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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended June 30, 2003

or

For the transition period from                                  to                                 

Commission file number 000-33367

UNITED ONLINE, INC.
(Exact name of registrant as specified in its charter)

(805) 418-2000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.0001 per share
Preferred Stock Purchase Rights

        Indicate by check mark whether the registrant (1) has filed all documents and reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

        As of December 31, 2002, the aggregate market value of voting stock held by non-affiliates of the registrant, based on the last reported sales price of the registrant's common stock on such date reported by the Nasdaq National Market, was approximately $639,899,217 (calculated by excluding shares beneficially owned by directors and officers). As of July 15, 2003, there were a total of 42,484,434 shares of the registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

        The information required by Part III of this annual report, to the extent not set forth herein, is incorporated herein by reference to the registrant's definitive proxy statement relating to the 2003 annual meeting of stockholders to be filed with the Securities and Exchange Commission not later than 120 days after the end of the registrant's fiscal year.

UNITED ONLINE, INC.
INDEX TO FORM 10-K

For the Year Ended June 30, 2003

        In this document, "United Online," the "Company," "we," "us" and "our" collectively refer to United Online, Inc. and its wholly-owned subsidiaries.

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        This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements based on our current expectations, estimates and projections about our operations, industry, financial condition and liquidity. Statements containing words such as "anticipate," "expect," "intend," "plan," "believe," "may," "will" or similar expressions constitute forward-looking statements. These forward looking statements include, but are not limited to, statements about the Internet access market, our user base, the advertising market, operating expenses, operating efficiencies, revenues, capital requirements and our cash position. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Such statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. The sections entitled "Risk Factors" in this Annual Report on Form 10-K and our other filings with the SEC set forth some of the important risk factors that may affect our business, results of operations, financial condition and cash flows. Statements indicating factors that we believe may impact our results are not intended to be exclusive. We undertake no obligation to revise or update publicly any forward-looking statements, other than as required by law.

PART I

ITEM 1. BUSINESS

Overview

        We are a leading Internet service provider ("ISP") offering consumers free and value-priced Internet access and email. United Online commenced operations on September 25, 2001, following the merger of NetZero and Juno into two of its wholly-owned subsidiaries (the "Merger"). Our services, currently offered through the NetZero, Juno and BlueLight Internet brands, are available in more than 6,500 cities across the United States and Canada. In addition, we offer marketers numerous online advertising products as well as online market research and measurement services. At June 30, 2003, we had over 2.5 million subscribers to our pay services and approximately 5.2 million active users, including pay subscribers. "Active" users include all pay subscribers and those free users who have logged onto our services during the preceding 31-day period.

        Juno launched its first service, a free dial-up email service, in April 1996 and began offering free Internet access service in 1999. NetZero launched its first service, a free Internet access service, in October 1998. These free services were predicated on generating advertising revenues to fund their operations. Due to a variety of factors, including reductions in online advertising rates, we began offering pay Internet access services and took various measures to limit the cost of providing our free services.

        Juno started offering pay services in 1998, NetZero began offering pay services in January 2001 and we acquired the Internet access assets of BlueLight.com LLC in November 2002. The NetZero and Juno pay services differ from their respective free services in that the hourly and certain other limitations set for the free services do not apply. In addition, the free services incorporate a number of advertising initiatives, including a persistent on-screen advertising banner, which are not included on the pay services. Our pay services are offered through various pricing plans, generally $9.95 per month. Recently we began offering "accelerated" dial-up services for $14.95 per month. Our accelerated dial-up services are enhanced with compression, caching and other technologies that reduce the average time for certain Web pages to download to users' computers when compared to standard dial-up services. At June 30, 2003, subscribers to our accelerated dial-up services comprised approximately 8% of our total pay subscriber base.

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Industry Background

        It has been estimated that, as of the end of 2002, approximately 60% of U.S. households had some form of Internet access, representing an estimated 66 million to 70 million consumer Internet access accounts. Of these households, an estimated 48 million to 54 million accessed the Internet using a narrowband, or "dial-up," connection, with the remainder using some type of "broadband" connection.

        While there are several thousand ISPs in the U.S., a small number of large, nationwide providers dominate the Internet access market. The top ten ISPs currently account for more than 90 percent of the U.S. dial-up market, and the majority of these providers charges in excess of $20 for their standard monthly dial-up service, which we refer to as a "premium-priced" dial-up service. Many premium-priced services offer a variety of ancillary services for no additional fee, including unlimited telephone customer support, multiple account names and email addresses, Web storage and, in some cases, content. While some major dial-up providers offer discounted pricing plans, many of these plans are subject to relatively low monthly usage limits and are marketed to consumers on a limited basis, and thus represent a small percentage of their accounts. A number of ISPs currently offer nationwide, value-priced Internet access as their primary consumer offering, and NetZero and Juno are currently the only nationwide ISPs that also offer free Internet access services. Broadband access, which includes cable, digital subscriber lines ("DSL"), satellite and wireless, generally offers users significantly faster connection and download speeds than dial-up access for a substantially higher standard monthly fee, currently ranging from an estimated $35.00 to $55.00 per month.

