences from New York University.

BURTON J. MANNING

Burton J. Manning has served as a member of our board of directors since May 1999. From 1987 to March 1997, Mr. Manning was Chairman and Chief Executive Officer of J. Walter Thompson Co. From March 1997 to January 1998, Mr. Manning was Chairman of J. Walter Thompson Co. From January 1998 to present, he has served as President of Brookbound, Inc. In addition to his service on our board of directors, he serves on the board of directors of a number of non-publicly traded companies.

JOSEPH A. RIPP

Joseph A. Ripp has served as a member of our board of directors since September 2005. From October 2005 to May 2007, Mr. Ripp served as President and Chief Operating Officer of Dendrite International, Inc., a publicly traded company focusing on sales, marketing, clinical and compliance solutions for the global pharmaceutical industry. From November 2004 to October 2005, Mr. Ripp served as Senior Vice President, Media and Communications of Time Warner, Inc. Prior to this position Mr. Ripp was Vice Chairman of America Online, Inc., which he joined in 2001 as Executive Vice President and Chief Financial Officer. In 2002, Mr. Ripp was named Vice Chairman of America Online, overseeing AOL Technology, Network Operations, Marketing, Member Service, Human Resources, and Legal. He served in that role until November 2004. From 1999 to 2001 Mr. Ripp was Executive Vice President and Chief Financial Officer of Time Warner, Inc. Prior to that, he was Executive Vice President and Chief Financial Officer of Time Inc., the publishing division of Time Warner, Inc., where earlier he held the title of Senior Vice President, Chief Financial Officer, and Treasurer. Mr. Ripp graduated from Manhattan College with a Bachelor of Arts degree and earned a Master’s of Business Administration from Bernard M. Baruch College of the City University of New York.

JOEL R. MESZNIK

Joel R. Mesznik has served as a member of our board of directors since May 1999. He has been President of Mesco Ltd., a consulting company, since 1990. He is also a director of a number of non-publicly traded companies. Mr. Mesznik holds a B.S. from City University of New York and an M.B.A. from Columbia University, Graduate School of Business.

ALBERT ANGRISANI

Mr. Angrisani has served as our President and Chief Executive Officer and a member of our board of directors since September 2005. From April 2004 to September 2005, Mr. Angrisani served as President of Angrisani Partners LLC, an advisory firm for underperforming companies, which he established in 2004. Prior to that Mr. Angrisani served as President and Chief Operating Officer and director of Harris Interactive Inc., from November 2001 to April 2004. From July 1998 to November 2001, Mr. Angrisani served as President and Chief Executive Officer of Total Research Corporation and as director of Total Research Corporation from November 1994 to November 2001. Mr. Angrisani holds an A.P.C. from New York University, an M.B.A. from Fairleigh Dickenson University and a B.A. from Washington & Lee University.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

Our company collects consumer attitudes about products and services, enabling consumers to reach informed purchasing decisions about the products and services they want to buy and helping companies to better understand their customers in order to formulate effective marketing strategies. Proprietary, innovative technology enables us to collect thousands of consumer opinions quickly and accurately, and to organize them into actionable form. We currently do this in two lines of business:


• Internet Survey Solutions: Through our Greenfield Online and Ciao websites and affiliate networks, we collect, organize and sell consumer opinions in the form of survey responses to marketing research companies and end-users on a global basis.

• Comparison Shopping: Through our Ciao comparison shopping portals we gather unique and valuable user-generated content in the form of product and merchant reviews. Visitors to our Ciao portals use these reviews to help make purchasing decisions and we derive revenue from this Internet traffic via e-commerce merchants and advertising sales.

Key Historical Events that Impact Our Business

We were incorporated in the State of Connecticut on September 28, 1995. Until May 17, 1999, Andrew S. Greenfield and certain members of his family owned all of our capital stock. On May 17, 1999, our then-existing management and a group of new investors completed a management buyout (the “Management Buyout”), in which approximately 97% of our outstanding common stock was acquired by Greenfield Holdings, LLC (“Greenfield Holdings”), an entity formed for the sole purpose of the Management Buyout. The remaining 3% was retained by the prior owner. From 1999 until 2002, we invested significant amounts to build our Internet panels and our Internet-based technology infrastructure. In December 2002, our controlling stockholders completed a recapitalization of our business and Greenfield Holdings was dissolved.

Until January 2002, we sold both custom Internet-based marketing research and the Internet survey solutions we sell today. A majority of our revenues for the first seven years of our existence was derived from the sale of custom marketing research. In September 2001, we embarked on a strategy to convert the focus of our business from providing custom marketing research to end-users to providing Internet survey solutions to the marketing research firms we target today. This strategy culminated in the sale of our custom marketing research business (the “Custom Research Business”) to Taylor Nelson Sofres Operations, Inc. (“TNSO”) in January 2002. The sale of our Custom Research Business represented a turning point in our development as we shifted from a labor-intensive, professional services business model to a scalable Internet-based services business model.

Under our asset sale agreement with TNSO, we received $2.0 million in cash consideration at closing in January 2002 and an additional $600,000 in January 2003. Contemporaneously with the execution of the asset sale agreement, we entered into an alliance agreement with Taylor Nelson Sofres Intersearch (“TNSI”) that terminated on December 31, 2006. We treated $1.4 million of the proceeds received at closing as consideration for the value of the assets conveyed and $600,000 as a prepayment of the first three months’ payments due under the alliance agreement. The alliance agreement obligated TNSI to use our services to meet substantially all of its Internet sample survey requirements for U.S.-based marketing research until certain minimum revenue guarantees were met. In 2002, the alliance agreement required TNSI to provide us with a minimum of $200,000 per month after the first three months of qualifying revenue for purchases of sample and other services, and in 2003 this minimum monthly amount increased to $300,000. In December 2003, TNSI satisfied its total minimum purchase requirement.

In July 2003, we formed Greenfield Online Private Limited (“GFOL India”) in Gurgaon, India in order to reduce labor costs and to allow us to offer around-the-clock data processing and survey programming services. In March 2004, we formed Greenfield Online Canada, Ltd. in order to expand our North American operations to cover the Canadian market. In 2006, we relocated a significant portion of our North American Internet survey solutions project management function to our Canadian operations center.

In July 2004, we completed the initial public offering of our common stock, including the sale of 4.0 million shares by us and 1.75 million shares by certain of our stockholders. Net proceeds to us from the initial public offering totaled approximately $34.8 million, after payment of underwriters’ commissions, mandatory conversion and redemption payments, and other related expenses. In connection with our initial public offering, all shares of our Series C-2 Redeemable Non-Voting Preferred Stock were redeemed and all outstanding shares of our Series A Convertible Participating Preferred Stock, Series B Convertible Participating Preferred Stock, and Series C-1 Convertible Participating Preferred Stock were converted into shares of our common stock on a one-for-14 basis.

On October 21, 2004, we completed the acquisition of OpinionSurveys.com’s Internet-based panel from The Dohring Company for $3.2 million in cash. Under the terms of the acquisition, we acquired specific assets from The Dohring Company, including the complete OpinionSurveys.com panel; certain profile information contained in its database; title to the domain names “OpinionSurveys.com” and “OpinionSurvey.com;” as well as certain intellectual property associated with the OpinionSurveys.com panel, including the registered trademark in the logo of OpinionSurveys.com. Under the terms of the acquisition, we did not assume any liabilities from The Dohring Company. This acquisition was recorded under the purchase method with $2.9 million of the total consideration allocated to the fair value of the assets acquired (including the OpinionSurveys.com panel database) and approximately $340,000 allocated to other intangibles (including domain names and service marks).

