Overstock.com 2015 Annual Report Download - page 99

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
Direct revenue is derived from merchandise sales of our owned inventory to individual consumers and businesses. Direct revenue comes from
merchandise sales that occur primarily through our Website, but may also occur through offline and other channels.

Partner and other revenue is derived primarily from merchandise sales of inventory owned by our partners which they generally ship directly to our
consumers and businesses. Partner and other revenue comes from merchandise sales that occur primarily through our Website, but may also occur through
offline and other channels.

We have a customer loyalty program called Club O Gold for which we sell annual memberships. We also introduced an introductory customer
loyalty program called Club O Silver for customers who agree to receive promotional emails. For Club O Gold memberships, we record membership fees as
deferred revenue and we recognize revenue ratably over the membership period. Both the Club O Gold and Club O Silver loyalty programs allow members to
earn Club O Reward dollars for qualifying purchases made on our Website. We also have a co-branded credit card program (see 
 below for more information). Co-branded cardholders are also Club O Gold members and earn additional reward dollars for purchases made on our
Website, and from other merchants.
We account for these transactions as multiple element arrangements and allocate revenue to the elements using their relative fair values. We include
the value of reward dollars earned in deferred revenue and we record it as a reduction of revenue at the time the reward dollars are earned.
Club O Reward dollars earned may be redeemed on future purchases made through our Website. Club O Gold membership reward dollars expire 90
days after the customer’s Club O Gold membership expires. Club O Silver reward dollars expire 90 days after they are earned if no additional qualifying
purchases are made during that period. We recognize revenue for Club O Reward dollars when customers redeem their reward dollars as part of a purchase on
our Website. When Club O Reward dollars expire, we recognize reward dollar breakage as Other income in our consolidated statements of income.
In instances where customers receive free Club O Reward dollars not associated with any purchases, we account for these transactions as sales
incentives such as coupons and record a reduction of revenue at the time the reward dollars are redeemed.

We have a co-branded credit card agreement with a commercial bank for the issuance of credit cards bearing the Overstock.com brand, under which
the bank pays us fees for new accounts and for customer usage of the cards. The agreement also provides for a customer loyalty program offering reward
points that customers will accrue from card usage and can use to make purchases on our Website (see  above for more information).
New account fees are recognized as revenue on a straight-line basis over the estimated expected life of co-branded credit card customers. Credit card usage
fees are recognized as revenues as actual credit card usage occurs.
We also have a private label credit card agreement with another commercial bank for the issuance of credit cards bearing our brand, but that is only
available for use on our Website. In connection with the agreement, we received upfront fees that we recognize as revenue on a straight line basis over the
term of the agreement, which runs through February 2022. When customers make regular revolving purchases using the card, we receive fees, which are
recognized as revenue. When we offer promotional financing for purchases made with the card (for example, 12 months same as cash), we pay a discount fee
to the commercial bank, which we recognize as a reduction of revenue. The commercial bank owns all of the accounts under the program and performs all
account administration, underwriting and servicing. Fees and royalties from new accounts, credit card usage fees, and fees from both of these cards were less
than 1% of total net revenues for all periods presented.

Customer orders are recorded as deferred revenue prior to delivery of products or services ordered. We record amounts received for Club O Gold
membership fees as deferred revenue and we recognize it ratably over the membership period. We
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