        The number of U.S. households using broadband has grown significantly over the last few years and is expected to continue to grow. Many industry analysts estimate that, as a result of broadband adoption, the total number of dial-up accounts in the U.S. has begun to decline and will continue to decline. While United Online's pay subscriber base has grown significantly, a number of the major premium-priced providers have recently experienced declines in their user bases. We believe that the rate of segmentation of the Internet access market among premium-priced dial-up, value-priced dial-up and broadband services will depend upon a variety of factors, including (i) broadband providers' ability to reduce pricing, bundle related communication services and expand geographic coverage, (ii) future consumer demand for applications that require more bandwidth, such as video and music applications, and (iii) consumer price sensitivity in a maturing Internet access market.

        We believe that an increase in consumer price sensitivity could result from the potential commoditization of Internet access as the market matures as well as from potential changes in the demographics of Internet users. We believe the majority of future growth in the U.S. Internet access market may be driven by a significant increase in lower-income households accessing the Internet, where penetration rates have been lowest. For these reasons, we believe that value-priced Internet services, like those offered by United Online, are well positioned to grow and increase their share of the U.S. dial-up Internet access market at least in the near term.

        In recent months, a number of ISPs, including NetZero and Juno, began offering accelerated dial-up Internet access services. These services operate using a standard dial-up Internet connection and enable users to download certain Web pages faster than standard dial-up services. While these services are relatively new and their adoption rate is difficult to estimate, these services may be attractive to many consumers as an alternative to more expensive broadband offerings. However, these services do not provide certain of the benefits of broadband services, such as continuous connections and faster downloads of music and video files, and in some circumstances result in some degradation of image quality. Several companies also offer software to accelerate a dial-up connection, regardless of the ISP. Pricing of these accelerated dial-up products and services varies significantly among ISPs and software providers. Our accelerated services are priced at $14.95 per month. AOL Time Warner and EarthLink, however, have recently announced that they will offer accelerated services as part of their

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premium-priced dial-up services at no additional charge, which may result in pressure on us and other providers to reduce the pricing of these services.

        We believe that the business of providing Internet access services is affected somewhat by seasonality. Internet usage generally declines during the spring and summer months and increases in the fall and winter months. In the past, we have experienced relatively more new user sign-ups and increased usage in the winter months compared to the summer months.

Sources of Revenue

        We generate revenue from billable services and advertising and commerce transactions.

Billable Services Revenues

        Billable services revenues were $247.8 million, or 89% of total revenues, for fiscal 2003, compared to $141.0 million, or 84% of total revenues, for fiscal 2002. Billable services revenues consist primarily of monthly fees charged to subscribers for dial-up Internet access services and, to a lesser extent, fees charged to users for live telephone technical support.

        Our pay services have been offered under a number of pricing plans, ranging from $1.95 to $29.95 per month. Currently, our most common pricing plan is $9.95 per month. Recently we began offering accelerated dial-up services for $14.95 per month. In general, we charge our subscribers in advance of providing the service, which results in the deferral of billable services revenue to the period in which the Internet access services are provided. We generally charge our users $1.95 per minute for live telephone technical support. We have experimented with a variety of pricing plans both in connection with offers extended to some of our existing users and through external marketing channels. We may continue testing a variety of pricing plans in the future to determine their impact on profitability, subscriber acquisition, conversion rates of free users to pay subscribers and subscriber retention rates. We intend to continually evaluate the desirability and effectiveness of our pricing plans and may, in the future, make changes to these plans. We may also offer additional fee-based products and services, as well as a wide range of discounted flat-rate plans and promotions, such as a free month of service or a discounted rate for an initial or prepaid period.

Advertising and Commerce Revenues

        Advertising and commerce revenues were $29.5 million, or 11% of total revenues, for fiscal 2003, compared to $26.5 million, or 16% of total revenues, for fiscal 2002. Our advertising and commerce revenues are generated from both our pay subscribers and free users.

        We are able to designate the initial Web site viewed by our users during an Internet access session. This Web site, or "start page," displays sponsored links to a variety of content, services and products. We also display a toolbar on users' screens throughout their online sessions that is always visible regardless of the particular Web site they visit. The toolbar contains search functionality and a variety of buttons, icons and drop-down menus. On our free services, the toolbar is larger than on our pay services and also contains banner advertisements. We generate revenues from the start page and the toolbar by displaying, or users clicking on, banner, text-link and other advertisements that are linked to advertisers' and sponsors' Web sites, or by users utilizing functionality offerings such as Internet search services.

        We also generate advertising and commerce revenues by users clicking on, or by displaying, rich media advertisements in a small window on the computer screens of certain users while they make a dial-up Internet connection and immediately prior to terminating their connection; by delivering email messages on behalf of advertisers or by users clicking on such messages and being referred to sponsors'

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Web sites; by enabling customer registrations for partners; and by providing third parties with data analysis and other market research services, such as surveys and questionnaires.

