(2) Significant Accounting Policies

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These judgments are difficult as matters that are inherently uncertain directly impact their valuation and accounting. Actual results may vary from management’s estimates and assumptions.

On September 10, 2013, the Company launched its Domains Marketplace, which provides domain names available for sale and initiated plans to facilitate the active buying and transacting of domain names. Domain name sales occurring after this launch were $899,000 for the three and nine months ended September 30, 2013 and have been recognized as revenue in the condensed consolidated financial statements. Historically, the sale of domain names were not a core operation of the Company and were peripheral to the generation of advertising revenue from domain names held for use and as such domain name sales were reported as gains on sales and disposals of intangible assets, net in the condensed consolidated financial statements. Substantially all of the Company’s domain names that are available for sale are also used to generate advertising revenue. The Company also continues to maintain a portfolio of domain names which are solely held for use primarily to generate advertising revenue.

The Company capitalizes costs incurred to acquire domain names or URLs, which include the initial registration fees. The capitalized costs are amortized over the expected useful life of the domain names on a straight-line basis and for domain names sold any remaining unamortized cost basis is expensed at the time of sale and is recorded as service costs in the condensed consolidated financial statements. The carrying value of domain names that are both used to generate advertising revenue and are available for sale was not significant as of September 30, 2013. Domain names that are solely held for use are recorded in intangible and other assets, net in the condensed consolidated balance sheets.

The Company capitalizes costs incurred to renew or extend the term of the domain names or URLs to prepaid expenses and other current assets or long-term portion in intangible and other assets, net. The capitalized costs are amortized over the renewal period on a straight-line basis.

Deferred Acquisition Payment

The Company’s deferred acquisition payments represent consideration payable related to a business combination, which were paid in cash in April 2012 and October 2012 and are shown as a financing cash outflow in the Condensed Consolidated Statements of Cash Flows in the period paid.

Revenues

The following table presents the Company’s revenues, by revenue source, for the periods presented (in thousands):


	Nine months ended September 30,				Three months ended September 30,
	2012		2013		2012		2013
Partner and Other Revenue Sources	$	91,372	$	105,743	$	31,664	$	37,412
Proprietary Web site Traffic Sources and Other Revenue		8,986		7,127		2,027		3,148

Total Revenue	$	100,358	$	112,870	$	33,691	$	40,560

The Company’s partner network revenues are primarily generated using third party distribution networks to deliver the 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, mobile carriers and other 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, and campaign management 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, and 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. Other proprietary web site traffic revenues include domain name sales which were recognized as revenue with the launch of its Domains Marketplace in September 2013.