It was social networking before social networking was cool, and now it's ready to cash in on the trend. Classmates Media -- the parent of trendsetter and loyalty marketing specialist My Points -- is filing to go public.

Now, before you begin dusting off your old high school yearbooks to see whether you stashed away any forgotten money between the pages -- or at the very least, spot any eventual celebrities that would make the yearbook valuable on eBay -- you'd better get your coattails in order.

Classmates is no Facebook. It's no MySpace. 

United Online (NASDAQ:UNTD) acquired Classmates for just $100 million in November 2004, and we now know why. Classmates was losing money before it was scooped up, and it's been posting operating losses at United Online ever since.

You can't blame Internet access provider United Online for trying to ride the wave, though. The IPO process gives it the chance to enrich itself, with a $50 million dividend going its way. United Online will also retain the majority of its voting power in the company, by issuing shares that will have just a tenth of the voting power of the Class B shares it will retain.

Leave off the last 'S' for savings
Classmates will eventually trade under the ticker symbol CLAS, once the offering is completed and priced. Investors should know that is no slouch. It watches more than 50 million registered accounts. There's also growth in its premium accounts business, with paying members growing from 1.8 million to 2.7 million over the past 18 months.

Classmates also owns several related international websites, like France's, Sweden's, and Germany's So it may prove tempting as a European dot-com play, too.

However, it's important to read the prospectus carefully. Investors have been known to forgive near-term losses in the pursuit of top-line gains, and the historical income statement appears to offer exactly that. Revenues surged 64% higher last year, going from $84.9 million to $139.4 million. Things get even juicier when you see a $152.1 million pro forma showing for 2006.

Anytime you see the words "pro forma" in a prospectus or quarterly earnings report, that's your immediate to dig a little deeper into the footnotes to get the whole story.

In this case, that buried tale involves loyalty marketing website MyPoints, which was acquired in April 2006. If you're not familiar with MyPoints, it's an addictive website where 8.4 million registered users gather to earn points by reading emails or shopping at affiliated merchants online. Accumulated points can then be redeemed for gift cards offered by the same merchants.

It's not as hokey as it sounds. Participants include real blue-chip e-tailers such as Target (NYSE:TGT), Best Buy (NYSE:BBY), and (NASDAQ:OSTK). Because online retailers pay commissions to lead-generators like MyPoints, the site can then share some of that largesse with its shoppers through gift-card redemptions.

If it sounds like a good business, you're right. MyPoints has been consistently profitable, and it's so lucrative that the pro forma results -- which add on the first three months and change at MyPoints to Classmates Media, to assume full-year ownership -- turn an operating loss into a small operating profit, boosting the top line by $12.7 million.

The 24% solution
At this point, you should begin to see the problem of assuming that 2006's 64% revenue spike is organic. Clearly, it's not. If MyPoints can generate $12.7 million and a handsome profit in just 99 days, just imagine what it did for Classmates Media in the 266 other days that are part of the historical 2006 results.

Since that isn't immediately broken down, you have to go from page 7 all the way down to page F-62 for the real deal. There, you'll see that MyPoints generated a profit of $5.5 million on $37.8 million in revenue in 2005, when it was still owned by air carrier UAL (NASDAQ:UAUA). (Yes, MyPoints has gone from one United to another.) Armed with that data, we can now create a pro forma 2005 to stack up against the pro forma 2006 for an apples-to-apples comparison.

If we look at MyPoints and Classmates as a single company -- the way the 2006 pro forma financials want you to -- we see a combined firm that has grown its revenue from $122.7 million in 2005 to $152.1 million in 2006. That's still a respectable 24% uptick, though obviously not as rosy as it first appeared.

Is MyPoints or Classmates the real growth driver here? It may not matter. Investors are now being asked to buy into the combined company. Still, I think it's intriguing that MyPoints is the best reason to buy into Classmates Media, even though it's being packaged as a social networking site -- and padded with MyPoints' healthier fundamentals. It seems the market can't wait for Facebook to go public, or for News Corp. (NYSE:NWS) to show us how sharp it was for buying MySpace for just $580 million two years ago.

"United Online's was a pioneer in this field and dropped the ball, but I wouldn't be so quick to write it off while it still has time to catch up," I wrote last summer, when Facebook was first hinting at an IPO.

It's a pity. You've probably seen the Classmates ads for years, urging you to check in on how your former classmates turned out. This was before Facebook became a campus sensation, or LinkedIn became the corporate networking standard. Classmates arrived fashionably early to social networking, but forgot to set its watch ahead a notch to Web 2.0. Now that it's finally going public, I find myself more enamored by MyPoints' potential instead.

In Classmatesesque speak, may not be much of a looker these days, but it sure snagged itself a trophy wife in time for its Wall Street reunion. Well, it turned my head, anyway. 

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Longtime Fool contributor Rick Munarriz recently had his 20-year high school reunion, and he can't believe that he still feels young. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool's disclosure policy has some really funky hair in its high-school yearbook picture.