Marketing and Subscriber Acquisition

        Our marketing efforts are focused primarily on attracting pay subscribers and building our brands. These efforts include television, Internet, sponsorships, radio, print and outdoor advertising. Our marketing department consists of marketing management, media, creative services, Web development, strategic alliances and business development personnel. We produce a significant amount of our marketing materials in-house, using state-of-the-art design computers and graphics program techniques.

        In addition to our traditional marketing activities, we view our free services as an effective component of our pay subscriber acquisition strategy. While we have not spent significant marketing resources on our free services since the Merger and have experienced a decrease both in our active free user base and in the number of people signing up for free services, our free user base continues to be a significant source of new pay subscribers. Our active free user base and the number of users who convert from our free services to our pay services may continue to decrease, particularly if we do not actively promote our free services in the future.

        We use a variety of distribution channels to promote our pay services. Prospective users can access the software necessary to run our services by either downloading it from the Internet or by using a compact disc ("CD") to install it on their computers. Because the initial download of our software can be done in less than two minutes using a standard dial-up connection, we currently do not rely extensively on the costly practice of widespread distribution of CDs, which is a common practice of many of our major competitors. Our traditional marketing activities are designed to drive prospective pay subscribers to either download our software from our main Web sites or to call and order our services, or a CD, by telephone.

        We have also entered into a variety of distribution relationships where third parties assist in the distribution of our software. Such arrangements generally include distribution of our software in conjunction with their services and download links to our services on their Web sites. In most cases we pay a per subscriber acquisition fee to these distributors. We intend to continue to evaluate and engage in a variety of distribution channels to enable us to make our services known and available to a larger population of potential users.

Billing

        Most of our subscribers pay for our Internet services with a credit card, but subscribers may also pay for their service with a personal check or money order or may elect to be billed through their local telephone company. Subscribers who elect to pay with a personal check or money order are currently required to sign-up for one of our multi-month payment plans. Fees charged to users for live telephone technical support are generally billed on a per-minute basis. Users may pay for telephone technical support with a credit card or may elect to be billed through their local telephone company.

        We utilize a combination of third-party and internally developed software applications for customer billing. Customer billing is a complex process, and our billing systems must efficiently interface with third-parties' systems, such as our credit card processor's system. Our ability to accurately and efficiently bill and collect payment from our users is dependent on the successful operation of our billing systems and various third-party processors. In addition, our ability to offer new pay services or alternative payment plans is dependent on our ability to customize our billing system.

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Customer Support

        Our customer support infrastructure consists of internal personnel, including employees at our facility in Hyderabad, India, and third parties to whom we outsource selected support services, including telephone technical support. We offer a variety of online and offline "self-help" tools, including our offline "Quick Help" software that is loaded onto a user's computer when the service is initially installed. This tool can be accessed without connecting to our services and provides valuable troubleshooting for connection-related inquiries. Our Web site, automated email response system and self-help tools are all designed to provide comprehensive tutorials, advice, tips, step-by-step solutions and answers to many frequently asked questions. These self-help tools are also designed to assist users in updating and verifying billing information, downloading and operating our software and setting up their email accounts. In addition, we provide traditional email support where our personnel generally respond to users within a day of receiving an inquiry.

        We offer telephone technical support billed on a per-minute basis and telephone billing support for free. We monitor the effectiveness of our user support functions and measure performance metrics such as average hold time and first call resolution and abandonment rates. Communications with users are logged and categorized to enable us to recognize and act on trends. An internal quality assurance team monitors the work of our vendors and provides feedback to improve their skills and establish consistency throughout our user support functions.

Technology

        Our services are provided through a combination of internally developed and third-party software, industry standard hardware and outsourced network services. We have developed software to enhance the functionality of the components of our services, including user connectivity, billing, email, customer support and targeted advertising. We maintain data centers in multiple locations around the country with redundant systems to provide high levels of service availability and connectivity. We outsource the majority of our data center services and all of our bandwidth and managed modem services. We have integrated many aspects of the NetZero, Juno and BlueLight Internet services, which has enabled us to provide higher levels of service to our users while reducing per-user telecommunications and network operating costs.

        In order to utilize our services, users generally are required to install our client software onto their computers. This software allows us to manage and enhance connection quality, deliver important user messages and upgrade users with new features and functionality. We also use our client software to collect important data regarding the quality of dial-up connections so that we can quickly resolve network problems that may occur. The client software also contains our internally developed "autodialer" technology that presents users with a list of phone numbers for their area and helps to ensure users are connected to a cost-effective and reliable network. Our client software also enables us to deliver targeted advertising and collect other user data.

        One key feature of our client software is the initial download size. We have developed an initial client application that downloads to the user's computer in less than two minutes over a standard dial-up connection. Once installed, a user can create an account with us and get connected to the Internet. The remaining portion of our client software is then downloaded to the user's computer over time during future Internet sessions. We recently released new client software that includes accelerated dial-up services that is integrated with our client software for Microsoft Windows. Our client software currently operates on the Windows 95, Windows 98, Windows 2000, Windows ME, Windows XP, Windows NT 4.x and Mac OS X operating systems.

