|6 Months Ended|
Jun. 30, 2013
|Customer Concentration [Abstract]|
12. Customer Concentration
The Company's revenues are highly dependent on two customers, LinkedIn and Apollo Group, Inc. ("Apollo Group" or "Apollo"). The loss of either major customer would materially and adversely affect the Company's business, operating results and financial condition. If LinkedIn or Apollo seek to negotiate its agreement on terms less favorable to the Company and the Company accepts such unfavorable terms, or if the Company seeks to negotiate better terms but is unable to do so, then the Company's business, operating results and financial condition would be materially and adversely affected.
Two customers accounted for 91%, or approximately $885,000, of total gross sales with LinkedIn representing 51% and Apollo representing 40% of total gross sales for the three months ended June 30, 2013. Two customers accounted for 98%, or approximately $1,489,000, of total gross sales with Monster representing 66% and Apollo representing 32% of total gross sales for the three months ended June 30, 2012. Two customers accounted for 92%, or approximately $1,739,000, of total gross sales with LinkedIn representing 52% and Apollo representing 40% of total gross sales for the six months ended June 30, 2013. Two customers accounted for 96%, or approximately $2,914,000, of total gross sales with Monster representing 66% and Apollo representing 30% of total gross sales for the six months ended June 30, 2012. Apollo accounted for 86% or approximately $385,000 of accounts receivable at June 30, 2013. In addition, two customers accounted for 72% or approximately $1,400,000 of accounts receivable with Monster representing 52% and Apollo representing 20% at December 31, 2012.
Revenues from the Company's recruitment services are recognized when the services are performed, evidence of an arrangement exists, the fee is fixed or determinable and collectability is probable. The Company's recruitment revenue is derived from the Company's agreements through single and multiple job postings, recruitment media, access to the Company's resume database, talent recruitment communities, basic and premier corporate memberships, hiring campaign marketing and advertising, e-newsletter marketing and research and outreach services.
Our agreement with Monster Worldwide, which expired on December 31, 2012, provided for an annual fixed fee of $4 million that was subject to adjustment based on certain criteria, e.g. the flat fee could have been decreased by 10% for any calendar quarter where the ratio of our job applicants to jobs posted falls below a certain threshold. The flat fee could have been increased if Monster Worldwide's gross revenue from diversity and inclusion services (e.g., job postings, resume search services and recruitment media advertising) exceeded a certain threshold.
On November 12, 2012, we entered into a diversity recruitment partnership agreement with LinkedIn, which became effective on January 1, 2013. Pursuant to our agreement, LinkedIn may resell to its customers diversity-based job postings and recruitment advertising on our websites. Our agreement with LinkedIn provides that LinkedIn will make fixed quarterly payments to us in the amount of $500,000 per quarter. The fixed quarterly payments are payable regardless of sales volumes or any other performance metric.
Pursuant to the LinkedIn agreement, we may earn additional commission payments from LinkedIn (i) if certain sales levels are achieved and (ii) we may earn revenue by selling our services directly. Under our agreement with LinkedIn, we will receive (i) no commissions on the first $10 million of LinkedIn's revenue from the sale of our services during any calendar year, (ii) 20% commission on LinkedIn's revenue from the sale of our services during any calendar year that is in excess of $10 million and less than $50 million, and (iii) 15% commission on LinkedIn's revenue from the sale of our services during any calendar year that is in excess of $50 million. As an example solely to illustrate the stair-step structure of our commission schedule with LinkedIn, if LinkedIn sells $60 million of our services during any calendar year, we would receive $9.5 million in commission revenue for such year, in addition to our fixed payments. This is because we would earn no commission revenue for the first $10 million of LinkedIn sales of our services, $8 million in commission revenue for the next $40 million of LinkedIn sales of our services and $1.5 million in commission revenue for the remaining $10 million of LinkedIn sales of our services. We will not obtain information about commissions earned from LinkedIn, if any, until within 60 days following the end of any fiscal quarter. Accordingly, any commission earned from LinkedIn sales during any quarter will be reflected in our financial statements for the subsequent quarter, subject to the applicable revenue recognition criteria being met. We did not earn a commission from LinkedIn during the three months ended March 31, 2013 and do not expect to earn a commission for the three months ended June 30, 2013.
Consumer Advertising and Consumer Marketing Solutions Revenue
The businesses and organizations that use the Company's marketing solutions are enabled to target and reach large audiences of diverse professionals and connect to relevant services with solutions that include email marketing, social media, search engines, traffic aggregators and strategic partnerships. Advertising revenue is recognized based upon fixed fees with certain minimum monthly website visits, a fixed fee for revenue sharing agreements in which payment is required at the time of posting, billed based upon the number of impressions recorded on the websites as specified in the customer agreement or through our business relationships with Apollo Group.
On October 1, 2012, the Company entered into an agreement with Apollo Group that provides for a fixed monthly fee of $116,667 for services and technical solutions provided by the Company to the University of Phoenix and its students and alumni. The primary service provided is for recruitment solutions for the University of Phoenix student and alumni career services. The Company recognized revenue under this agreement in the amount of $350,000 and $700,000 during the three and six months ended June 30, 2013, respectively.
In January 2012, the Company launched an advertising and promotion campaign for the University of Phoenix containing digital banners, dedicated email blasts and weekly blogs. The Company guaranteed at least 30,000 visits to the sites over a six month period or was required to refund any shortfall at $5.00 per visit less than 30,000 visits or extend the agreement until the 30,000 visit guarantee is reached. Site visits for the number of users were measured through an outside service which monitored the Company's compliance with such minimum visits requirement. Total fees payable could not exceed $150,000. The Company recognized the lesser of (i) 1/6th of the $150,000 fee per month for each of the 6 months during the minimum measurement period of January 1, 2012 through June 30, 2012, or (ii) the cumulative number of visits through the end of such month. The Company recognized revenue under this agreement of $0 and $75,000 during the three months ended June 30, 2013 and 2012, respectively, and $0 and $150,000 during the six months ended June 30, 2013 and 2012, respectively.
On June 11, 2012, we agreed to an insertion order with Apollo Group that replaced the above January 2012 advertising and promotion campaign for the University of Phoenix. The insertion order provided for payment to us of up to $150,000 per month for a period of 12 months based upon the number of persons we referred to the University of Phoenix who expressed an interest in obtaining information about attending the University of Phoenix. There was no guaranteed payment associated with the insertion order for the lead generation for the University of Phoenix. The Company recognized revenue under the insertion order of $34,914 and $64,300 for the three months ended June 30, 2013 and 2012, respectively, and $39,039 and $64,300 for the six months ended June 30, 2013 and 2012, respectively. The insertion order for the lead generation for the University of Phoenix ended by mutual agreement as of June 30, 2013.
The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date.
Reference 1: http://www.xbrl.org/2003/role/presentationRef