Travelzoo 2010 Annual Report Download - page 71

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possible that such claims may be asserted as a result of the review. The Company is unable to predict the outcome of
the unclaimed property review.
On October 15, 2004, the Company announced a program under which it would make cash payments to people
who establish that they were former stockholders of Travelzoo.com Corporation, and who failed to submit requests
to convert shares into Travelzoo Inc. within the required time period. The accompanying consolidated financial
statements include a charge in general and administrative expenses of $20,000 for the year ended December 31,
2010. The total cost of this program is not reliably estimable because it is based on the ultimate number of valid
requests received and future levels of the Company’s common stock price. The Company’s common stock price
affects the liability because the amount of cash payments under the program is based in part on the recent level of the
stock price at the date valid requests are received. The Company does not know how many of the requests for shares
originally received by Travelzoo.com Corporation in 1998 were valid, but the Company believes that only a portion
of such requests were valid. As noted above, in order to receive payment under the program, a person is required to
establish that such person validly held shares in Travelzoo.com Corporation. Assuming 100% of the requests from
1998 were valid, former stockholders of Travelzoo.com Corporation holding approximately 4,067,000 shares had
not submitted claims under the program.
(b) Revenue Recognition
The Company’s revenue consists primarily of advertising sales. Advertising revenues are principally derived
from the sale of advertising in North America and Europe on the Travelzoo website, in the Travelzoo Top 20 e-mail
newsletter, in Newsflash, from SuperSearch, from the Travelzoo Network, and from Fly.com. The Company also
generates revenue from the sale of vouchers through our Local Deals e-mail alert service.
The Company recognizes revenues in accordance with Securities and Exchange Commission Staff Accounting
Bulletin for revenue recognition. Advertising revenues are recognized in the period in which the advertisement is
displayed, provided that evidence of an arrangement exists, the fees are fixed or determinable and collection of the
resulting receivable is reasonably assured.
Where collectibility is not reasonably assured, the revenue will be recognized upon cash collection, provided
that the other criteria for revenue recognition have been met. The Company recognizes revenue for fixed-fee
advertising arrangements ratably over the term of the insertion order as described below, with the exception of
Travelzoo Top 20 or Newsflash insertions, which are recognized upon delivery. The majority of insertion orders have
terms that begin and end in a quarterly reporting period. In the cases where at the end of a quarterly reporting period
the term of an insertion order is not complete, the Company recognizes revenue for the period by pro-rating the total
arrangement fee to revenue and deferred revenue based on a measure of proportionate performance of its obligation
under the insertion order. The Company measures proportionate performance by the number of placements
delivered and undelivered as of the reporting date. The Company uses prices stated on its internal rate card, for
measuring the value of delivered and undelivered placements. The stand-alone price is the price that would be
charged if the advertiser purchased only the individual insertion. Fees for variable-fee advertising arrangements are
recognized based on the number of impressions displayed, number of clicks delivered, or number of referrals
generated during the period.
Under these policies, no revenue is recognized unless persuasive evidence of an arrangement exists, delivery
has occurred, the fee is fixed or determinable, and collection is deemed reasonably assured. The Company evaluates
each of these criteria as follows:
•Evidence of an arrangement. The Company considers an insertion order signed by the advertiser or its
agency to be evidence of an arrangement.
•Delivery. Delivery is considered to occur when the advertising has been displayed and, if applicable, the
click-throughs have been delivered.
44
TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)