        Another major component of our technology is our server software, written primarily in Java and C++ software code, which consists of a group of software applications running on multiple servers that manage each user's account and online sessions. Our server software interacts with the client software

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to send and receive information such as authentication data, phone lists, advertisements and other usage data. Database servers store session information, user information and advertisement display and click data. Advertisement targeting servers manage the advertising inventory and determine which advertisements users will view and which will be downloaded to users' computers during their online sessions. Other major server software systems include our email server software, our accelerated dial-up services server software and our billing server software.

        We license a number of our software applications and components. Our billing system is based on a software application that is licensed from Portal Software, Inc. and our customer support system utilizes a software application that is licensed from Remedy, a BMC Software company. The majority of our database systems runs on Oracle database applications and we use Oracle financial and human resources management software for internal administrative purposes. We license Sun Microsystem's Java technology for our client and server software applications. Our accelerated dial-up services use software technology components licensed from Slipstream, Inc.

        We protect our technologies and trademarks through a combination of patent, copyright, trade secret and trademark law. We have filed numerous patent applications relating to a variety of business methods and technologies. We generally enter into confidentiality or license agreements with our employees, consultants and corporate partners, and generally control access to, and distribution of, our technologies, documentation and other proprietary information.

Competition

        Competition for Subscribers.    Competition for subscribers of Internet access services is intense. We compete with established online service and content providers such as AOL Time Warner and The Microsoft Network; independent national ISPs such as EarthLink; companies combining their resources to offer Internet services in conjunction with other services such as Yahoo! and SBC Internet Services, and AOL Time Warner and Walmart.com; national communications companies and local exchange carriers such as AT&T WorldNet, Qwest Communications International, Inc. and Verizon; cable companies such as Comcast Corporation, Cox Communications, Inc., Charter Communications, Inc. and Adelphia Communications Corporation; local telephone companies; and regional and local commercial ISPs. We also compete against other companies that offer services or products such as personal computers, bundled with, or as promotions for, Internet access services. We believe that the primary competitive factors determining success in the market for Internet users include price, a reputation for reliability of service, effective customer support, easy to use and reliable software, geographic coverage and scope of services. Other important factors include the timing and introduction of new products and services as well as general economic trends. While we believe that we compete favorably with respect to price and most of these factors, many of our competitors have an advantage over us with respect to specific factors, particularly customer support and scope of services.

        Our standard monthly pricing is currently much lower than the standard monthly pricing of most of our major competitors. Certain significant competitors, however, are engaging in more aggressive pricing of their dial-up services either under their primary brands or alternate brands and some competitors do not charge more for their accelerated dial-up service. We cannot assure you that this increased competition will not adversely impact our ability to maintain or grow our pay subscriber base, particularly for our accelerated dial-up services. We also cannot assure you that some or all of our competitors will not reduce their pricing to be more price competitive with us.

        Most of our major competitors also offer significantly greater customer support and scope of services than we currently offer. Some competitors have made content a significant factor in their offerings, and we do not currently offer our own content. Our decision not to offer a broader variety of services may adversely impact our ability to compete. Our ability to compete effectively for new

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subscribers would likely be negatively impacted to the extent that our competitors develop additional features, functionality or services that we do not currently offer.

        In addition, many of our competitors have significantly greater brand recognition than we do and spend significantly more on marketing their services than we do. Our business model is predicated upon having a significantly lower pay subscriber acquisition cost than is customary in our industry. As a result, we have not participated extensively in a variety of large distribution channels, such as being pre-bundled on branded computers or being offered at various retail outlets of major franchises, where the cost to acquire a subscriber has been higher than we have been willing to spend. To the extent the channels in which we do not participate become the key channels for acquiring new subscribers, we may be at a competitive disadvantage. If we choose to participate in more costly distribution channels, our subscriber acquisition cost may increase and our results of operations could be negatively impacted. Our competitors also routinely offer free trial periods, and if we choose to offer similar free trial periods on a significant scale, it may adversely impact our results of operations. In addition, there is no assurance that our marketing resources will be sufficient for us to continue to compete effectively with our major competitors.

        Some providers of broadband services have decreased pricing to attract new users. The decline in the size of the dial-up market could accelerate significantly if broadband services become widely available at lower prices or if there is significant consumer adoption of services, such as online video and music applications, which depend upon connections that provide significant bandwidth. In addition, several companies bundle broadband services with their cable or phone services, which may result in lower prices of the broadband service to the consumer. We currently offer a broadband service in Nashville and Indianapolis through Comcast Corporation's cable systems. The service, however, is not value-priced and we have had a minimal number of subscribers sign up for it. We currently do not plan to offer broadband services on a significant scale, which will adversely impact our ability to compete for new subscribers and to retain existing subscribers.

        We expect competition for subscribers to continue to intensify and cannot assure you that we will be able to compete successfully. Our inability to compete effectively could require us to make significant revisions to our strategies and business model, and would likely result in increased costs, decreased revenues and the loss of users, all of which could materially and adversely impact our business, financial condition, results of operations and cash flows.

