(3) Stock-based Compensation Plans

Stock-based compensation expense has been included in the same lines as compensation paid to the same employees in the condensed consolidated statement of operations. Stock-based compensation expense was included in the following operating expense categories as follows (in thousands):


	Three months ended March 31,
	2013		2014
Service costs	$	180	$	282
Sales and marketing		60		204
Product development		372		659
General and administrative		1,295		1,738

Total stock-based compensation	$	1,907	$	2,883

Income tax benefit related to stock-based compensation included in net income from continuing operations	$	509	$	908

FASB ASC 718 requires the benefits of tax deductions in excess of the stock-based compensation cost to be classified as financing cash inflows and is shown as “Excess tax benefit related to stock-based compensation” on the consolidated statement of cash flows. In addition, a tax benefit and a credit to additional paid-in capital for the excess deductions are not recognized until that deduction reduces taxes payable. For the three months ended March 31, 2014, the Company incurred an excess tax deduction of $1.3 million for which the tax benefit was not recorded because the Company is in a cumulative loss carryforward position for income taxes.

The Company uses the Black-Scholes option pricing model to estimate the per share fair value of stock option grants with time-based vesting. The Black-Scholes model relies on a number of key assumptions to calculate estimated fair values. For the quarters ended March 31, 2013 and 2014, the expected life of each award granted was determined based on historical experience with similar awards, giving consideration to contractual terms, anticipated exercise patterns, vesting schedules and forfeitures. Expected volatility is based on historical volatility levels of the Company’s Class B common stock and the expected volatility of companies in similar industries that have similar vesting and contractual terms. The risk-free interest rate is based on the implied yield currently available on U.S. Treasury issues with terms approximately equal to the expected life of the option. The Company uses an expected annual dividend yield in consideration of the Company’s common stock dividend payments.

The following weighted average assumptions were used in determining the fair value of time-vested stock option grants for the periods presented:


	Three months ended March 31,
	2013		2014
Expected life (in years)		4.0		4.0
Risk-free interest rate		0.57%		1.32	%
Expected volatility		57%		55%-60	%
Expected dividend yield		2.33%		0.76	%

Stock option activity during the three months ended March 31, 2014 is summarized as follows:


	Shares			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate intrinsic value (in thousands)
Balance at December 31, 2013		7,707,713		$	7.48	$	6.99	$	17,148
Options granted		86,000			10.12
Options forfeited		(58,073	)		5.39
Options expired		(37,061	)		12.13
Options exercised		(206,811	)		6.65

Balance at March 31, 2014		7,491,768		$	7.52	$	6.81	$	27,477

The Company issues restricted stock awards and restricted stock units to employees for future services and/or in connection with acquisitions. Restricted stock units entitle the holder to receive one share of the Company’s Class B common stock upon satisfaction of certain vesting conditions. Restricted stock award and restricted stock unit grants are generally measured at fair value on the date of grant based on the number of awards granted and the quoted price of the Company’s common stock. Restricted shares issued are accounted for under FASB ASC 718 using the straight-line method net of estimated forfeitures.

Restricted stock awards and restricted stock units activity during the three months ended March 31, 2014 is summarized as follows:


	Shares/ Units			Weighted average grant date fair value
Unvested balance at December 31, 2013		2,709,443		$	5.41
Granted		10,000			9.86
Vested		(146,875	)		6.10
Forfeited		(25,750	)		3.89

Unvested balance at March 31, 2014		2,546,818		$	5.40

The Company repurchased 12,008 shares from certain executives for minimum withholding taxes on 41,000 restricted stock awards that vested during 2014. The number of shares repurchased was based on the value on the vesting date of the restricted stock awards equivalent to the value of the executives’ minimum withholding taxes of $148,000, which was remitted in cash to the appropriate taxing authorities. The payments are reflected as a financing activity within the condensed consolidated statement of cash flows when paid.