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Description Of Business And Summary Of Significant Accounting Policies And Practices | 12 Months Ended
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Dec. 31, 2011
Description Of Business And Summary Of Significant Accounting Policies And Practices [Abstract] |
Description Of Business And Summary Of Significant Accounting Policies And Practices | (1) Description of Business and Summary of Significant Accounting Policies and Practices (a) Description of Business and Basis of Presentation Marchex, Inc. (the "Company") was incorporated in the state of Delaware on January 17, 2003. The Company is a digital call advertising and small business solutions company. The Company delivers call and click-based advertising products and services to tens of thousands of advertisers, ranging from small businesses to the Fortune 500 companies. The consolidated financial statements include the accounts of Marchex and its wholly-owned subsidiaries. Acquisitions are included in the Company's consolidated financial statements as of and from the date of acquisition. The Company's purchase accounting resulted in all assets and liabilities of acquired businesses being recorded at their estimated fair values on the acquisition dates. All inter-company transactions and balances have been eliminated in consolidation. Certain reclassifications have been made to the consolidated financial statements in the prior years to conform to the current year presentation. Acquisition On April 7, 2011, the Company acquired 100% of the stock of Jingle Networks, Inc. ("Jingle"), a provider of mobile voice search performance advertising and technology solutions in North America. See Note 10 for further discussion. (b) Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash equivalents consist primarily of money market funds. (c) Fair Value of Financial Instruments The Company had the following financial instruments as of December 31, 2010 and 2011: cash and cash equivalents, accounts receivable, refundable taxes, accounts payable and accrued liabilities. The carrying value of cash and cash equivalents, accounts receivable, refundable taxes, accounts payable and accrued liabilities approximates their fair value based on the liquidity of these financial instruments or based on their short-term nature. (d) Accounts Receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. Accounts receivable balances are presented net of allowance for doubtful accounts and allowance for advertiser credits. Allowance for Doubtful Accounts The allowance for doubtful accounts is the Company's best estimate of the amount of probable credit losses in existing accounts receivable. The Company determines the allowance based on analysis of historical bad debts, advertiser concentrations, advertiser credit-worthiness and current economic trends. Past due balances over 90 days and specific other balances are reviewed individually for collectibility. The Company reviews the allowance for collectibility quarterly. Account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for doubtful account activity for the periods indicated is as follows (in thousands):
|  | Balance at beginning of period |  |  | Charged to costs and expenses |  |  | Write-offs, net of recoveries |  |  | Balance at end of period |
December 31, 2009 |  | $ | 817 |  |  | $ | 59 |  |  | $ | 409 |  |  | $ | 467 |
December 31, 2010 |  |  | 467 |  |  |  | 343 |  |  |  | 353 |  |  |  | 457 |
December 31, 2011 |  |  | 457 |  |  |  | 453 |  |  |  | 117 |  |  |  | 793 |
Allowance for Advertiser Credits The allowance for advertiser credits is the Company's best estimate of the amount of expected future reductions in advertisers' payment obligations related to delivered services. The Company determines the allowance for advertiser credits and adjustments based on analysis of historical credits. The allowance for advertiser credits activity for the periods indicated is as follows (in thousands):
|  | Balance at beginning of period |  |  | Additions charged against revenue |  |  | Credits processed |  |  | Balance at end of period |
December 31, 2009 |  | $ | 486 |  |  | $ | 917 |  |  | $ | 939 |  |  | $ | 464 |
December 31, 2010 |  |  | 464 |  |  |  | 1,005 |  |  |  | 830 |  |  |  | 639 |
December 31, 2011 |  |  | 639 |  |  |  | 690 |  |  |  | 856 |  |  |  | 473 |
(e) Property and Equipment Property and equipment are stated at cost. Depreciation on computers and other related equipment, purchased and internally developed software, and furniture and fixtures is calculated on the straight-line method over the estimated useful lives of the assets, generally averaging three years. Leasehold improvements are amortized straight-line over the shorter of the lease term or estimated useful lives of the assets ranging from three to eight years. (f) Goodwill Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed in business combinations accounted for under the purchase method. The Company applies the provisions of FASB ASC 350 "Goodwill and Intangible Assets". Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of FASB ASC 350. FASB ASC 350 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with FASB ASC 360. (g) Impairment or Disposal of Long-Lived Assets The Company reviews its long-lived assets for impairment in accordance with FASB ASC 360 whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds fair value. Assets to be disposed of would be separately presented on the balance sheet and reported at the lower of their carrying amount or fair value less costs to sell, and no longer depreciated. (h) Revenue Recognition The following table presents our revenues, by revenue source, for the periods presented (in thousands):
