Enom 2010 Annual Report Download - page 107

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)
of the membership term, if not previously cancelled. Membership revenue is recognized on a straight-line basis over the membership term.
The Company configures, hosts, and maintains its platform social media services under private-labeled versions of software for commercial customers.
The Company earns revenue from its social media services through initial set-up fees, recurring management support fees, overage fees in excess of standard
usage terms, and outside consulting fees. Due to the fact that social media services customers have no contractual right to take possession of the Company's
private labeled software, the Company accounts for its social media services revenue as service arrangements, whereby social media services revenue is
recognized when persuasive evidence of an arrangement exists, delivery of the service has occurred and no significant obligations remain, the selling price is
fixed or determinable, and collectibility is reasonably assured.
Social media service arrangements may contain multiple elements, including, but not limited to, single arrangements containing set-up fees, monthly
support fees and overage billings and consulting services. To the extent that consulting services have value on a standalone basis and there is objective and
reliable evidence of social media services, the Company allocates revenue to each element based upon each element's objective and reliable evidence of fair
value. Objective and reliable evidence of fair value for all elements of a service arrangement is based upon the Company's normal pricing and discounting
practices for those services when such services are sold separately. To date, substantially all consulting services entered into concurrent with the original
social media service arrangements are not treated as separate deliverables as such services are essential to the functionality of the hosted social media services
and do not have value to the customer on a standalone basis. Such fees are recognized as revenue on a straight-line basis over the greater of the contractual or
estimated customer life once monthly recurring services have commenced. Fees for other items are recognized as follows:
Customer set-up fees: set-up fees are generally paid prior to the commencement of monthly recurring services. The Company initially defers its
set-up fees and recognizes the related revenue straight-line over the greater of the contractual or estimated customer life once monthly recurring
services have commenced;
Monthly support fees: recognized each month at contractual rates; and,
Overage billings: recognized when delivered and at contractual rates in excess of standard usage terms.
The Company determines the estimated customer life based on analysis of historical attrition rates, average contractual term and renewal expectations.
The Company periodically reviews the estimated customer life at least quarterly and when events or changes in circumstances, such as significant customer
attrition relative to expected historical of projected future results, occur. Outside consulting services performed for customers on a stand-alone basis are
recognized ratably as services are performed at contractual rates.
Registrar
Domain Name Registration Service Fees. Registration fees charged to third parties in connection with new, renewed, and transferred domain name
registrations are recognized on a straight-line basis
F-11
•
•
•