In December 2004, we completed a follow-on public offering of our common stock, including the sale of 4.5 million shares by us and 2.4 million shares by certain of our stockholders. Net proceeds to us from the follow-on public offering totaled approximately $76.4 million, after payment of underwriters’ commissions and other related expenses.

On January 25, 2005, we completed the acquisition of Rapidata.net, Inc., a privately held North Carolina corporation (“Rapidata”), pursuant to the terms and conditions of a Stock Purchase Agreement dated January 25, 2005 (the “Stock Purchase Agreement”) among us, Rapidata and all of the shareholders of Rapidata. Pursuant to the Stock Purchase Agreement, we acquired all of the outstanding common stock of Rapidata for $5.5 million in cash, subject to certain closing and post closing adjustments. The results of operations of Rapidata were included in our results of operations beginning January 26, 2005. In September 2005, we paid an additional $39,000 as a result of adjustments to current accounts receivable not previously included in the working capital adjustment under the Stock Purchase Agreement and in October 2005, we paid an additional $46,000, as a result of the Incremental Tax Cost Amount, as defined in the Stock Purchase Agreement.

On February 8, 2005, we completed the acquisition of Zing Wireless, Inc., a privately held California corporation (“goZing”), pursuant to the terms and conditions of an Agreement and Plan of Reorganization, dated February 8, 2005 (the “Plan of Reorganization”), among us, goZing and our wholly-owned acquisition subsidiary, Greenfield Acquisition Sub, Inc. Pursuant to the Plan of Reorganization, we acquired all of the outstanding shares of common stock of goZing for an aggregate consideration of approximately $31.9 million in cash, subject to certain closing and post closing adjustments.

On April 6, 2005, we entered into a Share Purchase Agreement (the “Share Purchase Agreement”) among us, Ciao AG, a privately held German company (“Ciao”), the shareholders of Ciao as the sellers, the representative of the sellers, our wholly-owned acquisition subsidiary SRVY Acquisition GmbH and its wholly-owned subsidiary Ciao Holding GmbH as buyers, and the Company Trustee (as identified therein). The signing and closing under the Share Purchase Agreement occurred on April 6, 2005. Pursuant to the Share Purchase Agreement, we acquired all of the outstanding shares of stock of Ciao for €57,692,250 (approximately $74.3 million) in cash and 3,947,367 shares of our common stock valued at $20.19 per share (the closing price of our common stock on Nasdaq on April 6, 2005). We funded a portion of the cash proceeds delivered in the transaction from the Commerce Bank Credit Facility as described in Note 10 under the section entitled “Commerce Bank Credit Facility” and the remaining balance from the proceeds of our follow-on public offering (see Note 1). In addition to the €57,692,250 set forth above, the cash portion of the consideration was adjusted to reflect the estimated amount of cash on hand at Ciao in excess of a specified amount of working capital as of the closing date and adjusted again based upon the final closing date balance sheet of Ciao. In September 2005, we paid an additional €54,000 (approximately $69,000), as a result of certain net cash adjustments as set forth in the Share Purchase Agreement.

On December 10, 2005, our Board of Directors approved a North American rightsizing plan pursuant to which we determined to reduce costs in North America in an effort to more closely align our costs with our revenue outlook. As part of this rightsizing effort, we reduced our employee base, amended and terminated certain existing leases, in-sourced certain previously outsourced functions, and engaged in actions designed to reduce our cost structure and improve profitability. During the year ended December 31, 2006, we recorded approximately $236,000 in pre-tax charges in connection with this rightsizing plan for costs and expenses primarily related to lease cancellation costs, which are included in restructuring charges in the consolidated statements of operations.

We conducted our initial review of goodwill and other intangible assets as of October 31, 2005 and determined that impairment existed. We therefore recorded a pre-tax impairment charge of $89.8 million related to goodwill, and a $1.5 million pre-tax impairment charge related to other intangible assets, for the year ended December 31, 2005. We conducted our annual reviews of goodwill and other intangible assets as of October 31, 2007 and 2006 and determined that no impairment existed for the years ended December 31, 2007 and 2006.

During the second quarter of 2007, we completed the separation of the two European businesses, the Ciao Internet survey solutions business and the Ciao comparison shopping business. Prior to the separation of the Ciao Internet survey solutions and the Ciao comparison shopping businesses, the Ciao comparison shopping segment had no inter-segment revenues. Effective with the separation of these businesses, the Ciao comparison shopping segment records inter-segment revenues from the sale of panelists to the Ciao Internet survey solutions segment. Furthermore, during the third quarter of 2007, we began exploring organic development opportunities for Ciao comparison shopping in the U.S. No revenues were generated from these activities during 2007; however, we incurred operating expenses, which are included in the Ciao comparison shopping segment. In addition, in November of 2007 we implemented a global management structure for our Internet survey solutions segment. Financial information about our reportable segments is included in Note 14 to the Consolidated Financial Statements.

Explanation of Key Financial Statement Captions

Net Revenues

We report our Internet survey solutions segment revenues net of customer volume rebates and cash discounts. Discounts for larger customers typically range from 5% to 20% off of our standard rates and we typically limit volume rebates to a few customers. Historically, these rebates have not been material, nor do we expect them to be material in the near future. Our Internet survey solutions segment net revenues are derived primarily from the following offerings:


• Full Service — we program our clients’ surveys, host them on our website infrastructure, invite our panelists to take the surveys and deliver the compiled data to our clients for their analysis and presentation to their clients.

• Sample Solutions — clients that have their own programming capabilities, but have limited or no access to survey respondents, can purchase controlled access to our Internet based respondents.

For our comparison shopping business, we generate revenues from e-commerce commissions and advertising. The core of this business consists of attracting visitors to our shopping portals, and referring these visitors to the websites of our online merchant clients. Whenever a visitor is referred from us to a client’s website, a “click-through” is recorded both by us and by the client. At the end of each month, the total number of click-throughs in that month is calculated, multiplied by the cost-per-click-through agreed to contractually with the client, and the resulting amount is invoiced and recognized as revenue in that month. Advertising revenues are generated from the display of customer advertising on our Ciao comparison shopping portals. In this case, an advertising serving software is used to measure the number of page views that the advertising message has received in each month. We and our advertising customers both have access to this software to verify the number of page views. We only invoice and recognize revenues once an advertising campaign has been achieved in full, which occurs when the contractually agreed upon number of page views has been reached.

Cost of Revenues

Our direct costs associated with generating revenues primarily consist of the following items:


• Project Personnel — Project personnel have three distinct roles: project management, survey programming and data processing. We maintain project personnel in the United States, Europe, Canada, India, Romania and Australia. Labor costs are specifically allocated to each project. We utilize a timekeeping system in which project personnel maintain estimates of time incurred for each specific project. Project personnel are paid quarterly bonuses based upon service, quality and achievement of revenue goals associated with clients.