        Competition for Advertising Customers.    We believe that the competitive factors determining success in the market for advertising customers include the size and demographic profile of a user base, the ability to target users based on a variety of criteria, pricing and geographic coverage. While we believe that we compete favorably with respect to many of these factors, several of our competitors may have an advantage over us with respect to specific factors, particularly size of user base. We compete for revenues with major ISPs, content providers, large Web publishers, Web search engine and portal companies, Internet advertising providers, content aggregation companies, and various other companies that facilitate Internet advertising. Many of these companies have longer operating histories, greater name recognition, larger user bases and significantly greater financial, technical and sales and marketing resources than we do. This may allow them to devote greater resources to the development, promotion and sale of their products and services. These competitors may also engage in more extensive research and development, undertake more far-reaching marketing campaigns and adopt more aggressive pricing policies. Competition combined with a slowing of the growth of online advertising has resulted in, and may continue to result in, reductions in the number of advertisers on our services, price reductions and reductions in advertising revenues. We also compete with television, radio, cable and print media for a share of advertisers' total advertising budgets.

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Privacy Policy

        We believe that issues relating to the privacy of Internet users and the use of personal information about these users are critically important as the commercial uses of the Internet grow. We have adopted and disclosed to our users a detailed policy outlining the permissible uses of information about users and the extent to which such information may be shared with others. Our users must acknowledge and agree to this policy when registering to use our services. We do not sell or license to third parties any personally identifiable information of users unless they specifically authorize us to do so. However, we use information about our users to improve the effectiveness of advertising by our advertising customers.

Employees

        As of June 30, 2003, we had 461 employees, 325 of which were located in the United States and 136 of which were located in Hyderabad, India. We had 247 employees in product development, 89 employees in general and administrative, 72 employees in sales and marketing, and 53 employees in network operations. None of these employees are subject to any collective bargaining agreements, and we consider our relationships with employees to be good.

Web Availability of Reports

        Our corporate Web site is www.untd.com. On this Web site, we make available, free of charge, our annual, quarterly and current reports, changes in the stock ownership of our directors and executive officers, and other documents filed with, or furnished to, the SEC as soon as reasonably practicable after such documents are filed with, or furnished to, the SEC.

ITEM 2. PROPERTIES

        We currently maintain the following principal facilities:

        We believe that our existing facilities are adequate to meet our current requirements and that suitable additional or substitute space will be available as needed to accommodate any physical expansion of our corporate operations, customer support and technology centers or for any additional sales offices.

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ITEM 3. LEGAL PROCEEDINGS

        On April 20, 2001, Jodi Bernstein, on behalf of himself and all others similarly situated, filed a lawsuit in the United States District Court for the Southern District of New York against NetZero, certain officers and directors of NetZero and the underwriters of NetZero's initial public offering, Goldman Sachs Group, Inc., BancBoston Robertson Stephens, Inc. and Salomon Smith Barney, Inc. The complaint alleges that the prospectus through which NetZero conducted its initial public offering in September 1999 was materially false and misleading because it failed to disclose, among other things, that (i) the underwriters had solicited and received excessive and undisclosed commissions from certain investors in exchange for which the underwriters allocated to those investors material portions of the restricted number of NetZero shares issued in connection with the offering; and (ii) the underwriters had entered into agreements with customers whereby the underwriters agreed to allocate NetZero shares to those customers in the offering in exchange for which the customers agreed to purchase additional NetZero shares in the aftermarket at pre-determined prices. Plaintiffs are seeking injunctive relief and damages. Additional lawsuits setting forth substantially similar allegations were also served against NetZero on behalf of additional plaintiffs in April and May 2001. The case against NetZero was consolidated with approximately 300 other suits filed against more than 300 issuers that conducted their initial public offerings between 1998 and 2000, their underwriters and an unspecified number of their individual corporate officers and directors (the "Consolidated Cases"). Counsel for the plaintiffs, the issuers and the insurers for the issuers have entered into a Memorandum of Understanding regarding a proposed settlement in the Consolidated Cases, which is subject to court approval and other conditions.

        On January 8, 2002, plaintiffs Dorothy Steff, John Kozarevich, Rachel Ward and Lori Anderson filed a class action in Los Angeles County Superior Court for the State of California against United Online, NetZero and Juno. Plaintiffs allege that we used marketing and promotional materials to mislead or deceive the alleged class members regarding their billable Internet services. Plaintiffs are seeking injunctive relief, restitution, disgorgement of profits, the establishment of a constructive trust and attorneys' fees. The parties have entered into a settlement agreement in this case which is subject to final approval by the court.

        On May 17, 2001, plaintiff Ann Louise Truschel filed an action in the Supreme Court of the State of New York for the County of New York against Juno on behalf of herself and all others similarly situated. Plaintiff alleges unjust enrichment, unfair and deceptive business practices and breach of contract. Specifically, plaintiff alleges that Juno was unjustly enriched and deceived consumers by: (i) advertising "free" Internet access services and limiting the usage of heavier users of the service, and (ii) advertising a free trial month for its premium service and not disclosing that the free month begins when the software is requested, rather than when it is first used, resulting in users receiving less than one month of free use. Plaintiff is seeking damages, injunctive relief and attorneys' fees. Discovery is ongoing and no trial date has been set.