|  | Years ended December 31, |
|  | 2009 |  |  | 2010 |  |  | 2011 |
Partner and Other Revenue Sources |  | $ | 61,698 |  |  | $ | 71,537 |  |  | $ | 126,210 |
Proprietary Web site Traffic Sources |  |  | 31,563 |  |  |  | 26,029 |  |  |  | 20,516 |
Total Revenue |  | $ | 93,261 |  |  | $ | 97,566 |  |  | $ | 146,726 |
The Company's partner network revenues are primarily generated using third party distribution networks to deliver the pay-for-call or pay-per-click advertisers' listings. The distribution network includes mobile and online search engines and applications, directories, destination sites, shopping engines, third party Internet domains or web sites, other targeted Web-based content, and offline sources. The Company generates revenue upon delivery of qualified and reported phone calls or click-throughs to our advertisers or to advertising services providers' listings. The Company pays a revenue share to the distribution partners to access their mobile, online, offline and other user traffic. Other revenues include the Company's call provisioning and call tracking services, presence management services, campaign management services and natural search optimization services. The Company's proprietary web site traffic revenues are generated from the Company's portfolio of owned web sites which are monetized with pay-for-call or pay-per-click listings that are relevant to the web sites, as well as other forms of advertising, including banner advertising and sponsorships. When an online user navigates to one of the Company's owned and operated web sites and calls or clicks on a particular listing or completes the specified action, the Company receives a fee. The Company's primary sources of revenue are the performance-based advertising services, which include pay-for-call and voice search services, pay-per-click services, cost-per-action services and historically feed management and related services. These primary sources amounted to greater than 78% of revenue for the years ended December 31, 2009, 2010 and 2011. The secondary sources of revenue are small business solutions products which enable partner resellers to sell call adverting and/or search marketing products, campaign management services, and natural search optimization services. These secondary sources amounted to less than 22% of revenue for the years ended December 31, 2009, 2010 and 2011. The Company has no barter transactions. The Company recognizes revenue upon the completion of its performance obligation, provided that: (1) evidence of an arrangement exists; (2) the arrangement fee is fixed and determinable; and (3) collection is reasonably assured. In certain cases, the Company records revenue based on available and reported preliminary information from third parties. Collection on the related receivables may vary from reported information based upon third party refinement of the estimated and reported amounts owing that occurs subsequent to period ends. In providing call advertising services and pay-per-click advertising, the Company generates revenue upon delivery of qualified and reported phone calls or click-throughs to advertisers or advertising service providers' listings. These advertisers and advertising service providers pay the Company a designated transaction fee for each phone call or click-through, which occurs when an online user makes a phone call or clicks on any of their advertisement listings after it has been placed by the Company or by the Company's distribution partners. Each phone call or click-through on an advertisement listing represents a completed transaction. The advertisement listings are displayed within the Company's distribution network, which includes mobile and online search engines and applications, directories, destination sites, shopping engines, third party Internet domains or web sites, the Company's portfolio of owned web sites and other targeted Web-based content and offline sources. The Company also generates revenue from cost-per-action services, which occurs when the online user is redirected from one of the Company's web sites or a third party web site in our distribution network to an advertiser web site and completes the specified action. The Company generates revenue from reseller partners and publishers utilizing the Company's small business solutions products to sell call advertising and/or search marketing products. The Company is paid account fees and also agency fees for the Company's products in the form of a percentage of the cost of every call or click delivered to advertisers. The reseller partners or publishers engage the advertisers and are the primary obligor, and the Company, in certain instances, is only financially liable to the publishers in the Company's capacity as a collection agency for the amount collected from the advertisers. The Company