Enom 2013 Annual Report Download - page 49

Basis of Presentation
Revenue
Our revenue is derived from our Content & Media and Registrar service offerings.
Content & Media Revenue
We currently generate a vast majority of our Content & Media revenue through the sale of advertising, and to a lesser extent through
subscriptions to our social media applications and select content and service offerings. Articles and videos, each of which we refer to as a content
unit, generate revenue both directly and indirectly. Direct revenue is revenue directly attributable to a content unit, such as advertisements,
including sponsored advertising links, display advertisements and in-text advertisements, on the same webpage on which the content is
displayed. Indirect revenue is also derived primarily by our content library, but is not directly attributable to a specific content unit. Indirect
revenue includes advertising revenue generated on our owned and operated websites’ home pages (e.g., home page of eHow), on topic category
webpages (e.g., home and garden category page), on user generated article pages that feature content that was not acquired through our
proprietary content acquisition process, and from subscriptions. Our revenue generating advertising arrangements, for both our owned and
operated websites and our network of customer websites, include cost-per-click performance-based advertising, display advertisements where
revenue is dependent upon the number of page views, and lead generating advertisements where revenue is dependent upon users registering for,
or purchasing or demonstrating interest in, advertisers’ products and services. We generate revenue from advertisements displayed alongside our
content offered to consumers across a broad range of topics and categories on our owned and operated websites and on certain customer
websites. Our advertising revenue also includes revenue derived from cost-per-click advertising links we place on undeveloped websites owned
both by us, which we acquire and sell on a regular basis, and certain of our customers. To a lesser extent, we also generate revenue from our
subscription-based offerings, which include our social media applications deployed on our network of customer websites and subscriptions to
premium content or services offered on certain of our owned and operated websites. Other revenue is generated through the sale or license of
media content or the sale of undeveloped websites. Revenue from the sale or perpetual license of content and sale of undeveloped websites is
recognized when the content and undeveloped websites have been delivered and the contractual performance obligations have been fulfilled.
Revenue from the license of content is recognized over the period of the license as content is delivered or when other related performance
criteria are fulfilled.
Where we enter into revenue sharing arrangements with our customers, such as those relating to our advertiser network and our
undeveloped customer websites, and when we are considered the primary obligor, we report the underlying revenue on a gross basis in our
consolidated statements of operations, and record these reve nue-sharing payments to our customers as traffic acquisition costs, or TAC, which
are included in service costs. In circumstances where we distribute our content on third-party websites and the customer acts as the primary
obligor we recognize revenue on a net basis.
We recognize revenue from product sales upon delivery, net of estimated returns based on historical experience. Payments received in
advance of delivery are included in deferred revenue in the accompanying consolidated balance sheets. Revenue is recorded at the gross amount
due to the following factors: we are the primary obligor in a transaction, we have inventory and credit risk and we have latitude in establishing
prices and selecting suppliers. Product sales and shipping revenue is recognized net of promotional discounts, rebates, and return allowances. We
periodically provide incentive offers to customers to encourage purchases. Such offers may include current discount offers, such as percentage
discounts off current purchases, and other similar offers.
Registrar Revenue
Our Registrar revenue is principally comprised of registration fees charged to resellers and consumers in connection with new, renewed
and transferred domain name registrations. In addition, our registrar also generates revenue from the sale of other value-added services that are
designed to help our customers easily build, enhance and protect their domain names, including security services, email accounts and web
hosting, and the performance of services for registries. Finally, we generate advertising and domain name sales revenue as part of our
aftermarket service offering. We generate this aftermarket revenue on domain names that we own, as well as by providing these services to third
parties. Our revenue varies based upon the number of domain names registered or utilizing our aftermarket service offerings, the rates we charge
our customers, our ability to sell value-added services, our ability to sell domain names from our portfolio, and the monetization we are able to
achieve through our aftermarket service offerings. We primarily market our wholesale registration services under our eNom brand, and our retail
registration services under our Name.com brand.
We began our service offering related to our New gTLD Initiative in the fourth quarter of 2013. The amount as well as the timing of
revenue is uncertain and is dependent upon when our back-
end registry customers' applications for gTLDs are approved by ICANN, the outcome
of negotiations or auctions to acquire the operating rights for gTLD applications contested with other participants, and the continued progress of
the overall ICANN New gTLD initiative. To the extent that our registry will offer performance incentive rebates to our partners, those incentives
will be recognized as a reduction to revenue.
47