Enom 2011 Annual Report Download - page 48

Our historical growth in Content & Media revenue has principally come from growth in RPMs and page views due to both the increased volume of
commercially valuable content published on our owned and operated websites as well as an increase in the number of visitors to our existing content. To a
lesser extent, Content & Media revenue growth has resulted from the publishing of our content on our network of customer websites and from utilizing our
social media tools on certain of these sites. We believe that there are opportunities to grow our revenue and our page views by creating and publishing more
content in a greater variety of formats on our owned and operated sites as well as by increasing our distribution to and expanding our network of customer
websites. We also believe there is long term revenue growth opportunity from improving advertising yields to several of our owned and network websites and
from introducing innovative new products.
We believe that there is an opportunity to accelerate the growth of our Content & Media service offering by publishing and distributing our content to an
expanding number of distribution outlets. For example, we launched our premium multi-channel YouTube initiative in December 2011, and we currently have
arrangements with a number of third-party customers to distribute and license our content on their websites. During the second half of 2011, we also expanded
distribution to our network of customer websites via our acquisition of IndieClick and believe that IndieClick's innovative product offerings provide us an
opportunity to increase revenue.
Throughout 2011, Google deployed a series of changes to its search engine algorithms, some of which led the Company to experience a substantial
reduction in the total number of Google search referrals to its owned and operated websites. The overall impact of these changes on the Company's owned and
operated websites was negative, primarily due to a decline in traffic to eHow.com beginning in the second quarter of 2011. Due to the timing of the most
significant changes, the vast majority of the adverse impact on eHow.com full-year revenue was concentrated in the second half of 2011. During the fourth
quarter of 2011 and in response to the various 2011 changes in search engine algorithms, we performed an evaluation of our existing content library. As a
result of this evaluation, we elected to remove certain content assets from service, resulting in $5.9 million of accelerated amortization expense in the fourth
quarter of 2011. The evaluation is expected to be completed in the first quarter of 2012 and any further potential discretionary changes are not anticipated to
result in acceleration of amortization greater than $2 million in that period.
We intend to evolve and continuously improve our content creation and distribution platform through a number of initiatives, including creating new
content formats to meet rapidly changing consumer demand. Such changes may include increasing our investment in video and long-form content, increasing
and expanding distribution of our content to our network of customer websites and an overall reduction in the volume of shorter-form text articles published
on eHow.com. In the near term we also anticipate increased expenditures in non-algorithmic content such as premium video, longer-form and photo-centric
content designed to further enhance user engagement. These potential changes to our content creation platform could increase our per unit content creation
costs, including costs associated with our community of creative professionals, potentially resulting in higher service costs as a percentage of revenue if the
changes are unsuccessful in generating additional revenue. While we assess such improvements to our content creation and distribution platform, we have
begun and expect to maintain a reduced level of overall investment in media content when compared to historical amounts.
There can be no assurance that these or any future changes that may be implemented by the Company, by search engines to their algorithms and search
methodologies, or by consumers in their web usage habits might not adversely impact the carrying value, estimated useful life or intended use of our long-
lived assets. The Company will continue to monitor these changes as well as any future changes and emerging trends in search engine algorithms and
methodologies, including the resulting impact that these changes may have on future operating results, the economic performance of the Company's long-
lived assets and in its assessment as to whether significant changes in circumstances might provide an indication of potential impairment of the carrying value
of its long-lived assets, including its media content and goodwill arising from acquisitions.
While we experienced a significant decline in the trading price of our common stock over the course of 2011, our market capitalization remained in
excess of the carrying value of our net assets throughout the year. Based upon our annual goodwill impairment test that we performed in the fourth quarter of
2011, the indicated fair value of each of our reporting units was substantially in excess of their carrying value and that the fair value of our Content & Media
reporting unit, which includes our entire library of content assets, exceeded its carrying value by approximately 47%.
The growth in our Registrar revenue is dependent upon our ability to attract and retain customers to our Registrar platform through competitive pricing
on domain registrations and value added services. Beginning in the first quarter of 2010 and extending through the first quarter of 2011, we added several
customers with large volumes of domains to our Registrar platform. This resulted in fluctuations in our average revenue per domain over these periods, from
which we only recognized revenue on a portion of these domain names while deferring revenue recognition on the remainder. Beginning July 1, 2011, we
adjusted the number of net new domains to include only new registered domains added to our platform for which we have
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