Enom 2010 Annual Report Download - page 106

Table of Contents
Demand Media, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(In thousands, except per share amounts)
2. Summary of Significant Accounting Policies (Continued)
standalone basis; (ii) there is objective and reliable evidence of the fair value of the undelivered item(s); and, (iii) if a general right of return exists relative to
the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the Company. If there is
objective and reliable evidence of fair value for all elements in the arrangement, the Company allocates the total arrangement fee to each of the elements
based on their relative fair values. If there is objective and reliable evidence of the fair value of the undelivered element but not the delivered element, the
Company allocates the total arrangement fee using the residual method.
The Company's revenue is principally derived from the following services:
Content & Media
Advertising Revenue. Advertising revenue is generated by performance-based Internet advertising, such as cost-per-click, or CPC, in which an
advertiser pays only when a user clicks on its advertisement that is displayed on the Company's owned and operated websites and customer websites; fees
generated by users viewing third-party website banners and text-link advertisements; fees generated by enabling customer leads or registrations for partners;
and fees from referring users to, or from users making purchases on, sponsors' websites. In determining whether an arrangement exists, the Company ensures
that a binding arrangement is in place, such as a standard insertion order or a fully executed customer-specific agreement. Obligations pursuant to the
Company's advertising revenue arrangement typically include a minimum number of impressions or the satisfaction of the other performance criteria.
Revenue from performance-based arrangements, including referral revenue, is recognized as the related performance criteria are met. The Company assesses
whether performance criteria have been met and whether the fees are fixed or determinable based on a reconciliation of the performance criteria and an
analysis of the payment terms associated with the transaction. The reconciliation of the performance criteria generally includes a comparison of third-party
performance data to the contractual performance obligation and to internal or customer performance data in circumstances where that data is available.
When the Company enters into advertising revenue sharing arrangements where it acts as the primary obligor, the Company recognizes the underlying
revenue on a gross basis. In determining whether to report revenue gross for the amount of fees received from the advertising networks, the Company assesses
whether it maintains the principal relationship with the advertising network, whether it bears the credit risk and whether it has latitude in establishing prices.
In circumstances where the customer acts as the primary obligor, the Company recognizes the underlying revenue on a net basis.
In certain cases, the Company records revenue based on available and preliminary information from third parties. Amounts collected on the related
receivables may vary from reported information based upon third party refinement of estimated and reported amounts owing that occurs typically within
30 days of the period end. For the years ended December 31, 2008 and 2009 and 2010, the difference between the amounts recognized based on preliminary
information and cash collected was not material.
Subscription Services and Social Media Services. Subscription services revenue is generated through the sale of membership fees paid to access
content available on certain owned and operated websites. The majority of the memberships range from 6 to 12 month terms, and renew automatically at the
end
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