recognizes revenue for these fees under the net revenue recognition method. In limited arrangements resellers pay the Company a fee for fulfilling an advertiser's campaign in its distribution network and the Company acts as the primary obligor. The Company recognizes revenue for these fees under the gross revenue recognition method. In providing pay-per-click contextual targeting services, advertisers purchase keywords or keyword strings, based on an amount they choose for a targeted placement on vertically-focused web sites or specific pages of a web site that are specific to their products or services and their marketing objectives. The contextual results distributed by our services are prioritized for users by the amount the advertiser is willing to pay each time a user clicks on the advertisement and the relevance of the advertisement, which is dictated by historical click-through rates. Advertisers pay the Company when a click-through occurs on their advertisement. Prior to 2010, the Company offered feed management services in which advertisers paid for their Web pages and product databases to be crawled, or searched, and included in search engine, directory and product shopping engine results within the Company's distribution network. Generally, the feed management listings were presented in a different section of the Web page than the pay-per-click listings. For this service, revenue was generated when an online user clicks on a feed management listing from search engine, directory or product shopping engine results. Each click-through on an advertisement listing represented a completed transaction for which the advertiser paid for on a per-click basis. The placement of a feed management result was largely determined by its relevancy, as determined by the distribution partner. Yahoo! discontinued its feed management service relationship with the Company effective December 31, 2009 as a result of its partnership with Microsoft. Accordingly, the Company discontinued its feed management and related service offerings as of that date. Advertisers pay the Company additional fees for services such as campaign management and natural search engine optimization. Advertisers generally pay the Company on a click-through basis, although in certain cases the Company receives a fixed fee for delivery of these services. In some cases we also deliver banner campaigns for select advertisers. Banner advertising revenue may be based on a fixed fee per click and is generated and recognized on click-through activity. In other cases, banner payment terms are volume-based with revenue generated and recognized when impressions are delivered. The Company enters into agreements with various distribution partners to provide distribution for pay-for-call and pay-per-click advertisement listings which contain call tracking numbers and/or URL strings of our advertisers. The Company generally pays distribution partners based on a percentage of revenue or a fixed amount per phone call or click-through on these listings. The Company acts as the primary obligor with the advertiser for revenue call or click-through transactions and is responsible for the fulfillment of services. In accordance with FASB ASC 605, the revenue derived from advertisers is reported gross based upon the amounts received from the advertiser. The Company also recognizes revenue for certain agency contracts with advertisers under the net revenue recognition method. Under these specific agreements, the Company purchases listings on behalf of advertisers from mobile sources, search engines and applications, directories, other Web-based content providers and offline sources. The Company is paid account fees and also agency fees based on the total amount of the purchase made on behalf of these advertisers. Under these agreements, the advertisers are primarily responsible for choosing the publisher and determining pricing, and the Company, in certain instances, is only financially liable to the publisher for the amount collected from our advertisers. This creates a sequential liability for media purchases made on behalf of advertisers. In certain instances, the web publishers engage the advertisers directly and the Company is paid an agency fee based on the total amount of the purchase made by the advertiser. In limited arrangements resellers pay us a fee for fulfilling an advertiser's campaign in our distribution network and we act as the primary obligor. We recognize revenue for these fees under the gross revenue recognition method. The Company applies FASB ASC 605 to account for revenue arrangements with multiple deliverables. FASB ASC 605 addresses certain aspects of accounting by a vendor for arrangements under which the vendor will perform multiple revenue-generating activities. When an arrangement involves multiple elements, the entire fee from the arrangement is allocated to each respective element based on its relative fair value and recognized when the revenue recognition criteria, as described above, for each element are met. Fair value for each element is established based on the sales price charged when the same element is sold separately. (j) Service Costs The largest component of the Company's service costs consist of user acquisition costs that relate primarily