Juno 2012 Annual Report Download - page 135

Table of Contents
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


whether an arrangement exists, the Company ensures that a written contract is in place, such as a standard insertion order or a customer-specific
agreement. The Company assesses whether performance criteria have been met and whether the fees are fixed or determinable based on a reconciliation
of the performance criteria and the payment terms associated with the transaction. The reconciliation of the performance criteria generally includes a
comparison of the Company's internally-tracked performance data to the contractual performance obligation and, when available, to third-party or
customer-provided performance data.
Advertising and other revenues for the Company's online loyalty marketing service consist primarily of fees generated when emails are transmitted
to members, when members respond to emails and when members complete online transactions. Each of these activities is a discrete, independent
activity, which generally is specified in the agreement with each advertising customer. As the earning activities take place, activity measurement data
(examples include the number of emails delivered and the number of responses received) is accumulated and the related revenues are recorded. The
Company's online loyalty marketing service also generates revenues from the sale of gift cards.
Probability of collection is assessed based on a number of factors, including past transaction history with the customer and the creditworthiness of
the customer. If it is determined that collectibility is not reasonably assured, revenue is not recognized until collectibility becomes reasonably assured,
which is generally upon receipt of cash.
—Cost of revenues primarily includes product costs; shipping and delivery costs; costs associated with taking orders; printing
and postage costs; systems installation, training and support costs; costs of points earned by members of the Company's online loyalty marketing
service; telecommunications and data center costs; depreciation of network computers and equipment; license fees; costs related to providing customer
support; costs related to customer billing and billing support for the Company's pay accounts and floral network members; fees associated with the
storage and processing of customer credit cards and associated bank fees; domain name registration fees; and personnel- and overhead-related costs
associated with operating the Company's networks and data centers.
—Sales and marketing expenses include expenses associated with promoting the Company's brands, products and services
and with generating advertising revenues. Expenses associated with promoting the Company's brands, products and services include advertising and
promotion expenses; fees paid to distribution partners, third-party advertising networks and co-registration partners to acquire new pay and free
accounts; personnel and overhead-related expenses for marketing, merchandising, customer service, and sales personnel; and telemarketing costs
incurred to acquire and retain pay accounts and up-sell pay accounts to additional services. Expenses associated with generating advertising revenues
include sales commissions and personnel-related expenses. The Company has expended significant amounts on sales and marketing, including branding
and customer acquisition campaigns consisting of television, Internet, public relations, sponsorships, print, and outdoor advertising, and on retail and
other performance-based distribution relationships. Marketing and advertising costs to promote the Company's products and services are expensed in
the period incurred. Advertising and promotion expenses include media, agency and promotion expenses. Media production costs are expensed the first
time the advertisement is run. Media and agency costs are expensed over the period the advertising runs. Advertising and promotion expenses for the
years ended December 31,
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