• Respondent Incentives — Our panelists receive cash and non-cash incentives for participating in our surveys. We maintain an incentive account for each member of our Internet panels. Our panelists accrue incentives based upon a member qualifying for and completing a survey within a predetermined timeframe. The panel member may request and receive payment of his or her incentives at any point in time prior to expiration. In prior periods, incentives awarded would generally expire one year after a panelist becomes inactive as outlined in the terms and conditions available on our panelist website. In February 2006, in our North American Internet survey solutions segment, we reduced the expiration threshold for panelists’ incentives from one year to six months of inactivity. With our Real-Time Sampling capability incentives are determined by the website or publisher that refers potential survey respondents to us.

• Data Processing — We perform the majority of the processing of survey data with our own professionals. Occasionally, we outsource certain data processing functions to third-party suppliers.

• Outside Sample — We supplement our sample with survey responses from individuals who are not members of our Internet panels or acquired via our Real-Time Sampling capability. These situations occur where our proprietary respondent traffic cannot meet customer demands because of timing, capacity or demographic constraints; or when we are asked to supply survey responses in markets in which we do not have respondent access, typically certain international geographic sectors.

• Real-Time Sampling — We have developed and implemented our Real-Time Sampling ® capability, primarily in our North American operating segment. Real-Time Sampling allows us to present an offer to take surveys to visitors at third party websites, and if a visitor accepts this offer, he or she is then directed to proprietary software and screening techniques to match that individual to a survey project for which they are likely to qualify. Real-Time Sampling broadens our potential pool of survey takers beyond our Internet panelists, allowing us to reach individuals who may not want to join a panel, but are willing at certain points in time to share their opinions about topics that are relevant and important to them. In January 2008, we began expanding the use of Real-Time Sampling as we launched the use of this capability in the United Kingdom.


• Other Direct Costs — Other direct costs may include the following: (i) fees paid to a third party for healthcare-related sample data retrieved from a panel of healthcare professionals developed by this third-party and (ii) in years prior to 2007, fees paid to Microsoft Corporation (“Microsoft”) for surveys completed and sold using data from panelists we obtained through the Microsoft Network (“MSN”). During the first quarter of 2006, our obligation to make payments for MSN for surveys completed by MSN-sourced panelists was terminated. For the year ended December 31, 2007 and 2006, we included stock-based compensation charges as a result of the adoption of Financial Accounting Standards No. 123 (revised 2004), “ Share-based Payment.” (“SFAS 123 (R)”) on January 1, 2006. Also included in other direct costs for years prior to 2006 is the amortization associated with the previously recorded unearned stock-based compensation charges, which are amortized over the service period for options granted to project personnel.

• Amortization of Internal Use Software — We include in cost of revenues amortization of capitalized software costs related to both our Internet survey production and our comparison shopping business.

Selling, General and Administrative Expenses

As of December 31, 2007, we employed 85 individuals that support the sales and marketing of our Internet survey solutions business. These sales professionals are compensated based upon project delivery and revenue recognition. Commissions are accrued when we deliver completed projects to our clients. In addition, we maintain our Internet panels with a staff of 23 panel management personnel. These individuals design programs geared toward panelist recruitment, retention and incentives and are also responsible for panel database design and development. Furthermore, we support our Internet survey solutions sales effort with a staff of 9 marketing professionals who design product, pricing, promotional and distribution strategies. As of December 31, 2007, we employed 87 individuals who provide a foundation for these functions in the areas of executive, finance, human resources and information technology operations. This group is responsible for maintaining the infrastructure and support for the entire sales, delivery and panel teams.

As of December 31, 2007, we employed 24 individuals that support the sales of our comparison shopping business. These sales professionals are compensated based upon both qualitative and quantitative goals. Commissions are accrued when the corresponding revenue is recognized associated with the attainment of these goals. In addition, we maintain a staff of 79 who support our product management and content development. These individuals are responsible for improving the content and quality of our sites and the quantity of items offered as well as the overall usability of the site, which results in an enhanced user experience. In addition, as of December 31, 2007, we employed 15 individuals who provide a foundation for these functions in the areas of executive, finance, human resources and information technology operations.

Results of Operations

Year Ended December 31, 2007 Versus Year Ended December 31, 2006

Consolidated Results

Net Revenues. Net revenues for the year ended December 31, 2007 were $129.0 million, compared to $100.3 million for the year ended December 31, 2006, an increase of $28.7 million, or 28.6%. Fluctuations in currency rates increased net revenues by approximately $4.9 million, or 4.9%. Net revenues increased primarily as a result of our comparison shopping business, which accounted for approximately $11.4 million and our North American Internet survey solutions segment, which accounted for approximately $10.1 million, and to a lesser extent, our Ciao Internet survey solutions segment, which accounted for approximately $2.3 million.

Net revenues at our comparison shopping business increased as a result of increased traffic, improved site content, increases in conversion rates of visitors to click-throughs, expanded product catalogues, increased merchant relationships, improved product search capabilities, as well as growth in the core e-commerce markets in Europe.

Net revenues at our Internet survey solutions segments increased as a result of improvement in survey respondent supply via our panel, our Real-Time Sampling capability and our outside sample suppliers, in conjunction with a significant investment in our selling, marketing and business development team in North America as well as at the Ciao Internet survey solutions team in Europe. Furthermore, improvement in quality contributed to our overall revenue growth.

Gross Profit. Gross profit for the year ended December 31, 2007 was $96.3 million, compared to $76.3 million for the year ended December 31, 2006, an increase of $20.0 million, or 26.3%. Gross profit for the year ended December 31, 2007 was 74.6% of net revenues, compared to 76.0% for the year ended December 31, 2006. Fluctuations in currency rates increased gross profit by approximately $3.6 million, or 4.8%.

Gross profit increased primarily due to the additional revenues described above, offset by higher supply chain costs associated with the increased use of our Real-Time Sampling capability to fill surveys, higher incentive and outside sample costs, as well as higher direct project personnel costs. These increased costs were partially offset by lower revenue share costs.

Gross profit as a percentage of revenues decreased due primarily to increased supply chain costs associated with higher Real-Time Sampling costs, outside sample, incentives, direct project labor and amortization costs, partially offset by lower revenue share costs. Additionally, the increased Real-Time Sampling costs are partially offset by a reduction in our panel acquisition costs, which are recorded below gross profit in operating expenses.

We expect gross margin to remain variable from period to period as a result of shifts in product mix among full service, sample only, business-to-business, healthcare and projects requiring outside sample, as product mix remains largely unpredictable. Additionally, gross profit will be affected by the timing and amount of comparison shopping revenue recognized in each period. We believe our Internet survey solutions margins could experience downward pressure as a result of the increasingly competitive environment and the resulting pricing pressure in the Internet survey solutions segment; however, this could be reduced or offset by the high gross margin in the faster growing comparison shopping segment as the comparison shopping segment’s net revenues become a greater proportion of our consolidated net revenues.

Selling, General and Administrative. Selling, general and administrative expenses for the year ended December 31, 2007 were $61.4 million, compared to $44.7 million for the prior year, an increase of $16.7 million, or 37.4%. Fluctuations in currency rates increased selling, general and administrative expenses by approximately $2.6 million, or 5.8%.