to payments made to distribution partners for access to their mobile, online, and offline user traffic. The Company enters into agreements of varying durations with distribution partners that integrate the Company's services into their web sites and indexes. The primary payment structure of the distribution partner agreements is a variable payment based on a specified percentage of revenue. These variable payments are often subject to minimum payment amounts per phone call or click-through. Other payment structures that to a lesser degree exist include: 1) fixed payments, based on a guaranteed minimum amount of usage delivered, 2) variable payments based on a specified metric, such as number of paid click-throughs, and 3) a combination arrangement with both fixed and variable amounts that may be paid in advance. The Company expenses user acquisition costs based on whether the agreement provides for fixed or variable payments. Agreements with fixed payments with minimum guaranteed amounts of usage are expensed as the greater of the pro-rata amount over the term of arrangement or the actual usage delivered to date based on the contractual revenue share. Agreements with variable payments based on a percentage of revenue, number of paid phone calls or click-throughs or other metrics are expensed as incurred based on the volume of the underlying activity or revenue multiplied by the agreed-upon price or rate. Service costs also include network operations and customer service costs that consist primarily of costs associated with providing performance-based advertising and search marketing services, maintaining the Company's web sites, credit card processing fees, network costs and fees paid to outside service providers that provide the Company's paid listings and customer services. Customer service and other costs associated with serving the Company's search results and maintaining the Company's web sites include depreciation of web sites, network equipment and internally developed software, colocation charges of the Company's network web site equipment, bandwidth, software license fees, salaries of related personnel, stock-based compensation and amortization of intangible assets. Other service costs include license fees, the amortization of the purchase cost of domain names, the costs incurred for the renewal of the domain name registration and telecommunication costs, including the use of telephone numbers for providing call-based advertising services. (k) Advertising Expenses Advertising costs are expensed as incurred and include Internet-based advertising, sponsorships, and trade shows. Such costs are included in sales and marketing. Internet-based advertising is concentrated primarily with four providers. The amounts for online and related outside marketing activities were approximately $8.1 million, $3.8 million and $3.3 million for the years ended December 31, 2009, 2010 and 2011, respectively. (l) Other Intangible Assets and Product Development The Company capitalizes costs incurred to acquire domain names or URLs, which include the initial registration fees, and amortizes the costs over the expected useful life of the domain names on a straight-line basis. The expected useful lives range from 12 to 84 months. In order to maintain the rights to each domain name acquired, the Company pays periodic registration fees, which generally cover a minimum period of 12 months. The Company records registration renewal fees of domain name intangible assets as a prepaid expense and recognizes the cost over the renewal period. Product development costs consist primarily of expenses incurred by the Company in the research and development, creation, and enhancement of the Company's Internet sites and services. Research and development costs are expensed as incurred and include compensation and related expenses, costs of computer hardware and software, and costs incurred in developing features and functionality of the services. For the periods presented, substantially all of the product development expenses are research and development. Product development costs are expensed as incurred or capitalized into property and equipment in accordance with FASB ASC 350. FASB ASC 350 requires that cost incurred in the preliminary project and post-implementation stages of an internal use software project be expensed as incurred and that certain costs incurred in the application development stage of a project be capitalized. (m) Income Taxes The Company utilizes the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recognized in results of operations in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets when it is more likely than not that such deferred tax assets will not be realized. (n) Stock-Based Compensation The Company follows FASB ASC 718 and accounts for stock-based compensation for employees and non-employees under the fair value method. As a result, stock-based compensation consists of the following:
| • |  | all share-based compensation arrangements granted after January 1, 2006 (adoption date of FASB ASC 718) and for any such arrangements that are modified, cancelled, or repurchased after that date; and
| • |  | the portion of previous share-based awards for which the requisite service was not rendered as of January 1, 2006.
