Tucows 2014 Annual Report Download - page 77

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Value-Added Services decreased by $0.6 million to $9.7 million when compared to Fiscal 2013. This decrease
was largely due to the $0.7 million decrease in revenue from pay-per-click advertising and the sale of names through the
OpenSRS Domain Expiry Stream. The revenue associated with names sales and advertising has recently experienced flat
to declining trends due to the uncertainty around the implementation of ICANN’s New gTLD Program, lower traffic and
advertising yields in the marketplace, which we expect to continue.
Retail
Net revenues from Retail for Fiscal 2014, as compared to Fiscal 2013, increased by $2.1 million to
$10.4 million. This increase was largely due to the success that our retail marketing initiatives and improved websites are
having on our ability to attract new customers and retain existing ones for Hover.
Portfolio
Net revenues from Portfolio for Fiscal 2014, as compared to Fiscal 2013, decreased by $2.4 million to
$5.1 million from $7.5 million. This decrease was primarily related to gains we recognized from our withdrawal of our
applications for .media and .marketing during the three months ended September 30, 2013 compared to the gains we
recognized from participating in a confidential private auction for .group in July 2014. The market for monetization of
domain names is rapidly evolving and is being impacted by uncertainty around the implementation of ICANN’s New
gTLD Program. In addition, Portfolio revenues were impacted by lower sales of big ticket domains as well as the impact
the uncertainty around the implementation of ICANN’s new gTLD Program is having on our pay-per-click advertising
traffic.
Network Access Services
Ting
Net revenues from Ting mobile phone services and equipment for Fiscal 2014, as compared to Fiscal 2013,
increased by $19.4 million or 117% to $35.9 million. This increase primarily reflects the impact the larger subscriber base
is having on service revenues. As of December 31, 2014, Ting had 94,000 subscribers and 147,000 mobile devices under
its management compared to 48,000 subscribers and 74,000 devices under management as of December 31, 2013.
COST OF REVENUES
Wholesale
OpenSRS Domain Service
Cost of revenues for domain registrations represents the amortization of registry fees on a basis consistent with
the recognition of revenues from our customers, namely ratably over the term of provision of the service. Registry fees,
the primary component of cost of revenues, are paid in full when the domain is registered, and are initially recorded as
prepaid domain registry fees. This accounting treatment reasonably approximates a recognition pattern that corresponds
with the provision of the services during the period. Market development funds that do not meet the criteria for revenue
recognition under ASC 605-50 “Customer Payments and Incentives”, are reflected as cost of goods sold and are
recognized as earned.
Value-Added Services
Costs of revenues for Value-Added Services include licensing and royalty costs related to the provisioning of
certain components of related to hosted email, fees paid to third-party service providers, primarily for trust certificates
and for printing services in connection with Platypus. Fees payable for trust certificates are amortized on a basis
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