Selling, general and administrative expenses increased primarily as a result of increased personnel costs of approximately $9.0 million, increased advertising and promotion costs of approximately $2.5 million, higher facility and leasing costs of approximately $1.3 million, higher bad debt costs of approximately $0.8 million and costs associated with the bifurcation of the European businesses of approximately $0.6 million.

Selling expenses increased approximately $3.7 million for the year ended December 31, 2007, primarily related to personnel costs including commissions, travel costs, and stock-based compensation.

Advertising and promotion costs increased approximately $2.5 million for the year ended December 31, 2007, primarily related to advertising and marketing programs associated with our comparison shopping business of approximately $1.9 million and higher marketing costs associated with our internet survey solutions business of approximately $0.6 million.

General and administrative expenses increased approximately $8.0 million for the year ended December 31, 2007, primarily as a result of higher personnel costs of approximately $5.3 million, higher facility and leasing costs of approximately $1.2 million, costs incurred in connection with the bifurcation of our European businesses of approximately $0.6 million, higher consulting fees and other costs including higher bad debt costs.

Personnel costs associated with general and administrative expenses increased approximately $5.3 million for the year ended December 31, 2007, primarily as a result of an increase in incentive compensation accruals for general and administrative employees and senior management, related to our improved performance in 2007 over 2006. Additionally, we made investments in the latter part of 2006 in finance and administrative staff, primarily in our European businesses as a result of the initial implementation of Sarbanes-Oxley Section 404 compliance in Europe, and incurred higher stock-based compensation and higher travel costs due primarily to the separation of the Ciao businesses and the implementation of a global management structure for our Internet survey solutions business.

Selling, general and administrative expenses as a percentage of net revenues increased to 47.6% for the year ended December 31, 2007 from 44.6% of net revenues for the year ended December 31, 2006. During the year ending December 31, 2008, we expect selling, general and administrative expenses to be higher as a percentage of net revenues in the early part of the year and to decline as revenues increase during the year. In addition, our legal fees during the first quarter of 2008 will be higher than previously estimated as further explained in “Costs Associated with Pending Class Action Lawsuit” under the “Liquidity and Capital Resources” section.

Panel Acquisition. Panel acquisition expenses were $3.3 million for the year ended December 31, 2007, compared to $5.5 million for the year ended December 31, 2006, a decrease of $2.2 million, or 39.7%. Fluctuations in currency rates were immaterial in panel acquisition expenses in the current period. Panel acquisition expenses decreased primarily as a result of our increased use of our Real-Time Sampling capability to obtain respondent data, resulting in lower production demand placed upon our panels. As noted in our discussion regarding gross profit, we experienced an increase in our Real-Time Sampling expense as a result of this production shift.

Panel acquisition expenses were 2.6% of net revenues for the year ended December 31, 2007 and 5.5% for the year ended December 31, 2006. Excluding the effects of amortization costs of acquired panel members, we expect our panel acquisition expenses to remain variable from period to period as a percentage of revenues as we continue to utilize our Real-Time Sampling capabilities to supplement our need for panelists, as we strategically expand the breadth and depth of our Internet panels in Europe, Latin America, Asia and North America and as we replenish panelist attrition, which we experience in the normal course of business.

Depreciation and Amortization. Depreciation and amortization expenses (excluding amortization included in cost of revenues and panel acquisition expenses) for the year ended December 31, 2007 were $8.8 million, compared to $9.2 million for the year ended December 31, 2006, a decrease of $0.4 million, or 4.0%. Fluctuations in currency rates increased depreciation and amortization expenses by approximately $0.4 million, or 4.6%. This decrease in depreciation and amortization expense occurred as a result of reduced amortization of certain software applications and certain amortizable intangible assets acquired in the acquisition of OpinionSurveys, Rapidata, goZing and Ciao in late 2004 and early 2005 as these amortizable intangible assets continue to become fully amortized. This decrease was partially offset by increases in capital expenditures, including higher capital expenditures related to internal use software, which have a shorter estimated useful life than other capital expenditures. The internal use software expenditures relate primarily to:


• continuing development of our Unified Panel System, our Survey Management System, and other Internet survey solutions operating systems in North America;

• expansion of our North American Internet survey solutions operating systems to a worldwide enterprise system; and

• ongoing enhancements and software re-engineering in our comparison shopping segment’s operating systems.

In the near-term, we expect acquisition-related amortization to continue to decline, offset by increased depreciation and amortization related to the internal use software development and expanding infrastructure needed to support growth in our comparison shopping and Internet survey solutions segments.

Research and Development. Research and development expenses for the year ended December 31, 2007 were $4.5 million, compared to $3.9 million for the year ended December 31, 2006, an increase of $0.6 million, or 16.7%. Fluctuations in currency rates increased research and development expenses by approximately $0.2 million, or 5.1%. Research and development expenses increased as a result of increased research and development staff in our European businesses due primarily to the increased growth in our comparison shopping segment. In addition, during the latter part of 2006, and as part of separating the European businesses, we required additional personnel to separate and maintain our European technology platforms and to continue to integrate and develop new software applications to automate manual processes in our Internet survey solutions operating environment in both our North American and Ciao Internet survey solutions business platforms. Further, we increased spending on research and development in our comparison shopping segment in order to improve scalability of our infrastructure and enhance the content and user experience on our comparison shopping websites. We expect research and development expenses to increase in the future as we continue on the path of automating, evolving and improving our internal technologies.

Restructuring Charges. In December 2005, we announced a rightsizing plan which involved a restructuring and rightsizing of our North American business. We included in the year ended December 31, 2006, pre-tax restructuring expenses of approximately $0.2 million associated with office closings and personnel terminations. We have completed the restructuring activities under this plan and these restructuring expenses associated with our rightsizing plan did not have a material impact on our results of operations, cash flows, liquidity, or capital resources.

Other Income (Expense), Net. Other income, net amounted to $1.3 million for the year ended December 31, 2007, compared to other expense, net of $0.2 million for the year ended December 31, 2006, an increase in other income, net of $1.5 million. This increase is primarily related to gains on sales on marketable securities of approximately $1.1 million, and increased interest income of approximately $0.6 million, offset by increased losses of approximately $0.2 million related to the effects of currency rate changes on transactions denominated in currencies other than the recording currency of the environment where our subsidiaries operate. The increase in the gains on sales of marketable securities and interest income are the result of our increasing excess cash position, which we invest in a mix of cash equivalent investments and investments in marketable securities. The unrealized gains or losses on marketable securities are recorded in Accumulated Other Comprehensive Income (“AOCI”), and are reclassified to the statement of operations upon sale, when these become realized. In addition, during the year ended December 31, 2006, we incurred interest expense associated with capital lease obligations with Somerset Capital, the balance of which we paid off in March 2006.

Provision for Income Taxes. We recorded an income tax provision for the year ended December 31, 2007 of $6.6 million, compared to $4.0 million for the year ended December 31, 2006. Our effective tax rate was 33.7% and 32.2% for the years ended December 31, 2007 and 2006, respectively. The increase in the tax provision is primarily a result of our increased profitability.