Stock-based compensation expense has been included in the same lines as compensation paid to the same employees in the consolidated statement of operations. (o) Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The Company has used estimates related to several financial statement amounts, including revenues, allowance for doubtful accounts, allowance for advertiser credits, useful lives for property and equipment, intangible assets, the fair-value of the Company's common stock and stock option awards, the impairment of goodwill and intangible assets and a valuation allowance for deferred tax assets. Actual results could differ from those estimates. In certain cases, the Company records revenue based on available and reported preliminary information from third parties. Collection on the related receivables may vary from reported information based upon third party refinement of the estimated and reported amounts owing that occurs subsequent to period ends. (p) Concentrations The Company maintains substantially all of their cash and cash equivalents with one financial institution. A significant majority of the Company's revenue earned from advertisers is generated through arrangements with distribution partners. The Company may not be successful in renewing any of these agreements, or if they are renewed, they may not be on terms as favorable as current arrangements. The Company may not be successful in entering into agreements with new distribution partners or advertisers on commercially acceptable terms. In addition, several of these distribution partners or advertisers may be considered potential competitors. There were no distribution partners representing more than 10% of consolidated revenue for the years ended December 31, 2009, 2010 and 2011. The advertisers representing more than 10% of consolidated revenue are as follows (in percentages):
|  | Years ended December 31, |
|  | 2009 |  |  | 2010 |  |  | 2011 |
Advertiser A |  |  | 11 | % |  |  | * |  |  |  | * |
Advertiser B |  |  | 22 | % |  |  | 23 | % |  |  | 31 | %
Advertiser C |  |  | 11 | % |  |  | * |  |  |  | * |
Advertiser A and B are also distribution partners.
* | Less than 10% of revenue.
The outstanding receivable balance for each advertiser representing more than 10% of consolidated accounts receivable is as follows (in percentages):
|  | At December 31, |
|  | 2010 |  |  | 2011 |
Advertiser B |  |  | 40 | % |  |  | 37 | %
Advertiser D |  |  | 11 | % |  |  | * |
* | Less than 10% of accounts receivable.
(q) Segment Reporting and Geographic Information Operating segments are revenue-producing components of the enterprise for which separate financial information is produced internally for the Company's management. For all periods presented the Company operated as a single segment. The Company operates in a single operating segment principally in domestic markets providing digital advertiser transaction services to enterprises. Revenues from advertisers by geographical areas are tracked on the basis of the location of the advertiser. The vast majority of the Company's revenue and accounts receivable are derived from domestic sales to advertisers engaged in various mobile, online and other digital activities. Revenues by geographic region are as follows (in percentages):
|  | Years ended December 31, |
|  | 2009 |  |  | 2010 |  |  | 2011 |
United States |  |  | 98 | % |  |  | 96 | % |  |  | 94 | %
Canada |  |  | 1 | % |  |  | 4 | % |  |  | 6 | %
Other countries |  |  | 1 | % |  |  | * |  |  |  | * |
|  |  | 100 | % |  |  | 100 | % |  |  | 100 | %
* | Less than 1% of revenue
(r) Net Income (Loss) Per Share The Company computes net income (loss) per share of Class A and Class B common stock using the two class method. Under the provisions of the two class method, basic net loss per share is computed by dividing net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the year. Diluted net income (loss) per share is computed by dividing net income (loss) applicable to common stockholder by the weighted average number of common and dilutive common equivalent shares outstanding during the period. The computation of the diluted net income (loss) per share of Class B common stock assumes the conversion of Class A common stock to Class B common stock, while the diluted net income (loss) per share of Class A common stock does not assume the conversion of those shares. In accordance with the two class method, the undistributed earnings (losses) for each year are allocated based on the contractual participation rights of the Class A and Class B common shares and the restricted shares as if the earnings for the year had been distributed. Considering the terms of the Company's charter which provides that, if and when dividends are declared on our common stock in accordance with Delaware General Corporation Law, equivalent dividends shall be and have been paid with respect to the shares of Class A common stock and Class B common stock and that both classes of common stock have identical dividend rights and would share equally in the