Juno 2013 Annual Report Download - page 109

Table of Contents




—Cost of revenues primarily includes product costs; shipping and delivery costs; printing and postage costs; costs of points
earned by members of the Company's 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; 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, services and products
and with generating advertising revenues. Expenses associated with promoting the Company's brands, services and products 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 services and products 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, 2013, 2012 and 2011 were $34.1 million, $40.5 million and $37.5 million, respectively. At December 31, 2013, the
Company did not have any prepaid advertising and promotion expenses. At December 31, 2012, prepaid advertising and promotion expenses totaling
$9,000 were included in other current assets in the consolidated balance sheet.
—Technology and development expenses include expenses for product development, maintenance of existing
software, technology and websites, and development of new or improved software and technology, including personnel-related expenses for the
Company's technology group in various office locations. Costs incurred by the Company to manage and monitor the Company's technology and
development activities are expensed as incurred.
—The Company accounts for costs incurred to develop software for internal use in accordance with ASC 350, which
requires such costs be capitalized and amortized over the estimated useful life of the software. The Company capitalizes costs associated with
customized internal-use software systems that have reached the application development stage. Such capitalized costs include external direct costs
utilized in developing or obtaining the applications and payroll and payroll-related expenses for employees who are directly associated with the
applications. Capitalization of such costs begins when the preliminary project stage is complete and ceases at the point in which the project is
substantially complete and ready for its intended purpose. The Company capitalized costs associated with internal-use software totaling $5.6 million and
$7.0 million in the years ended December 31, 2013 and 2012, respectively, which are being depreciated on a straight-line basis over each project's
estimated useful life, which is generally three years. Capitalized internal-use software is
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