LinkedIn 2011 Annual Report Download - page 78

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2011. Approximately $1.7 million of deferred offering costs related to the IPO were included in other assets on
the Company’s consolidated balance sheets as of December 31, 2010. There were no deferred offering costs
included in other assets as of December 31, 2011. Upon completion of the Company’s IPO and follow-on
offering, these amounts were offset against the proceeds of the offering and included in stockholders’ equity.
Revenue Recognition
In general, the Company recognizes revenue when (i) persuasive evidence of an arrangement exists,
(ii) delivery has occurred or services have been rendered to the customer, (iii) the fee is fixed or determinable,
and (iv) collectability is reasonably assured. Where arrangements have multiple elements, revenue is allocated to
the elements based on the relative selling price method and revenue is recognized based on the Company’s policy
for each respective element.
The Company generates revenue primarily from sales of the following services:
•Hiring Solutions—Hiring Solutions revenue is derived primarily from providing access to the LinkedIn
Recruiter product and job postings. The Company provides access to its professional database of both
active and passive job candidates with LinkedIn Recruiter, which allows corporate recruiting teams to
identify candidates based on industry, job function, geography, experience/education, and other
specifications. Revenue from providing access to the LinkedIn Recruiter product is recognized ratably
over the subscription period, which consists primarily of annual subscriptions that are billed monthly,
quarterly, or annually. The Company also earns revenue from the placement of job postings on its
website, which generally run for 30 days. Independent recruiters can pay to post job openings that are
accessible through job searches or targeted job matches. Revenue from job postings is recognized as
the posting is displayed or the contract period, whichever is shorter.
•Marketing Solutions—The Company earns revenue from the display of advertisements (both graphic
and text link) on its website primarily based on a cost per advertisement model. Revenue from internet
advertising is recognized net of any related agency commissions as the online advertisements are
displayed on the Company’s website. Agency commissions are amounts earned by advertising agencies
that act as representatives for advertisers and earn commissions by billing the advertiser the total dollar
value of the advertiser’s purchase while entering into an agreement with the Company to provide the
advertising for the dollar value of the advertiser’s purchase less a certain percentage representing the
agency commission. The typical duration of the Company’s advertising contracts is approximately two
months.
•Premium Subscriptions—The Company sells various subscriptions to customers that allow users to
have further access to premium services via its LinkedIn.com website. Revenue from Premium
Subscription services is recognized ratably over the contractual period, generally from one to 12
months.
Amounts billed or collected in excess of revenue recognized are included as deferred revenue. Sales tax is
excluded from reported net revenue. Although historical refunds have been minimal, the Company estimates
allowances, for each revenue type shown above, based on information available as of each balance sheet date.
This information includes historical refunds as well as specific known service quality issues.
A majority of the Company’s arrangements for hiring solutions and marketing solutions include multiple
deliverables. In accordance with recent authoritative guidance on revenue recognition, the Company allocates
arrangement consideration in multiple-deliverable revenue arrangements at the inception of an arrangement to all
deliverables based on the relative selling price method in accordance with the selling price hierarchy, which
includes: (i) vendor-specific objective evidence (“VSOE”) if available; (ii) third-party evidence (“TPE”) if
VSOE is not available; and (iii) best estimate of selling price (“BESP”) if neither VSOE nor TPE is available.
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