In July 2006, the FASB released Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. We adopted FIN 48 on January 1, 2007 and recognized an increase of approximately $230,000 in the liability for unrecognized tax benefits. This additional liability resulted in an increase to the accumulated deficit of approximately $230,000, a decrease to long-term deferred tax assets of approximately $325,000 and a decrease to long-term income taxes payable of approximately $95,000 as of January 1, 2007.

In July 2007, German tax reform was passed that reduces the combined corporate and trade tax rates for businesses. This tax rate reduction became effective January 1, 2008. Due to the reduction in the overall German tax rate, our net deferred tax asset as of December 31, 2007 was required to be recalculated and, therefore, we reflected an increase in our overall net deferred tax asset of approximately $0.4 million during the year ended December 31, 2007. This increase was credited to provision for income taxes during the year ended December 31, 2007.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Results of Operations
Three Months Ended March 31, 2008 compared to Three Months Ended March 31, 2007
Consolidated Results

Net Revenues. Net revenues for the three months ended March 31, 2008 were $30.9 million, compared to $27.5 million for the three months ended March 31, 2007, an increase of $3.4 million, or 12.6%. Fluctuations in currency rates increased net revenues by approximately $1.6 million or 5.7%. Net revenues increased primarily as a result of our comparison shopping segment, which accounted for approximately $4.1 million. Our Ciao Internet survey solutions segment was flat period over period and our North American Internet survey solutions segment revenues declined by $0.6 million.
Net revenues at our comparison shopping business increased 60.3% as a result of increased traffic visitation by unique visitors, improved site content, increases in conversion rates of visitors to click-throughs, expanded product catalogs, increased merchant relationships, improved product search capabilities as well as growth in the core e-Commerce markets in Europe. Net revenues at our combined Internet survey solutions segments declined 3.0% due primarily to lower than anticipated client spending and to a lesser extent to continued pricing pressure.
Gross Profit. Gross profit for the three months ended March 31, 2008 was $24.1 million, compared to $20.3 million for the three months ended March 31, 2007, an increase of $3.8 million, or 18.7%. Gross profit for the three months ended March 31, 2008 was 78.0% of net revenues, compared to 74.0% for the three months ended March 31, 2007. Fluctuations in currency rates increased gross profit by approximately $1.2 million. Gross profit increased primarily due to the increased high-margin comparison shopping revenues and to reduced incentive costs, partially offset by higher outside sample costs and amortization expense.
We expect gross profit margin to remain variable from period to period as a result of shifts in product mix among full service, sample only, business-to-business, healthcare and projects requiring outside sample, which product mix remains largely unpredictable. Additionally, gross profit will be affected by the timing and amount of comparison shopping revenue recognized in each period. We believe our Internet survey solutions margins could experience downward pressure as a result of the increasingly competitive environment and the resulting pricing pressure in the Internet survey solutions segment. However, this impact could be reduced or offset by the high gross margin in the faster growing comparison shopping segment as the comparison shopping segment’s net revenues become a greater proportion of our consolidated revenues.

Selling, General and Administrative. Selling, general and administrative expenses for the three months ended March 31, 2008 were $20.9 million, compared to $12.9 million for the same period in the prior year, an increase of $8.0 million, or 61.3%. Fluctuations in currency rates increased selling, general and administrative expenses by approximately $0.9 million. Selling, general and administrative expenses increased primarily as a result of costs incurred in connection with investigating and defending against the class action lawsuit of $3.1 million, the litigation settlement charge of $2.0 million, increased compensation costs of approximately $0.7 million, higher facility and lease costs of approximately $0.6 million and increased advertising and promotion costs of approximately $0.5 million.
Selling expenses increased approximately $0.4 million for the three months ended March 31, 2008, primarily related to personnel costs including commissions and stock-based compensation.
Advertising and promotion costs increased approximately $0.5 million for the three months ended March 31, 2008, primarily related to advertising and marketing programs associated with our comparison shopping business, and to a lesser extent to higher marketing costs in our Internet survey solutions businesses.
General and administrative expenses increased approximately $6.2 million for the three months ended March 31, 2008, primarily as a result of the investigation and litigation costs of $3.1 million, the litigation settlement charge of $2.0 million, higher facilities costs of approximately $0.6 million and higher personnel costs of approximately $0.5 million.
Personnel costs associated with general and administrative expenses increased approximately $0.5 million for the three months ended March 31, 2008, primarily as a result of increased personnel compensation costs, increased stock-based compensation and increased benefit costs, offset slightly by reduced travel and entertainment costs.
Selling, general and administrative expenses as a percentage of net revenues increased to 67.7% for the three months ended March 31, 2008 from 47.3% of net revenues for the three months ended March 31, 2007. The additional litigation and investigation costs accounted for approximately ten percentage points of this increase, the litigation settlement charge accounted for approximately six percentage points of the increase and currency rate fluctuations accounted for approximately three percentage points of the increase. In the near term, except for the impact of further litigation costs, we expect selling, general and administrative expenses as a percentage of net revenues to decline as revenues increase during the year.
Panel Expense. Panel expense was $0.8 million for the three months ended March 31, 2008, compared to $1.0 million for the three months ended March 31, 2007, a decrease of $0.2 million, or 22.5%. Fluctuations in currency rates were immaterial in panel acquisition expenses in the current period. Panel expense decreased primarily as a result of our increased use of our Real-Time Sampling capability to obtain respondent data, resulting in lower production demand placed upon our panels. As noted in our discussion regarding gross profit, we experienced an increase in our Real-Time Sampling expense as a result of this production shift.
Panel expense was 2.6% of net revenues for the three months ended March 31, 2008 and 3.8% for the three months ended March 31, 2007. Except for the effects of amortization costs of acquired panel members, we expect our panel acquisition costs to remain variable from period to period as a percentage of revenues as we continue to utilize our Real-Time Sampling capabilities to supplement our panel production, and we strategically expand the breadth and depth of our Internet panels in Europe, Latin America, Asia, Eastern Europe and North America and as we develop new panels in Europe for use with our Unified Panel System.
Depreciation and Amortization. Depreciation and amortization expenses (excluding amortization included in Cost of revenues and Panel expense) for the three months ended March 31, 2008 were $2.3 million, compared to $2.2 million for the three months ended March 31, 2007, an increase of $0.1 million, or 6.9%. Fluctuations in currency rates increased depreciation and amortization expenses by approximately $0.2 million. Depreciation and amortization remained relatively flat as a result of certain software applications and certain of the amortizable intangible assets acquired as a result of our prior acquisitions in late 2004 and early 2005, had become fully amortized. This reduction was offset by increased amortization related to our higher capital expenditures, including higher capital expenditures related to internal use software, which has a shorter estimated useful life than other capital expenditures. The internal use software expenditures relate primarily to:

i) the continuing development of our Unified Panel System, our Survey Management System, and other Internet survey solutions operating systems in North America;

ii) the expansion of our North American Internet survey solutions operating systems to a worldwide enterprise system; and,