        On December 19, 2002 plaintiff William Kleen filed a lawsuit in the Supreme Court of the State of New York for the County of New York against Juno on behalf of himself and all others similarly situated. Plaintiff alleges unjust enrichment, unfair and deceptive business practices and breach of contract. Specifically, plaintiff alleges that Juno was unjustly enriched and deceived consumers by: (i) advertising "free" Internet access services and limiting the usage of heavier users of the service, and (ii) advertising a free trial month for its premium service and not disclosing that the free month begins when the software is requested, rather than when it is first used, resulting in users receiving less than one month of free use. Plaintiff is seeking damages, injunctive relief and attorneys' fees. Discovery is ongoing and no trial date has been set.

        On August 21, 2001, Juno commenced an adversary proceeding in U.S. Bankruptcy Court in the Southern District of New York against Smart World Technologies, LLC, dba "Freewwweb," (the

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"Debtor"), a provider of free Internet access that had elected to cease operations and had sought the protection of Chapter 11 of the Bankruptcy Code. The adversary proceeding arose out of a subscriber referral agreement between Juno and Freewwweb. In response to the commencement of the adversary proceeding, Freewwweb and its principals filed a pleading with the Bankruptcy Court asserting that Juno is obligated to pay compensation in an amount in excess of $80 million as a result of Juno's conduct in connection with the subscriber referral agreement. In addition, a dispute arose between Juno and UUNET Technologies, Inc., an affiliate of MCI WorldCom Network Services, Inc., regarding the value of services provided by UUNET, with UUNET claiming in excess of $1,000,000 and Juno claiming less than $300,000. On April 25, 2003, Juno, the Committee of Unsecured Creditors, WorldCom and UUNET (allegedly the largest secured creditor) entered into a Stipulation of Settlement, which is subject to court approval. The parties expect that the Stipulation of Settlement will be objected to by the Debtor and certain of its shareholders. The Stipulation of Settlement provides for the payment by Juno of $5.5 million in final settlement of all claims against Juno, and we have reserved $5.5 million in connection with this proceeding.

        The pending lawsuits involve complex questions of fact and law and may require the expenditure of significant funds and the diversion of other resources to defend. Although we do not believe the outcome of the above outstanding legal proceedings, claims and litigation will have a material adverse effect on our business, financial condition, results of operations or cash flows, the results of litigation are inherently uncertain and we cannot assure you that we will not be materially and adversely impacted by the results of such proceedings. Other than with respect to the Consolidated Cases, we have established reserves for the matters discussed above and such reserves are reflected in our consolidated financial statements. We cannot assure you, however, that the reserves that have been established are sufficient to cover the possible losses from outstanding litigation.

        We are subject to various other legal proceedings and claims that arise in the ordinary course of business. We believe the amount, and ultimate liability, if any, with respect to these actions will not materially affect our business, financial condition, results of operations or cash flows. We cannot assure you, however, that such actions will not be material and will not adversely affect our business, financial condition, results of operations or cash flows.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        We did not submit any matters to a vote of security holders during the quarter ended June 30, 2003.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        Our common stock has been quoted on the Nasdaq National Market ("NASDAQ") under the symbol "UNTD" since September 26, 2001. Prior to that, NetZero common stock had been quoted on the NASDAQ under the symbol "NZRO" since September 23, 1999. The following table sets forth, for the fiscal quarters indicated, the high and low prices per share of our common stock since September 26, 2001 and NetZero common stock (adjusted to reflect the 0.20 shares of United Online common stock exchanged for each share of NetZero common stock in connection with the Merger) prior to September 26, 2001 as reported on the NASDAQ:

        On July 15, 2003, there were 894 holders of record of our common stock.

Dividends

        We have never declared or paid any cash dividends on our capital stock.

ITEM 6. SELECTED FINANCIAL DATA

        The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and related notes and Management's Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this Annual Report on Form 10-K.

        The consolidated statement of operations data for fiscal 2003, 2002 and 2001 and the consolidated balance sheet data at June 30, 2003 and 2002 are derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The consolidated statement of operations data for fiscal 2000 and 1999 and the consolidated balance sheet data at June 30, 2001, 2000 and 1999 are derived from our audited consolidated financial statements that are not included in this Annual Report on Form 10-K.

        The results reflect only the results of operations of NetZero and its subsidiaries prior to September 25, 2001, as predecessor to United Online. The results reflect the financial impact of the Merger subsequent to September 25, 2001 and the acquisition of the Internet access assets of BlueLight subsequent to November 4, 2002. For additional information related to our acquisitions, see Note 2 to our consolidated financial statements contained in this report.

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        The following amounts are in thousands, except per share data:

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

        We are a leading ISP offering consumers free and value-priced Internet access and email. Our services, currently offered through the NetZero, Juno and BlueLight Internet brands, are available in more than 6,500 cities across the United States and Canada. In addition, we offer marketers numerous online advertising products as well as online market research and measurement services. At June 30, 2003, we had over 2.5 million subscribers to our pay services and approximately 5.2 million active users, including pay subscribers. "Active" users include all pay subscribers and those free users who have logged onto our services during the preceding 31-day period.

