Enom 2012 Annual Report Download - page 56

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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 social media services revenues are 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
collectability 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, we allocate 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 our normal pricing and discounting practices for those services
when such services are sold separately. To date, substantially all consulting services entered into concurrently 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. We
initially defer set-up fees and recognize 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.
• Overage billings: recognized when delivered and at contractual rates in excess of standard usage terms.
We determine the estimated customer life based on analysis of historical attrition rates, average contractual term and
renewal expectations. We periodically review the estimated customer life and when events or changes in circumstances, such as
significant customer attrition relative to expected historical or projected future results, occur. Outside consulting services
performed for customers on a standalone 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 ranges 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.