iii) ongoing enhancements and software re-engineering in our comparison shopping segment’s operating systems.
In the near-term, we expect acquisition-related amortization to continue to decline, but to be offset by increased depreciation and amortization related to the internal use software development and expanding infrastructure needed to support growth in our comparison shopping and Internet survey solutions segments.
Research and Development. Research and development expenses for the three months ended March 31, 2008 were $1.1 million, compared to $1.1 million for the three months ended March 31, 2007. Fluctuations in currency rates increased research and development expenses by $0.1 million in the current period. Research and development expenses decreased slightly as a result of lower compensation costs primarily in our North American operating segment. This decrease was offset by increased research and development staff in our European businesses due primarily to the increased growth in our comparison shopping segment and additional personnel required to operate the separate businesses post bifurcation and as we continue to integrate and develop new software applications to automate manual processes in our Internet survey solutions operating environment in both our North American and Ciao Internet survey solutions business platforms. Further, we expect to increase spending on research and development in our comparison shopping segment in order to improve scalability of our infrastructure and enhance the content and user experience on our comparison shopping websites. We expect research and development expenses to increase in the future as we continue on the path of automating, evolving and improving our internal technologies.
Other Income, Net. Other income, net remained relatively flat for the three months ended March 31, 2008 when compared to the same period in the prior year. Other income, net increased by $0.2 million due to higher interest income as a result of higher invested cash, and decreased by $0.2 million due primarily to the effects of currency rate changes on transactions denominated in currencies other than the recording currency of the environment where our subsidiaries operate.
(Benefit) Provision for Income Taxes. We recorded an income tax benefit of approximately $0.8 million for the three months ended March 31, 2008, compared to an income tax provision of $1.2 million for the three months ended March 31, 2007. The decrease in the tax provision primarily resulted from the favorable tax effect of the litigation and investigation costs and the litigation settlement charge incurred during the three months ended March 31, 2008.
Net (Loss) Income. Our net loss for the three months ended March 31, 2008 was $0.1 million, compared to net income of $2.0 million for the three months ended March 31, 2007. The decrease in net income was primarily the result of the litigation and investigation costs and the litigation settlement charge, partially offset by our increased revenues and resulting operating profit, primarily in our comparison shopping segment. Net loss available to common stockholders for the three months ended March 31, 2008 was (zero) $0.00 per share for basic and diluted, as compared to net income of $0.08 per share for basic and $0.07 per share for diluted for the three months ended March 31, 2007.
North American Segment Results

Gross Segment Revenues. Gross segment revenues for the three months ended March 31, 2008 were $15.0 million, compared to $15.6 million for the three months ended March 31, 2007, a decrease of $0.6 million, or 3.7%. Gross segment revenues decreased primarily as a result of lower than anticipated client spending in the United States and to a lesser extent to continued pricing pressure.
Segment Operating Income. Segment operating income for the three months ended March 31, 2008 was $2.6 million, compared to $2.8 million for the three months ended March 31, 2007, a decrease of $0.2 million or 6.7%. Segment operating income decreased primarily as a result of decreased revenues, partially offset by decreased costs, primarily in the areas of selling, marketing and business development teams, and lower consulting costs.
Ciao Internet Survey Solutions Segment Results
The following table sets forth the results of our Ciao Internet survey solutions operating segment based on the amounts and percentage relationship of the items listed to gross segment revenues for the period presented.

CONF CALL

Cindy Brockhoff

Good afternoon everyone, and thank you for joining us. Welcome to Greenfield Online's first quarter 2008 financial results teleconference. On the call with me today are Albert Angrisani, President and Chief Executive Officer, and Bob Bies, Executive Vice President and Chief Financial Officer. The format for today's call will include formal remarks by both Al and Bob on the state of the business, and our first quarter 2008 performance. After the formal remarks, Al and Bob will be available for questions.

We would like to take this opportunity to remind you that certain statements made during this conference call are forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. These statements include predictions and guidance related to the company's future financial performance, other business and operating metrics, and involves a number of risks, known and unknown that could cause actual results, performance, or achievements of the company to be materially different from the expectations discussed on this call. Factors that could cause the company's results to materially differ from the forward-looking statements made today, and which are incorporated by reference herein, are more fully described in today's press release, as well as the company's SEC filings. The forward-looking statements made herein are only made as of the date of this presentation, and the company undertakes no obligation to publicly update them to reflect subsequent events or circumstances.

I would also like to mention at the outset that we will be discussing non-GAAP financial measures, including adjusted EBITDA, operating margins, excluding one-time charges, operating free cash flow, and segment operating income. These items may be referred to as pro forma, and a reconciled to GAAP financial data in our press release issued today.

I will now turn the call over to Greenfield Online's President and CEO, Al Angrisani. Please go ahead now, Al.

Al Angrisani

Thank you Cindy; good afternoon everyone, and thank you for joining us today. The results we reported today reflect the overall strength of our global footprint, and our diversified business model, which enables us to deliver total net revenue growth of approximately 12.6%. At the same time, pro forma adjusted EBITDA, excluding charges related to the Audit Committee investigation, and charges related to the proposed settlement of the securities class action litigation grew approximately 14.5% over the prior year, while we continue to invest in our business, and generated increase cash.

Our first quarter results also reflected mixed segment performance. On a positive note, our comparison shopping business exceeded expectations, delivering over 60% revenue growth, and segment operating margins of 53.6%, including our investment in the US expansion.

On the flip side, the global ISS business got off to a slower than expected start. However, our revenue outlook is improving for Q2 based on the year-over-year growth of our backlog to date in both the US and Europe. Accordingly, we are reaffirming our annual revenue guidance.

Finally, and importantly, on May 7 we entered in to an agreement in principal to settle the pending class action securities litigation. There are more details about the settlement in today's press release, but let me say this; putting this behind us is a positive event for the company and its shareholders. It is beneficial for us to enter in to this proposed settlement agreement in order to avoid costly and time consuming litigation, not to mention further management distraction.

The terms of the proposed settlement, which contains no admission of any liability or wrong doing on the part of any defendant, are subject to the completion of the confirmatory discovery by plaintiff's counsel. The negotiation of definitive documentation and approval by the court, and include a cash payment of $4 million, half of which expect to be funded by insurance proceeds.

We are recording a one-time net charge of $2 million in our interim financial statements for the quarter ended March 31, 2008.

I would like to move on now to discussing our high level financial results, as well as our progress on key 2008 initiatives. After that, I'll turn the call over to Bob to review the financials in more detail.

So let me now take you through the high level financials for the quarter. Total first quarter revenue was $30.9 million, an increase of approximately 12.6% over the same period last year, of which approximately $1.6 million, or 5.7% was due to currency effects.

Gross profit was $24.1 million, or 78% of revenue, which compares with $20.3 million and 74% of revenue in Q1 2007.

Non-GAAP pro forma adjusted EBITDA was $7.8 million, or 25.3% of revenue, excluding charges of $2.9 million related to the Audit Committee investigation and the $2 million charge related to the proposed settlement of the class action securities litigation, but including class action litigation defense costs of $200,000. This compares to non-GAAP adjusted EBITDA of $6.8 million, or 24.9% of revenues in Q1 2007, which include approximately $300,000 of non-recurring expenses related to a bifurcation of the European business and other strategic initiatives.

Let me take a minute now to highlight the results of our two key businesses, as well as discuss progress on our key initiatives.

With regard to comparison shopping, Daniel Keller and Stephan Musikant and the CSS Team again delivered very strong revenue and profitability for the first quarter of 2008, with 60.3% third-party revenue growth over the prior year, clearly exceeding our expectations.

