Enom 2011 Annual Report Download - page 54

circumstances, such as significant customer attrition relative to expected historical or 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 Fees
Registration fees charged to third parties in connection with new, renewed and transferred domain name registrations are recognized on a straight line
basis over the registration term, which range from one to ten years. Payments received in advance of the domain name registration term are included in
deferred revenue in our consolidated balance sheets. The registration term and related revenue recognition commences once we confirm that the requested
domain name has been recorded in the appropriate registry under accepted contractual performance standards. Associated direct and incremental costs, which
principally consist of registry and ICANN fees, are also deferred and expensed as service costs on a straight line basis over the registration term.
Our wholly owned subsidiary, eNom, is an ICANN accredited registrar. Thus, we are the primary obligor with our reseller and retail registrant
customers and are responsible for the fulfillment of our registrar services. As a result, we report revenue derived from the fees we receive from our resellers
and retail registrant customers for registrations on a gross basis in our consolidated statements of operations. A minority of our resellers have contracted with
us to provide billing and credit card processing services to the resellers' retail customer base in addition to registration services. Under these circumstances,
the cash collected from these resellers' retail customer base exceeds the fixed amount per transaction that we charge for domain name registration services.
Accordingly, these amounts, which are collected for the benefit of the reseller, are not recognized as revenue and are recorded as a liability until remitted to
the reseller on a periodic basis. Revenue from these resellers is reported on a net basis because the reseller determines the price to charge retail customers and
maintains the primary customer relationship.
Value-added Services
Revenue from online Registrar value-added services, which include, but are not limited to, security certificates, domain name identification protection,
charges associated with alternative payment methodologies, web hosting services and email services is recognized on a straight line basis over the period in
which services are provided. Payments received in advance of services being provided are included in deferred revenue.
Auction Service Revenue
Domain name auction service revenue represents fees received from facilitating the sale of third-party owned domains through an online bidding
process primarily through NameJet, a domain name aftermarket auction company formed in October 2007 by us and an unrelated third party. While certain
names sold through the auction process are registered on our Registrar platform upon sale, we have determined that auction revenue and related registration
revenue represent separate units of accounting, given that the domain name has value to the customers on a standalone basis and there is objective and reliable
evidence of the fair value of the registration service. We recognize the related registration fees on a straight-line basis over the registration term. We recognize
the bidding portion of auction revenues upon sale, net of payments to third parties since we are acting as an agent only.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable primarily consist of amounts due from:
• third parties who provide advertising services to our owned and operated websites and certain customer websites in exchange for a share of the
underlying advertising revenue. Accounts receivable from these advertising providers are recorded as the amount of the revenue share as reported
to us by them and are generally due within 30 to 45 days from the month-end in which the invoice is generated. Certain accounts receivable from
these providers are billed quarterly and are due within 45 days from the quarter-end in which the invoice is generated, and are non-interest bearing;
• social media services customers and include: account set-up fees, which are generally billed and collected once set-up services are completed;
monthly recurring services, which are billed in advance of services on a quarterly or monthly basis; account overages, which are billed when
incurred and contractually due; and consulting services, which are generally billed in the same manner as set-up fees. Accounts receivable from
social media customers are recorded at the invoiced amount, are generally due within 30 days and are non-interest bearing;
• direct advertisers who engage us to deliver branded advertising views. Accounts receivable from our direct advertisers are recorded at negotiated
advertising rates (customarily based on advertising impressions) and as the related advertising is delivered over our owned and operated websites.
Direct advertising accounts receivables are due within
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