Enom 2013 Annual Report Download - page 87

We configure, host, and maintain our platform social media services under private-
labeled versions of software for commercial customers.
We earn revenue 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 social media services customers have no contractual right to take
possession of our private-labeled software, we account for our social media services revenue as service arrangements, whereby social media
services revenue is 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 deliverables, including, but not limited to, single arrangements containing set-up
fees, monthly support fees and overage billings, consulting services and advertising services. To the extent that consulting services have value on
a standalone basis, we allocate revenue to each element in the multiple deliverable arrangement based upon their relative fair values. Fair value
is determined based upon the best estimate of the selling price. 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 do not have value to the customer on a
standalone basis. In such cases, the arrangement is treated as a single unit of accounting with the arrangement fee recognized over the term of the
arrangement on a straight-line basis. Set-up 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. We determine the estimated customer life based on analysis of historical
attrition rates, average contractual term and renewal expectations. We review the estimated customer life at least quarterly and when events or
changes in circumstances, such as significant customer attrition relative to expected historical or projected future results, occur. Overage billings
are recognized when delivered and at contractual rates in excess of standard usage terms.
Outside consulting services performed for customers that have value on a stand-alone basis are recognized as services are performed.
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 supp liers. 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, free shipping and other similar offers. Sales tax is not included in revenue, as we are a pass-through
conduit for collecting and remitting sales taxes.
Content and Other Revenue. Content and other revenue is generated through the sale or license of media content or undeveloped
websites. Revenue from the sale or perpetual license of content and undeveloped websites is recognized when the content and the sale of
undeveloped website s 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.
Registrar
Domain Name Registration Service Fees. We recognize revenue from registration fees charged to third parties in connection with new,
renewed and transferred domain name registrations on a straight-line basis over the registration term, which ranges from one to ten years. We
include payments received in advance of the domain name registration term 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. We defer the associated direct and incremental costs, which principally
consist of registry and ICANN fees, and expense them as service costs on a straight-line basis over the registration term.
Our businesses including eNom and Name.com, are ICANN accredited registrars. Thus, we are the primary obligor with our reseller and
retail registrant customers and are responsible for the fulfillment of our registrar services to those parties. As a result, we report revenue in the
amount of the fees we receive directly from our reseller and retail registrant customers. Our reseller customers maintain the primary obligor
relationship with their retail custome
rs, establish pricing and retain credit risk to those customers. Accordingly, we do not recognize any revenue
related to transactions between our reseller customers and their ultimate retail customers. A portion 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. We report revenue from these resellers on a net basis because the reseller
determines the price to charge its retail customers and maintains the primary customer relationship.
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