Revenue growth continues to be propelled by the beneficial impact of page optimization, increased offers, and merchant density, resulting an improved conversion rates and traffic monetization.

As you know, we get lots of questions each quarter regarding traffic trends when the numbers are published. We'd like to remind everyone that growth in revenue is a function of improvement across three things; traffic, CPCs, and conversion rates combined. No one single factor alone drives CSS revenue performance.

With regard to total comparison shopping operating income, it was $5.9 million, or 53.6% of revenues. The positive trend reflects the growing contribution of comparison shopping business to our overall profitability, which we expect to continue. In fact, this quarter, comparison shopping segment operating income totaled 59.2% of the operating income on all segments.

Moving on, with regard to the Ciao USA launch, I am pleased to report that we are on target with the Ciao USA business launch. Ciao USA added more than 150 merchants, since we reported our results on February 7. And we have experienced positive visitor traffic, averaging more than 460,000 unique visitors per month according comScore Media Metrics.

So far, I believe our risk managed investment in Ciao USA is paying off as a smart investment that will help us pursue our long-terms strategic goal of becoming a leading global competitor in the comparison shopping industry.

Now, moving on with regard to our Global Survey or ISS business. As I mentioned briefly, we did not meet our revenue objectives for Global ISS in Q1. Why? As you may recall, our first quarter backlog is stated on the February 7 earnings call was up only nominally versus the prior year, and we did not see a pickup in bookings until March.

Additional factors in my opinion include an apparent slowing of the US economy that to some degree may have impacted the purchasing behavior of end users and marketing research companies. And finally, significant management distraction in the ISS business, as the team focused on assisting the Audit Committee investigation related to the class action lawsuit.

With regard to the global ISS business in Q1, North America ISS third-party revenue was $14.8 million, and was down approximately 4.1% versus prior year. Ciao Surveys delivered third-party net revenues of $5.3 million, which was basically flat versus the prior year. However, based on our current revenue visibility, we remain cautiously optimistic about the second quarter.

As for a brief update on two key ISS initiatives; I am very pleased to report that we are currently processing more than 80% of our European ISS business on our new UPS platform. We are currently on schedule to operate on one unified survey platform by June 30 of this year. And finally, we also continue to view Asia as a growth opportunity, and are very pleased with the continued progress that Andy Ellis and his team are making.

With that said, now let me turn to guidance for the year. For the full fiscal year 2008, our guidance is as follows; as outlined in today's press release, when referring to pro forma guidance, these figures exclude the effects of approximately $2.9 million in expenses related to the Audit Committee investigation incurred during the first quarter, as well as the $2 million charge related to the proposed settlement of the class action securities litigation, but includes approximately $200,000 of class action related to defense costs.

Our guidance for total revenue remains at the range of $143 million to $153 million. We are updating our expected range for gross margins to approximately 75% to 76% from the previous range of 74% to 75%. We are updating our guidance ranges for non-GAAP adjusted EBITDA to the following percentage ranges; pro forma non-GAAP adjusted EBITDA 27% to 28%; as reported non-GAAP adjusted EBITDA 23% to 25%.

The guidance range for depreciation and amortization remains $13.7 million to $14.2 million. The guidance range for charges related to stock-based compensation is updated to a range of $3 million to $3.5 million, from $2.7 million to $3.5 million.

We are updating our guidance ranges for effective tax rate to the following percentage ranges; pro forma 28% to 30%, as reported 25% to 27%.

And with that, I will turn the call over to Bob to provide you with more details on the fourth quarter financials, and the breakout of our business segments; Bob?

Bob Bies

Thanks Al, good afternoon everyone. Today I will take you briefly through the consolidated financials, and we'll try to give some additional color on this busy quarter, and then I will review the numbers on our three segments.

Before we get started, at certain times today, I will be discussing pro forma results. Pro forma results exclude approximately $2.9 million of expenses related to the Audit Committee investigation, as well as $2 million net charge related to the proposed settlement of the class action litigation, but including approximately $200,000 of defense costs associated with the class action litigation.

Before I dive in to the details of the quarter, I'd like to stay at 30,000 feet and reflect upon our performance for the quarter and our business model.

Firstly, regarding the class action securities litigation, we are glad to bring the issue of litigation to closure. While we take the issues deeply seriously, we also from a business model perspective look through the economic impact of the event, and provide financial users with pro forma views of our performance in order to better understand the underlying trends in our business.

Secondly, with respect to the ISS performance, well, the quarter was soft, and many may view the quarter as reflective of sensitivity to economic headwinds. We still believe that there are three fundamental reasons why the business could perform well in this environment.

The first is, we have looked at the empirical data since 1990 on the worldwide domestic market media and public opinion research spending, sourced from inside research in SMR, and the data suggests that this market does not suffer significant negative effects in economic downturns.

Second is, we still believe that the secular shift from offline to online is happening in ISS. Domestically, we believe we are in inning seven of a nine inning game, and in the rest of the world, we believe we are in the third inning of a nine inning game. This going to provides us with additional boost to revenue growth that we believe it can help offset the dampening effect of a down economy.

And finally, the cost of online data is still less expensive than offline data, and we believe that the natural response of our clients will be to move to online data even further to offset the impact of lower revenues in their business models during economic headwinds.

While these factors are perhaps more academic than experiential arguments, because our new business model has yet to experience economic headwinds, they seem logical and well founded to us.

Thirdly, as you saw through the data we provide you in this quarter; please have a look at our margins. We believe they are superb in the CSS business, and in the ISS business, we have costs well controlled, and we believed we are position for EBITDA flow through, as revenue growth is restored for the remainder of the year.

Fourth and final is, our comparison shopping business; we continue to be bullish in our prospects in this business. For those who are new to our story, this is a company we purchased in April of 2005 as part of the Ciao acquisition with approximately $6 million in 2004 full year revenues, and $2.7 million of 2004 full year EBITDA. That has generated $10.8 million in revenues and $5.9 million in EBITDA in a single quarter three short years later. This growth has been under the tutelage of Daniel Keller, Stephan Musikant, and the very talented comparison shopping Team.

Now in to the details; regarding the consolidated financials, on the revenue front, as Al previously mentioned total net revenue for the first quarter of '08 was $30.9 million, which represented 12.6% year-over-year revenue growth, of which approximately $1.6 million or 5.7% was due to favorable currency effects.

Turning to gross profit; gross profit was $24.1 million or 78% of revenue, as compared to $20.3 million or 74% of revenue in the first quarter of 2007.

On a year-over-year basis, gross profit dollars increased primarily due to the increase in high margin comparison shopping revenues, and also to lower supply chain costs as a percentage of revenues in the Internet survey solutions segment. The balance of '08, we expect gross profit margins will be in the 75% to 76% range.

Turning over to SG&A, for the first quarter of '08, SG&A expense was $20.9 million or 67.7% of revenue, including approximately $2.9 million in expenses associated with the Audit Committee investigation, and the $2 million charge associated with the proposed settlement of the class action securities litigation, and including the $200,000 in class action litigation defense costs.

Pro forma, however, SG&A expense was $16.1 million or 51.9% of revenue. This compared to $13 million or 47.3% of revenue for the same period a year ago, and 50.8% for the fourth quarter of '07.

