Enom 2010 Annual Report Download - page 62

Table of Contents
We believe that the assumptions and estimates associated with our revenue recognition, accounts receivable and allowance for doubtful accounts,
capitalization and useful lives associated with our intangible assets, including our internal software and website development and content costs, income taxes,
stock-based compensation and the recoverability of our goodwill and long-lived assets have the greatest potential impact on our consolidated financial
statements. Therefore, we consider these to be our critical accounting policies and estimates.
Revenue Recognition
We recognize revenue when four basic criteria are met: persuasive evidence of a sales arrangement exists; performance of services has occurred; the
sales price is fixed or determinable; and collectability is reasonably assured. We consider persuasive evidence of a sales arrangement to be the receipt of a
signed contract. Collectability is assessed based on a number of factors, including transaction history and the credit worthiness of a customer. If it is
determined that collection is not reasonably assured, revenue is not recognized until collection becomes reasonably assured, which is generally upon receipt of
cash. We record cash received in advance of revenue recognition as deferred revenue.
Content & Media
Advertising Services
In determining whether an arrangement for our advertising services exists, we ensure that a binding arrangement is in place, such as a standard insertion
order or a fully executed customer-specific agreement. Obligations pursuant to our advertising revenue arrangements typically include a minimum number of
impressions or the satisfaction of the other performance criteria. Revenue from performance-based arrangements, including cost-per-click and referral
revenues, is recognized as the related performance criteria are met. We assess whether performance criteria have been met and whether our fees are fixed or
determinable based on a reconciliation of the performance criteria and an analysis of the payment terms associated with a transaction. The reconciliation of
the performance criteria generally includes a comparison of third-party performance data, such as periodic online reports provided by certain of our customer
websites, to the contractual performance obligation and to internal or customer performance data in circumstances where such data is available. Historically,
any difference between the amounts recognized based on preliminary information and cash collected has not been material to our results of operations.
Where we enter into revenue sharing arrangements with our customers, such as for the online version of the San Francisco Chronicle or with respect to
undeveloped customer websites, and when we are considered the primary obligor, we report the underlying revenues on a gross basis in our consolidated
statements of operations. In circumstances where the customer acts as the primary obligor, such as YouTube, we recognize the underlying revenue on a net
basis in our statement of operations.
Subscription 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,
such as Trails.com. The majority of the memberships range from six to twelve month terms, and generally renew automatically at the end of the membership
term, if not previously cancelled. Membership revenue is recognized on a straight-line basis over the membership term.
We configure, host and maintain almost all of our platform's social media services for commercial customers. We earn revenues from our 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 our social media services customers have no contractual right to take possession of our software, we account for our social media services as
subscription service arrangements, whereby
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