3. Fair Value Measurements

The fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company’s fair value hierarchy for its financial assets and liabilities that are measured at fair value on a recurring basis are as follows (in thousands):

	June 30, 2018
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Money market funds	$	141,123		—		—	$	141,123
Certificate of deposit		—		10,144		—		10,144
Short-Term investments:
Certificate of deposit		—		50,175		—		50,175
Total	$	141,123	$	60,319	$	—	$	201,442
Liabilities:
Contingent consideration related to Ahalogy acquisition ⁽¹⁾		—		—		14,582		14,582
Total	$	—	$	—	$	14,582	$	14,582

	December 31, 2017
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Money market funds	$	100,152		—		—	$	100,152
Short-Term investments:
Certificate of deposit		—		59,902		—		59,902
Total	$	100,152	$	59,902	$	—	$	160,054
Liabilities:
Contingent consideration related to Crisp acquisition ⁽¹⁾		—		—		18,500		18,500
Total	$	—	$	—	$	18,500	$	18,500

⁽¹⁾	Included in contingent consideration related to acquisitions

The valuation technique used to measure the fair value of money market funds included using quoted prices in active markets. The money market funds have a fixed net asset value (NAV) of $1. The valuation technique to measure the fair value of certificate of deposits included using quoted prices in active markets for similar assets.

The fair value of contingent consideration related to the acquisition of MLW Squared Inc., doing business as Ahalogy (“Ahalogy”) was estimated using an option pricing method and was based on significant inputs not observable in the market, thus classified as a Level 3 instrument. The inputs include expected achievement of certain financial metrics over the contingent consideration period, volatility and discount rate. Refer to Note 6 for further details related to the acquisition.

At December 31, 2017, the fair value of contingent consideration related to the acquisition of Crisp was estimated using an option pricing method and was based on significant inputs not observable in the market, thus classified as a Level 3 instrument. The inputs include expected achievement of certain financial metrics over the contingent consideration period, historical volatility and discount rate. Refer to Note 6 for further details related to the acquisition.

The following table represents the change in the contingent consideration (in thousands):

	Three Months Ended June 30, 2018					Six Months Ended June 30, 2018
	Ahalogy		Crisp			Ahalogy		Crisp
	Level 3		Level 3			Level 3		Level 3
Balance at the beginning of period	$	—	$	24,500		$	—	$	18,500
Addition related to acquisition		14,582		—			14,582		—
Change in fair value		—		—			—		6,000
Transfers out of Level 3		—		(24,500	)		—		(24,500	)
Balance as of June 30, 2018	$	14,582	$	—		$	14,582	$	—

The Company recorded no gains or losses due to the change in fair value of the contingent consideration during the three months ended June 30, 2018, as compared to a charge of $6.0 million during the six months ended June 30, 2018. The change in fair value of Crisp contingent consideration is due to the achievement of certain financial metrics over the contingent consideration period. The changes in the fair value of the contingent consideration are included as a component of operations in the accompanying condensed consolidated statements of operations.

The fair value of contingent consideration related to the acquisition of Crisp Media, Inc. (“Crisp”) was determined by using actual achievement of financial metrics over the contingent consideration period during the contingent consideration period ending May 31, 2018 and no longer represents a liability subject to the fair value disclosure requirements of this section. Accordingly, the liability was transferred out of the Level 3 input category of fair value measurements at June 30, 2018.

As of December 31, 2017, the Company determined that Shopmium S.A. (“Shopmium”) did not meet its revenue and profit milestones for the years ended December 31, 2016 and 2017, during the contingent consideration measurement period and the fair value was concluded to be zero. Accordingly, the Company determined that there was no payout required when the contingent consideration period expired on March 31, 2018.

Fair Value Measurements of Other Financial Instruments

As of June 30, 2018 and December 31, 2017, the fair value of the Company’s 1.75% convertible senior notes due 2022 was $207.0 million and $196.3 million, respectively. The fair value was determined based on a quoted price of the convertible senior notes in an over-the-counter market on the last trading day of the reporting period. Accordingly, these convertible senior notes are classified within Level 2 in the fair value hierarchy. Refer to Note 8 for additional information related to the Company’s convertible debt.