When compared to the prior year period, pro forma SG&A expenses increased by approximately $3.1 million, primarily as a result of the following; approximately $900,000 associated with foreign exchange impact; approximately $550,000 in incremental corporate overhead expense, such are rent and utilities primarily related to bifurcation; approximately $500,000 related to increased marketing and advertising expenses, primarily in Comparison Shopping segment; approximately $500,000 related to higher payroll costs in G&A associated with increased headcount and recruiting, primarily in Europe in our comparison shopping business; approximately $350,000 in incremental selling expenses primarily payroll in the Comparison Shopping segment as they build out sales headcount. And again, approximately $200,000 in class action litigation defense costs.

So in terms of targeting SG&A as a percentage of revenues for the balance of '08, we expect on a pro forma basis SG&A to range from 46% to 47% of revenues for the entire year, and that excludes the Audit Committee investigation expense of $2.9 million and the proposed litigation settlement charge of $2 million.

Turning over to panel expense, for the first quarter of '08, panel expenses totaled $812,000. This compares with approximately $1 million in the prior year. The decrease in panel build in 1Q '08, as compares with 1Q '07 was due to a shift of a portion of our production to real-time sampling from the panel.

For '08, we continue to expect that total panel expense will increase to support the transition to UPS in Europe, as well as the geographic expansion of the ISS business in to Asia, and should run in the 3% of revenues range.

Turning over to depreciation and amortization; this expense totaled approximately $2.3 million for the first quarter. There is additional depreciation and amortization in cost of revenues in panel expense related to internal use software, and acquired panel assets. In total, DA amounted to approximately $3.3 million for the quarter, compared to $2.9 million for the same period in the prior year.

Turning over to R&D; R&D expense was approximately $1.1 million, were approximately 3.7% of revenue, and essentially in line with our expectations for the first quarter as we continue to invest in developing our core operating systems in both the ISS and the CSS segments of our business, as well as to support the build out for Ciao USA.

Operating loss; total operating loss for the first quarter of '08 was $1.1 million or 3.4% of revenue, including the impact again of the Audit Committee investigation expenses and the charge related to the proposed settlement of the class action securities litigation, as compared with operating income of $3 million, or 11% of revenue in the prior year. However, again on a pro forma basis, pro forma operating income was $3.8 million or 12.3% of revenue.

Turning over to adjusted EBITDA; for the first quarter of '08, pro forma non-GAAP adjusted EBITDA was $7.8 million, or 25.3% of revenue, and compares with non-GAAP adjusted EBITDA, including approximately $300,000 of non-recurring expenses related to the bifurcation of the European business, and other strategic alternatives of $6.8 million, or 24.9% of revenue in the prior year.

And then finally, net loss for the first quarter of '08 was approximately $100,000, as compared with net income of about $2 million for the prior year, and again, on a pro forma basis, net income for the first quarter of '08 was $2.8 million.

Turning to cash flow, net cash provided by operating activities for the first quarter of '08 was approximately $6 million, and compares to $6.4 million for the same period last year. Net cash provided by operating activities for 1Q '08 was offset by an incremental tax payment of $4.1 million, which is mostly in Germany.

Non-GAAP operating free cash flow was $3.9 million for the first quarter of '08, and compares to $4.7 million for the same period last year. Non-GAAP operating free cash flow was negatively impacted by the incremental cash income tax payments that I just mentioned.

Turning over to the balance sheet; we ended the first quarter with cash and marketable securities of about $65 million, up from approximately $58 million at the end of the fourth quarter '07, and up from approximately $43 million at the same period a year ago.

Looking at our backlog and bid volume, as of today, ISS second quarter backlog defined as signed contracts for online survey projects that we expect to be completed and delivered to clients during the three months ended June 30, '08 is approximately $20.5 million, and excludes comparison shopping services and advertising revenues. This compares with ISS second quarter backlog of approximately $18.2 million as of May 8, 2007, and ISS first quarter backlog of $16 provided at February 7, '08.

As a reminder, this is a revised backlog figure for the prior period, and excludes comparison shopping service and advertising revenues. We advise caution regarding the use of year-over-year backlog as an indicator of second quarter revenue growth rates.

Bid volume for the three months ended March 31, '08 was approximately $136 million, and compares with bid volume of $138 million for the same period one year ago.

And finally, let's turn to segment information. Beginning with Ciao comparison shopping or the CSS segment, first quarter of '08 segment revenue for CSS segment totaled approximately $11 million, including inter-segment revenues for the sale of panelists sourced through the CSS portals. Excluding inter-segment revenues, CSS revenues totaled $10.8 million, representing growth of 50.3% or 43.1% excluding the impact of currency.

First quarter '08 non-GAAP CSS segment operating income was approximately $5.9 million, or 53.6% of revenue.

Looking at the unique visitor trends in the first quarter, Ciao comparison shipping had according to data compiled by comScore Media Metrics unique monthly visitors totaling 21.1 million, 18.1 million, and 18.6 million in the aggregate for the months of January, February, and March in the European countries of Germany, France, Italy, Spain, the UK, Sweden and The Netherlands. For comparative purposes, unique visitor data for the same periods in '07 were 16.2 million, 15.2 million, and 16.9 million respectively. The US also, according to comScore Media Metrics, unique visitors were approximately 470,000, 460,000, and 490,000 for the months of January, February and March of '08.

Regarding Ciao active merchant trends, as of March 31, '08, europeanciao.com had more than 1,900 active merchants, with active merchants being defined as merchants who display offers on comparison shopping portals, and accept click-throughs. This compared to 1,700 on December 31, '07.

As of March 31, '08 Ciao USA had more than 190 merchants, and compares to approximately 40 merchants that we reported on February 7, '08.

Moving to the North America ISS segment, first quarter '08 gross segment for North America ISS was approximately $15 million, including inter-segment revenue representing a decline of approximately 3.7% over the prior year.

First quarter '08 non-GAAP segment operating income for North America ISS was approximately $2.7 million, or 17.7% of revenues compared to $2.8 million, or 18.2% for the first quarter of '07.

Lastly, turning to the European ISS segment, first quarter '08 growth segment revenue for the Ciao Surveys was approximately $6.8 million. Approximately $1.6 million of this segment's revenues were related to European sample supplied to the North American customers through our North American Survey segment.

First quarter '08 non-GAAP segment operating income for Ciao Surveys was approximately $1.4 million, or 20.9% of revenue, compared to $1.9 million, or 27.6% of revenues for the first quarter of '07.

And with that, I'll turn the call back to Al.

Al Angrisani

Okay Bob, very quickly thank you very much, and as mentioned at the outset on the call, our global diversified business model helped deliver 12.6% total company revenue growth over the last year.

It's gratifying, mostly it's very gratifying and exciting to see the comparison shopping business continuing to outperform all of our expectations, and delivering an increasing contribution to our profitability.

It was a very busy quarter with many things happening in it. I think we got it all in front of you, and we're pleased with our results and excited about the next couple of quarter.

Thank you very much, and Cindy I'll give it back to you.

Cindy Brockhoff

Thank you, and with that operator, we're going to open up the floor to questions. As a reminder to participants, please ask your questions one at a time, and try to refrain from long-listed questions all at once. We promise to circle back and get to all your questions.

And with that operator, we are ready to begin; we'll take the questions in order. Thank you

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