        Juno launched its first service, a free dial-up email service, in April 1996 and began offering free Internet access service in 1999. NetZero launched its first service, a free Internet access service, in October 1998. These free services were predicated on generating advertising revenues to fund their operations. Due to a variety of factors, including reductions in online advertising rates, we began offering pay Internet access services and took various measures to limit the cost of providing our free services.

        Juno started offering pay services in 1998, NetZero began offering pay services in January 2001 and we acquired the Internet access assets of BlueLight in November 2002. The NetZero and Juno pay services differ from their respective free services in that the hourly and certain other limitations set for the free services do not apply. In addition, the free services incorporate a number of advertising initiatives, including a persistent on-screen advertising banner, which are not included on the pay services. Our pay services are offered through various pricing plans, generally $9.95 per month. Recently we began offering accelerated dial-up services for $14.95 per month. Our accelerated dial-up services are enhanced with compression, caching and other technologies that reduce the average time for certain Web pages to download to users' computers when compared to standard dial-up services. At June 30, 2003, subscribers to our accelerated dial-up services comprised approximately 8% of our total pay subscriber base.

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        United Online commenced operations on September 25, 2001, following the merger of NetZero and Juno into two of its wholly-owned subsidiaries (the "Merger"). The Merger was accounted for under the purchase method of accounting for business combinations as an acquisition of Juno by NetZero, which is considered the predecessor company to United Online.

Results of Operations

        The following table sets forth, for the periods presented, selected historical statements of operations data. The information contained in the table below should be read in conjunction with Critical Accounting Policies, Liquidity and Capital Resources and Financial Commitments included in this Item 7 as well as the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K. The results reflect only the results of operations of NetZero and its subsidiaries prior to September 25, 2001, as predecessor to United Online. The results reflect the financial impact of the Merger subsequent to September 25, 2001 and the acquisition of the Internet access assets of BlueLight subsequent to November 4, 2002. For additional information related to our acquisitions, see Note 2 to our consolidated financial statements contained elsewhere in this report.

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Year Ended June 30, 2003 Compared to
the Year Ended June 30, 2002

Revenues

        Billable Services Revenues

        Billable services revenues consist primarily of monthly fees charged to users for dial-up Internet access services and, to a lesser extent, fees charged to users for live telephone technical support. Our pay Internet access services have been offered under a number of pricing plans, ranging from $1.95 to $29.95 per month. Currently, our most common pricing plan is $9.95 per month. Recently we began offering accelerated dial-up Internet access services for $14.95 per month. At June 30, 2003, users of our accelerated dial-up services comprised approximately 8% of our total pay subscriber base. We generally charge our users $1.95 per minute for live telephone technical support.

        Billable services revenues may fluctuate from period to period primarily as a result of changes in the average number of pay subscribers. The average number of pay subscribers is a simple average calculated based on the number of pay subscribers at the beginning and end of a period. We may also experience periodic fluctuations in billable services revenues as a result of fluctuations from period to period in the average monthly revenue per pay subscriber. Average monthly revenue per pay subscriber is calculated by dividing billable services revenues for a period by the average number of pay subscribers for that period. Average monthly revenue per pay subscriber may fluctuate from period to period as a result of a variety of factors including the introduction of new pay services at different price points, the timing of pay subscribers joining and leaving our services, the use of discounted pricing plans, the use of promotions such as a free month of service, increases or decreases in the price of our services and changes in the mix of pay subscribers and their related pricing plans.

        Billable services revenues increased by $106.8 million, or 76%, to $247.8 million for fiscal 2003, compared to $141.0 million for fiscal 2002. The increase was due to an increase in our average number of pay subscribers, which was partially offset by a decrease in our average monthly revenue per pay subscriber. Our average number of pay subscribers was approximately 2,127,000 during fiscal 2003, compared to approximately 959,000 for fiscal 2002. The increase in our average number of pay subscribers resulted from a number of factors, including the Merger in September 2001, which increased our pay subscriber base by over 875,000 users, a significant number of our free users upgrading to pay services, increased marketing of our pay services and the acquisition of approximately 174,000 pay subscribers from BlueLight in November 2002. Average monthly revenue per pay subscriber was $9.71 for fiscal 2003, compared to $12.26 for fiscal 2002. Average monthly revenue per pay subscriber was abnormally high in fiscal 2002 as a result of the timing of the Merger.

        Our pay subscriber base increased by approximately 840,000 users, or 49%, during fiscal 2003. While we anticipate that our pay subscriber base will continue to increase in the near term, we do not believe that it will increase at the rate experienced during fiscal 2003. Future increases in our pay subscriber base will be dependent on a number of factors including the number of free users upgrading to pay services, changes in our distribution channels, the number of pay subscribers who cancel their accounts or have their accounts terminated, increases or decreases in our marketing expenditures, the effectiveness of our marketing activities, the impact of competition and the impact of acquisitions, if any.

