Support.com 2011 Annual Report Download - page 47

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• Collection is considered probable; and
• The fees are fixed or determinable.
We consider all arrangements with payment terms longer than 90 days not to be fixed or determinable. If the fee is determined not to be fixed or
determinable, revenue is recognized as payment becomes due from the customer.
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Services revenue is comprised primarily of fees for technology support services, including the set-up, protection, optimization and repair of
new and existing computers as well as other technology devices. We provide these services remotely, using work-from-home Personal Technology
Experts who utilize our proprietary technology to deliver the services.
We provide services to consumers and small business, either through our channel partners (which include brick and mortar and online retailers,
anti-virus providers, PC/CE manufacturers, ISP’s, and others) or directly via our website at www.support.com. We transact with customers via
reseller programs, referral programs and direct transactions. In reseller programs, the channel partner generally executes the financial transactions with
the consumer and pays a fee to us which we recognize as revenue when the service is delivered. In referral programs, we transact with the consumer
directly and pay a referral fee to the referring party. Referral fees are generally expensed in the period in which revenues are recognized. In such
instances, since we are the transacting party and bear substantially all risks associated with the transaction, we record the gross amount of revenue. In
direct-to-consumer transactions, we sell directly to the consumer at the retail price.
Our services are of three types for revenue recognition purposes:
• Incident-Based Services—Customers purchase a discrete, one-time service. Revenue recognition occurs at the time of service delivery.
Fees paid for services sold but not yet delivered are recorded as deferred revenue and recognized at the time of service delivery.
• Subscriptions—Customers purchase subscriptions or “service plans” under which certain services are provided over a fixed subscription
period. Revenues for subscriptions are recognized ratably over the respective subscription periods.
• Service Cards / Gift Cards—Customers purchase a service card or a gift card, which entitles the cardholder to redeem a certain service at a
time of their choosing. For these sales, revenue is deferred until the card has been redeemed and the service has been provided.
For certain direct and channel partnerships, we are paid for services that are sold but not yet delivered. We initially record such balances as
deferred revenue, and recognize revenue when the service has been provided or, on the non-subscription portion of these balances, when the
likelihood of the service being redeemed by the customer is remote (“services breakage”). Based on our historical redemption patterns for these
relationships, we believe that the likelihood of a service being delivered more than 90 days after sale is remote. Beginning in 2010, we therefore
recognized non-subscription deferred revenue balances older than 90 days as services revenue. For the twelve months ended December 31, 2011 and
2010, services breakage revenues were immaterial, and accounted for approximately one percent of revenue.
Channel partners are generally invoiced monthly. Fees from consumers via referral programs and direct transactions are generally paid with a
credit card at the time of sale. Revenue is recognized net of any applicable sales tax.
We generally provide a refund period on services, during which refunds may be granted to consumers under certain circumstances, including
inability to resolve certain support issues. For our channel sales, the refund period varies by partner, but is generally between five and 10 days. For
referral programs and direct transactions, the refund period is generally five days. For all channels, we recognize revenue net of refunds and
cancellations during the period. Refunds and cancellations have not been material.
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Software and other revenue is comprised primarily of fees for software products provided through direct consumer downloads and, to a lesser
extent, through the sale of this software via channel partners. Our software is sold to consumers as a perpetual license or as a fixed period
subscription. We act as the primary obligor and generally control fulfillment, pricing, product requirements, and collection risk and therefore we record
the gross amount of revenue.
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