Travelzoo 2009 Annual Report Download - page 47

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Our publications and products include the Travelzoo Web sites (www.travelzoo.com, www.travelzoo.ca,
www.travelzoo.co.uk, www.travelzoo.de, www.travelzoo.com.es, www.travelzoo.fr, among others), the Travelzoo
Top 20 e-mail newsletter, and the Newsflash e-mail alert service. We operate SuperSearch, a pay-per-click travel
search tool and the Travelzoo Network, a network of third-party Web sites that list deals published by Travelzoo. We
also operate Fly.com, a travel search engine that allows users to quickly and easily find and compare the best prices
on flights from hundreds of airlines and online travel agencies. More than 2,000 travel and entertainment companies
use our services.
On October 31, 2009, we completed the sale of our Asia Pacific operating segment to Azzurro Capital Inc. and
its wholly-owned subsidiaries, Travelzoo (Asia) Limited and Travelzoo Japan K.K. The results of operations of the
Asia Pacific operating segment have been classified as discontinued operations for all periods presented. We have
not had significant ongoing involvement with the operations of the Asia Pacific operating segment and have not had
any economic interests in the Asia Pacific operating segment since the completion of the sale. Starting November 1,
2009, the Travelzoo Web sites in Asia Pacific (cn.travelzoo.com, www.travelzoo.co.jp, www.travelzoo.com.au,
www.travelzoo.com.hk, www.travelzoo.com.tw, among others), the Travelzoo Top 20 e-mail newsletters in Asia
Pacific and the Newsflash e-mail alert service in Asia Pacific are published by Travelzoo (Asia) Limited and
Travelzoo Japan K.K., wholly owned subsidiaries of Azzurro Capital Inc., under a license agreement with the
Company. See Note 11 to the accompanying consolidated financial statements.
Our revenues are advertising revenues, consisting of listing fees paid primarily by travel and entertainment
companies to advertise their offers on the Travelzoo Web sites, in the Travelzoo Top 20 e-mail newsletter, in the
Newsflash e-mail alert service, in SuperSearch, through the Travelzoo Network, and on Fly.com. Revenues are
principally generated from the sale of advertising in the U.S. Listing fees are based on placement, number of
listings, number of impressions, number of click-throughs, or number of referrals. Smaller advertising agree-
ments — typically $2,000 or less per month — typically renew automatically each month if they are not terminated
by the client. Larger agreements are typically related to advertising campaigns and are not automatically renewed.
We have two operating segments based on geographic regions: North America and Europe. North America
consists of our operations in Canada and the U.S. Europe consists of our operations in France, Germany, Spain, and
the U.K. For the year ended December 31, 2009, our operations in Europe accounted for 17% of revenues and our
operations in North America accounted for 83% of revenues.
When evaluating the financial condition and operating performance of the Company, management focuses on
the following financial and non-financial indicators:
• Growth of number of subscribers of the Company’s newsletters and page views of the homepages of the
Travelzoo Web sites;
• Operating margin;
• Growth in revenues in the absolute and relative to the growth in reach of the Company’s publications; and
• Revenue per employee as a measure of productivity.
Critical Accounting Policies
We believe that there are a number of accounting policies that are critical to understanding our historical and
future performance, as these policies affect the reported amounts of revenue and the more significant areas
involving management’s judgments and estimates. These significant accounting policies relate to revenue recog-
nition, the allowance for doubtful accounts, and liabilities to former stockholders. These policies, and our
procedures related to these policies, are described in detail below.
Revenue Recognition
We recognize revenue on arrangements in accordance with SEC Staff Accounting Bulletin for revenue
recognition. We recognize advertising revenues in the period in which the advertisement is displayed, provided that
evidence of an arrangement exists, the fees are fixed or determinable and collection of the resulting receivable is
reasonably assured. If fixed-fee advertising is displayed over a term greater than one month, revenues are
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