Table of Contents 

INFOSPACE, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 

Years Ended December 31, 2001, 2000 and 1999 

Development and integration fees: 

    Development fees are charged for the development of private labeled solutions for customers. 

Integration fees are charged for the integration of the Company's products and application services into these private labeled solutions. 

Although these fees are generally paid to the Company at the commencement of the agreement, they are recognized ratably over the term of the 

agreement.  

Advertising: 

    Revenues from contracts based on the number of impressions displayed or click throughs provided are recognized as 

services are rendered. In some cases, the Company shares revenues that it earns from banner advertising with content providers and customers 

with co branded Web pages. Some of the Company's arrangements provide for an equal sharing of revenue from advertising sold by customers 

with co branded Web pages after deducting selling costs. In cases where the customer is responsible for the sale of advertising under a revenue 

sharing arrangement and the Company receives only a net amount from the customer, the Company records the net amount received as 

revenue. In cases where the Company acts as a principal and is responsible for the sale of advertising, it records the gross amount earned as 

revenue.  

Also included in revenues are revenues generated from non cash transactions. Revenue is recognized when the Company completes all of 

its obligations under the agreement. In accordance with EITF 99 17 for barter agreements, which generally relate to the exchange of 

advertising, the Company records a receivable or liability at the end of the reporting period for the difference in the fair value of the services 

provided or received. Barter revenue is recorded based on comparable cash transactions. The Company recognized $14.0 million, $9.8 million 

and $948,000 as revenue from barter agreements for the years ended December 31, 2001, 2000 and 1999, respectively.  

The Company also recognizes revenue associated with providing services in exchange for warrants. For warrants that vest based on the 

Company's future performance, the amount recorded in revenue is based on the fair value of the warrant. For warrants that are fully vested 

upon execution of a contract, the fair value of the warrant is determined on the date of the contract execution and the revenue is recognized on a 

straight line basis over the life of the contract. The Company measures the fair value of the equity instruments using the stock price and other 

measurement assumptions including a review of current financial information and recent rounds of financing, on the earlier of (i) the date the 

terms of the warrant compensation arrangement and a commitment for performance is reached or (ii) the date at which the Company's 

performance to earn the warrants is complete (vesting date). The Company's agreements rarely include performance commitments pursuant to 

which performance is assured because of sufficiently large disincentives for non performance. Accordingly, most of the Company's 

arrangements are valued on the vesting date. At December 31, 2001, deferred revenue included $2.6 million from the unamortized portion of 

fully vested warrants.  

Cost of revenues: 

    Cost of revenues consists of expenses associated with the delivery, maintenance and support of the Company's 

products and application services, including direct personnel expenses, communication costs such as high speed Internet access, server 

equipment depreciation, and content license fees.  

Product development expenses: 

    Product development expenses consist principally of personnel costs for research, design, maintenance 

and on going enhancements of the Company's patented and patent pending technology.  

Sales, general and administrative expenses: 

    Sales, general and administrative expenses (SGA) consist primarily of salaries and related 

benefits for sales, general and administrative personnel, advertising and promotion expenses, carriage fees, professional service fees, 

occupancy and general office expenses and travel expenses for sales and management personnel.  

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