Company's net assets in the event of liquidation, the Company has allocated undistributed earnings (losses) on a proportionate basis. Additionally, the Company has paid dividends equally to both classes of common stock and the restricted shares since it initiated a quarterly cash dividend in November 2006. Instruments granted in unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities prior to vesting. As such, the Company's restricted stock awards are considered participating securities for purposes of calculating earnings per share. Under the two class method, dividends paid on unvested restricted stock are allocated to these participating securities and therefore impacts the calculation of amounts allocated to common stock. The following table calculates net loss to net loss applicable to common stockholders used to compute basic net loss per share for the periods ended (in thousands, except per share amounts):
|  | Twelve months ended December 31, |
|  | 2009 |  |  | 2010 |  |  | 2011 |
|  | Class A |  |  | Class B |  |  | Class A |  |  | Class B |  |  | Class A |  |  | Class B |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (726 | ) |  | $ | (1,336 | ) |  | $ | (1,058 | ) |  | $ | (1,985 | ) |  | $ | 799 |  |  | $ | 2,160 |
Dividends paid to participating securities |  |  | — |  |  |  | (187 | ) |  |  | — |  |  |  | (199 | ) |  |  | — |  |  |  | (259 | )
Net income (loss) applicable to common stockholders |  | $ | (726 | ) |  | $ | (1,523 | ) |  | $ | (1,058 | ) |  | $ | (2,184 | ) |  | $ | 799 |  |  | $ | 1,901 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average number of shares outstanding used to calculate basic net income (loss) per share |  |  | 10,884 |  |  |  | 22,830 |  |  |  | 10,661 |  |  |  | 21,993 |  |  |  | 9,928 |  |  |  | 23,358 |
Basic net income (loss) per share applicable to common stockholders |  | $ | (0.07 | ) |  | $ | (0.07 | ) |  | $ | (0.10 | ) |  | $ | (0.10 | ) |  | $ | 0.08 |  |  | $ | 0.08 |
The following table calculates net income (loss) to diluted net income (loss) applicable to common stockholders used to compute diluted net income (loss) per share for the periods ended (in thousands, except per share amounts):
|  | Twelve months ended December 31, |
|  | 2009 |  |  | 2010 |  |  | 2011 |
|  | Class A |  |  | Class B |  |  | Class A |  |  | Class B |  |  | Class A |  |  | Class B |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (726 | ) |  | $ | (1,336 | ) |  | $ | (1,058 | ) |  | $ | (1,985 | ) |  | $ | 799 |  |  | $ | 2,160 |
Dividends paid to participating securities |  |  | — |  |  |  | (187 | ) |  |  | — |  |  |  | (199 | ) |  |  | — |  |  |  | (259 | )
Reallocation of net income (loss) for Class A shares as a result of conversion of Class A to Class B shares |  |  |  |  |  |  | (726 | ) |  |  | — |  |  |  | (1,058 | ) |  |  | — |  |  |  | 799 |
Net income (loss) applicable to common stockholders |  | $ | (726 | ) |  | $ | (2,249 | ) |  | $ | (1,058 | ) |  | $ | (3,242 | ) |  | $ | 799 |  |  | $ | 2,700 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average number of shares outstanding used to calculate basic net income (loss) per share |  |  | 10,884 |  |  |  | 22,830 |  |  |  | 10,661 |  |  |  | 21,993 |  |  |  | 9,928 |  |  |  | 23,358 |
Weighted average stock options and common shares subject to repurchase or cancellation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  |  |  |  |  | 2,032 |
Conversion of Class A to Class B common shares outstanding |  |  | — |  |  |  | 10,884 |  |  |  | — |  |  |  | 10,661 |  |  |  | — |  |  |  | 9,928 |
Weighted average number of shares outstanding used to calculate diluted net income (loss) per share |  |  | 10,884 |  |  |  | 33,714 |  |  |  | 10,661 |  |  |  | 32,654 |  |  |  | 9,928 |  |  |  | 35,318 |
Diluted net income (loss) per share applicable to common stockholders |  | $ | (0.07 | ) |  | $ | (0.07 | ) |  | $ | (0.10 | ) |  | $ | (0.10 | ) |  | $ | 0.08 |  |  | $ | 0.08 |
The computation of diluted net income (loss) per share excludes the following because their effect would be anti-dilutive (in thousands):
| • |  | For the years ended December 31, 2009 and 2010, outstanding options to acquire 4,701 and 6,411 shares, respectively, of Class B common stock. For the year ended December 31, 2011, outstanding options to acquire 4,792 shares of Class B common stock.
| • |  | For the years ended December 31, 2009, 2010, and 2011, 2,542, 3,214 and 134 shares, respectively, of unvested Class B restricted common shares issued to employees and in connection with acquisitions. These shares were for future services that vest over periods ranging from two to six years.
| • |  | For the year ended December 31, 2010 and 2011, 255 and 153 restricted stock units with vesting based on meeting certain service and market conditions.
| • |  | For the year ended December 31, 2011, 5,987 shares of Class B common stock that may be issued in lieu of cash for the deferred payments related to the acquisition of Jingle using the "if converted" method. See Note 11 for further discussion.
