9. Stock-based Compensation

2013 Equity Incentive Plan

In October 2013, the Company adopted the 2013 Equity Incentive Plan (the “2013 Plan”), which became effective in March 2014 and serves as the successor to the Company’s 2006 Stock Plan (the “2006 Plan”). Pursuant to the 2013 Plan, 4,000,000 shares of common stock were initially reserved for grant, plus (1) any shares that were reserved and available for issuance under the 2006 Plan at the time the 2013 Plan became effective, and (2) any shares that become available upon forfeiture or repurchase by us under the 2006 Plan and 2000 Plan. Under the 2013 Plan, the Company may grant stock options, stock appreciation rights, restricted stock and restricted stock units, performance shares and units to employees, directors and consultants.

Stock Options

The fair value of each stock option is estimated on the date of grant for the periods presented using the Black-Scholes model based on the following assumptions:

	Six Months Ended June 30,
	2014		2013
Expected life (in years)		6.08		6.08
Risk-free interest rate		2.33%		1.09%
Volatility		55%		51%
Dividend yield	—		—

The weighted-average grant-date fair value of options granted was $8.60 and $1.80 per share during the six months ended June 30, 2014 and 2013, respectively. No options were granted during the three months ended June 30, 2014 and 2013.

Restricted Stock Units

The fair value of RSUs equals the market value of the Company’s common stock on the date of grant. RSUs granted prior to the Company’s IPO have a contractual term of seven years and vest upon the satisfaction of both a service condition and a liquidity-event condition. The service condition is satisfied as to 25% of the RSUs on each of the first four anniversaries of the vesting commencement date. The liquidity-event condition is satisfied upon the earlier of (i) six months after the effective date of the IPO or (ii) March 15 of the calendar year following the year in which the IPO was declared effective; and (iii) the time immediately prior to the consummation of a change in control. The vesting condition that will be satisfied six months following the Company’s IPO does not affect the expense attribution period for the RSUs for which the service condition has been met as of the date of the Company’s IPO. This six-month period is not a substantive service condition and, accordingly, beginning on the effectiveness of the Company’s IPO in March 2014, the Company recognized a cumulative stock-based compensation expense for the portion of the RSUs that had met the service condition as of the date of the Company’s IPO.

RSUs granted on or after the Company’s IPO have similar terms as the RSUs granted prior to the Company’s IPO, but are not subject to a liquidity-event condition in order to vest, and the compensation expense is recognized on a straight-line basis over the applicable service period.

A summary of the Company’s stock option and RSUs award activity under the Plan is as follows:

				Options Outstanding									RSUs Outstanding
	Shares Available for Grant			Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in thousands)		Number of Shares			Weighted Average Grant Date Fair Value
Balance as of December 31, 2013		2,035,282			12,635,707		$	5.87		7.02	$	68,944		4,521,191		$	5.59
Increase in shares authorized		4,000,000
Options granted		(46,875	)		46,875			16.00
Options exercised		—			(1,430,239	)		2.12				11,912
Options canceled or expired		29,802			(29,802	)		6.49
RSUs granted		(3,106,663	)											3,106,663			17.95
RSUs canceled or expired		282,777												(282,777	)		8.84
Balance as of June 30, 2014		3,194,323			11,222,541			6.39		6.80		223,590		7,345,077			10.70
Vested and expected to vest as of June 30, 2014					10,546,146			6.10		6.69		213,241
Vested and exercisable as of June 30, 2014					7,163,304			3.25		5.69		165,160

The aggregate intrinsic value disclosed in the table above is based on the difference between the exercise price of the options and the fair value of the Company’s common stock.

The aggregate total fair value of shares which vested during the three and six months ended June 30, 2014 was $854,000 and $1,859,000, respectively, and during the three and six months ended June 30, 2013 was $1,404,000 and $2,988,000, respectively.

Employee Stock Purchase Plan

The Company’s Board of Directors adopted the 2014 Employee Stock Purchase Plan (“ESPP”), which became effective in March 2014, pursuant to which 1,200,000 shares of common stock have been reserved for future issuance. Eligible employees can enroll and elect to contribute up to 15% of their base compensation through payroll withholdings in each offering period, subject to certain limitations. Each offering period is six months in duration, with the exception of the initial offering period which commenced in March 2014 and ends in November 2014. The purchase price of the stock is the lower of 85% of the fair market value on (a) the first day of the offering period or (b) the purchase date.

The fair value of the option feature is estimated using the Black-Scholes model for the period presented based on the following assumptions:

	Six Months Ended June 30, 2014
Expected life (in years)		0.62
Risk-free interest rate		0.08%
Volatility		55%
Dividend yield	—

Stock-based Compensation Expense

The following table sets forth the total stock-based compensation expense resulting from RSUs, stock options and ESPP included in the Company’s condensed consolidated statements of operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Cost of revenues	$	523	$	85	$	2,100	$	171
Sales and marketing		1,284		322		5,401		704
Research and development		1,760		271		7,270		571
General and administrative		3,094		390		6,482		1,108
Total stock-based compensation expense	$	6,661	$	1,068	$	21,253	$	2,554

As of June 30, 2014, there was $59,263,000 of unrecognized stock-based compensation expense (net of estimated forfeitures), of which $10,028,000 is related to stock options and ESPP shares and $49,235,000 is related to RSUs. The total unrecognized stock-based compensation expense related to stock options and ESPP as of June 30, 2014 will be amortized over a weighted-average period of 2.7 years. The total unrecognized stock-based compensation expense related to RSUs as of June 30, 2014 will be amortized over a weighted-average period of 3.5 years.

The amount of stock-based compensation cost capitalized in property and equipment, net on the accompanying condensed consolidated balance sheets was immaterial for all periods presented.