Advertising and Commerce Revenues

        Our advertising and commerce revenues consist of fees from our Internet search partners that are generated as a result of our users utilizing their Internet search services, fees generated by our users viewing and clicking on third-party Web site advertisements, fees generated by enabling customer registrations for partners and fees from referring our users to, and our users making purchases on,

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sponsors' Web sites. We also generate revenues from providing third parties with data analysis capabilities and traditional market research services, such as surveys and questionnaires. Our advertising and commerce revenues are generated from both our pay subscribers and free users. Factors generally impacting our advertising and commerce revenues include the state of the online advertising market, changes in orders from significant customers, increases or decreases in our active user base, limitations on our free services and increases or decreases in advertising inventory available for sale. In the past, we have imposed limitations on our free services that have adversely impacted our volume of advertising inventory.

        Advertising and commerce revenues increased by $3.0 million, or 11%, to $29.5 million for fiscal 2003, compared to $26.5 million for fiscal 2002. The increase was primarily due to higher advertising revenues generated from our advertising agreement with General Motors Corporation ("GM") and a significant increase in revenues from fees derived from our Internet search partners. We derived approximately 37% of our advertising and commerce revenues for fiscal 2003 from GM, compared to approximately 34% for fiscal 2002. Additionally, we derived approximately 20% of our advertising and commerce revenues for fiscal 2003 from Internet search fees primarily provided through our agreement with Overture Services Inc. ("Overture"), compared to approximately 9% for fiscal 2002. The increased revenues from GM and Overture were partially offset by a decrease in advertising inventory available for sale as a result of a decrease in our active free user base and the use of available inventory for the promotion of our pay services to our free users.

        Our agreement with GM expires in December 2003 and will not be renewed. We do not anticipate that the GM agreement will be replaced by other arrangements that will generate comparable revenues and, as such, anticipate a substantial decrease in advertising and commerce revenues following the second quarter of fiscal 2004.

Cost of Billable Services

        Cost of billable services includes direct costs of billable services and costs that have been allocated to billable services based on the aggregate hourly usage of our pay subscribers as a percentage of total hours used by both our free users and pay subscribers. Direct costs consist of costs related to providing technical support, customer billing and billing support to our pay subscribers. Allocated costs consist primarily of telecommunications and data center costs, personnel and overhead-related costs associated with operating our network and data centers, and depreciation of network computers and equipment.

        Cost of billable services increased by $15.1 million, or 20%, to $89.3 million for fiscal 2003, compared to $74.2 million for fiscal 2002. The increase is due to a $12.1 million increase in telecommunications costs, a $3.1 million net increase in network personnel and overhead-related costs allocated to billable services and a $1.7 million increase in customer support and billing-related costs. These costs were partially offset by a $2.0 million decrease in network depreciation allocated to billable services. Telecommunications costs increased as a result of an increase in the number of pay subscribers and an increase in the average usage per pay subscriber. The increase in telecommunications hours utilized was partially offset by a 25% decrease in average hourly telecommunications costs, which decreased due to improvements in modem port utilization, consolidation of our network data centers and better pricing obtained from our managed modem vendors. Telecommunication hours allocated to our pay subscriber base increased to approximately 85% of total telecommunications hours purchased during fiscal 2003, compared to approximately 63% during fiscal 2002. Network personnel and overhead-related costs allocated to billable services increased due to the increase in telecommunications hours utilized by pay subscribers as a percentage of total telecommunications hours purchased. Customer support and billing-related costs increased as a result of the increase in the number of pay subscribers. Depreciation expense allocated to billable services has decreased due to assets placed in service in prior years becoming fully depreciated and significantly lower levels of capital expenditure in recent years versus prior years.

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        Cost of billable services as a percentage of billable services revenues was 36% in fiscal 2003, compared to 53% in fiscal 2002. Cost of billable services as a percentage of billable services revenues decreased as a result of decreased hourly telecommunications costs, decreased customer billing and support costs per pay subscriber and decreased depreciation expense, which were partially offset by an increase in average hourly usage per pay subscriber. We do not anticipate further significant decreases in hourly telecommunications costs in fiscal 2004 and may experience increased hourly telecommunications costs in future periods, particularly if we expand our service coverage to additional areas where telecommunications costs are higher. During fiscal 2003 we experienced an increase in average hourly usage per pay subscriber, and we believe this trend may continue. Any future increases in hourly usage per pay subscriber would likely have a negative impact on our cost of billable services. Customer billing and support costs per pay subscriber decreased as a result of cost savings gained through the consolidation of NetZero's and Juno's customer billing and support functions, which resulted in better pricing from our primary customer support vendor as a result of increased call volumes. We do not anticipate significant reductions in customer support and billing costs per pay subscriber in future periods.

Cost of Free Services

        Cost of free services includes direct costs incurred in providing technical and customer support to our free users as well as costs that have been allocated to free services based on the aggregate hourly usage of our free users as a percentage of total hours used by both our free users and pay subscribers. Allocated costs consist primarily of telecommunications and data center costs, personnel and overhead-related costs associated with operating our network and data centers, and depreciation of network computers and equipment.

        Cost of free services decrea