(s) Guarantees FASB ASC 460 provides accounting guidance surrounding liability recognition and disclosure requirements related to guarantees. In the ordinary course of business, the Company is not subject to potential obligations under guarantees that fall within the scope of FASB ASC 460 except for standard indemnification provisions that are contained within many of the Company's advertiser and distribution partner agreements, and give rise only to the disclosure requirements prescribed by FASB ASC 460. In certain agreements, the Company has agreed to indemnification provisions of varying scope and terms with advertisers, vendors and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company's breach of agreements or representations and warranties made by the Company, services to be provided by the Company and intellectual property infringement claims made by third parties. As a result of these provisions, the Company may from time to time provide certain levels of financial support to contract parties to seek to minimize the impact of any associated litigation in which they may be involved. To date, there have been no known events or circumstances that have resulted in any material costs related to these indemnification provisions and no liabilities therefore have been recorded in the accompanying consolidated financial statements. However, the maximum potential amount of the future payments we could be required to make under these indemnification provisions could be material. (t) Deferred Acquisition Payment The Company's deferred acquisition payments represent consideration payable related to a business combination, which may be paid in either cash or shares of the Company's Series B common stock at the Company's discretion. Any deferred acquisition payments settled in common stock will be increased by 5%. The deferred acquisition payments were originally recognized at fair value at the date of the business combination and are recorded as liabilities on the balance sheet. Interest expense on the principal amounts due is accreted each period using the effective interest rate method. (u) Recently Issued Accounting Standards In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs ("ASU 2011-04"). ASU 2011-04 amended Accounting Standards Codification Topic 820 ("ASC 820") to converge the fair value measurement guidance in U.S. GAAP and International Financial Reporting Standards ("IFRSs"). Some of the amendments clarify the application of existing fair value measurement requirements, while other amendments change a particular principle in ASC 820. In addition, ASU 2011-04 requires additional fair value disclosures. The amendments are to be applied prospectively and are effective for annual periods beginning after December 15, 2011. The Company will adopt these provisions in first quarter 2012 and the Company does not expect these provisions to have a material impact on the Company's consolidated financial statements. In June 2011, the FASB issued Accounting Standards Update No. 2011-05, C omprehensive Income (Topic 220): Presentation of Comprehensive Income ("ASU 2011-05"), to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. The amendment is effective for fiscal years beginning after December 15, 2011, and interim periods within that year. In December 2011, the FASB issued an amendment to an existing accounting standard which defers the requirement to present components of the reclassifications of other comprehensive income on the face of the income statement. The Company does not expect these standards to have a material impact on the Company's consolidated financial statements. In September 2011, the FASB issued Accounting Standards Update No. 2011-08, Testing Goodwill for Impairment ("ASU 2011-08"). ASU 2011-08 amended Accounting Standards Codification Topic 350 ("ASC 350") to allow companies to first assess qualitative factors to determine whether existence of events or circumstances leads to a conclusion that it is not more likely than not that the fair value of a reporting unit is less than the carrying value. If such a conclusion is reached, then the two-step impairment test is not required to be performed. ASU 2011-08 is effective for the Company in 2012 and earlier adoption is permitted. The Company will adopt this standard in the first quarter of 2012 and the Company does not expect the standard to have a material impact on the Company's consolidated financial statements.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Name Statement of Position (SOP) -Publisher AICPA -Number 94-6 -Paragraph 10 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Name FASB Interpretation (FIN) -Publisher FASB -Number 46R -Paragraph 4, 14, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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