FAIR VALUE MEASUREMENTS

Fair value is defined under U.S. GAAP 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 a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or a liability.

To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs in valuation methodologies used to measure fair value:

Level 1 - Measurements that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Measurements that include other inputs that are directly or indirectly observable in the marketplace.

Level 3 - Measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. These fair value measurements require significant judgment.

In determining fair value, the Company uses various valuation approaches within the fair value measurement framework. The valuation methodologies used for the Company's assets and liabilities measured at fair value and their classification in the valuation hierarchy are summarized below:

Cash equivalents - Cash equivalents primarily consist of AAA-rated money market funds. The Company classified cash equivalents as Level 1 due to the short-term nature of these instruments and measured the fair value based on quoted prices in active markets for identical assets.

Fair value option investments and available-for-sale securities - See Note 4, Investments, for a discussion of the valuation methodologies used to measure the fair value of the Company's investments in Monster LP and GroupMax. The Company measures the fair value of those investments using the discounted cash flow method, which is an income approach, and the market approach. The Company also has investments in redeemable preferred shares and convertible debt securities issued by nonpublic entities. The Company measures the fair value of those available-for-sale securities using the discounted cash flow method.

The Company has classified its fair value option investments and its investments in available-for-sale securities as Level 3 due to the lack of observable market data over fair value inputs such as cash flow projections and discount rates. Increases in projected cash flows and decreases in discount rates contribute to increases in the estimated fair values of the fair value option investments and available-for-sale securities, whereas decreases in projected cash flows and increases in discount rates contribute to decreases in their fair values.

Contingent consideration - The Company had contingent obligations to transfer cash to the former owners of acquired businesses if specified financial results are met over future reporting periods (i.e., earn-outs). Liabilities for contingent consideration were measured at fair value each reporting period, with the acquisition-date fair value included as part of the consideration transferred and subsequent changes in fair value are recorded in earnings within "Acquisition-related expense (benefit), net" on the condensed consolidated statements of operations.

The Company used an income approach to value contingent consideration obligations based on future financial performance, which was determined based on the present value of probability-weighted future cash flows. The Company classified the contingent consideration liabilities as Level 3 due to the lack of relevant observable market data over fair value inputs such as probability-weighting of payment outcomes.

The following tables summarize the Company's assets and liabilities that are measured at fair value on a recurring basis (in thousands):



			Fair Value Measurement at Reporting Date Using
Description	June 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	122,336	$	122,336	$	—	$	—
Fair value option investments	81,439		—		—		81,439
Available-for-sale securities:
Convertible debt securities	10,868		—		—		10,868
Redeemable preferred shares	15,923		—		—		15,923



			Fair Value Measurement at Reporting Date Using
Description	December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	202,241	$	202,241	$	—	$	—
Fair value option investments	82,584		—		—		82,584
Available-for-sale securities:
Convertible debt securities	10,038		—		—		10,038
Redeemable preferred shares	17,444		—		—		17,444

Liabilities:
Contingent consideration	14,588		—		—		14,588

The following table provides a roll-forward of the fair value of recurring Level 3 fair value measurements for the three and six months ended June 30, 2017 and 2016 (in thousands):



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Assets
Fair value option investments:
Beginning Balance	$	82,887		$	129,625		$	82,584		$	130,725
Total gains (losses) included in earnings	(1,448		)	(4,607		)	(1,145		)	(5,707		)
Ending Balance	$	81,439		$	125,018		$	81,439		$	125,018
Unrealized gains (losses) still held ⁽¹⁾	$	(1,448	)	$	(4,607	)	$	(1,145	)	$	(5,707	)
Available-for-sale securities
Convertible debt securities:
Beginning Balance	$	11,931		$	10,173		$	10,038		$	10,116
Purchase of convertible debt security	—			—			1,612			—
Proceeds at maturity of convertible debt security	(1,843		)	—			(1,843		)	—
Total gains (losses) included in other comprehensive income (loss)	(575		)	201			(533		)	220
Total gains (losses) included in earnings ⁽²⁾	1,355			199			1,594			237
Ending Balance	$	10,868		$	10,573		$	10,868		$	10,573
Unrealized gains (losses) still held ⁽¹⁾	$	512		$	400		$	816		$	457
Redeemable preferred shares:
Beginning Balance	$	17,788		$	22,699		$	17,444		$	22,834
Total gains (losses) included in other comprehensive income (loss)	(1,865		)	(356		)	(1,521		)	(491		)
Ending Balance	$	15,923		$	22,343		$	15,923		$	22,343
Unrealized (losses) gains still held ⁽¹⁾	$	(1,865	)	$	(356	)	$	(1,521	)	$	(491	)

Liabilities
Contingent Consideration:
Beginning Balance	$	14,600		$	13,938		$	14,588		$	10,781
Settlements of contingent consideration liabilities	(7,858		)	—			(7,858		)	—
Reclass to non-fair value liabilities when no longer contingent	(6,778		)	—			(6,778		)	(285		)
Total losses (gains) included in earnings ⁽³⁾	36			850			48			4,292
Ending Balance	$	—		$	14,788		$	—		$	14,788
Unrealized losses (gains) still held ⁽¹⁾	$	—		$	850		$	—		$	4,166


(1)	Represents the unrealized losses or gains recorded in earnings and/or other comprehensive income (loss) during the period for assets and liabilities classified as Level 3 that are still held (or outstanding) at the end of the period.


(2)	Represents a gain at maturity of a previously impaired convertible debt security, accretion of interest income and changes in the fair value of an embedded derivative.


(3)	Changes in the fair value of contingent consideration liabilities are classified within "Acquisition-related expense (benefit), net" on the condensed consolidated statements of operations.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis, including assets that are written down to fair value as a result of an impairment. The Company did not record any significant nonrecurring fair value measurements after initial recognition for the three and six months ended June 30, 2017 and 2016.

Estimated Fair Value of Financial Assets and Liabilities Not Measured at Fair Value

The following table presents the carrying amounts and fair values of financial instruments that are not carried at fair value in the condensed consolidated financial statements (in thousands):



	June 30, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cost method investments	$	33,206	$	42,977	$	31,816	$	35,369

The fair values of the Company's cost method investments were determined using the market approach or the income approach, depending on the availability of fair value inputs such as financial projections for the investees and market multiples for comparable companies. The Company has classified the fair value measurements of its cost method investments as Level 3 measurements within the fair value hierarchy because they involve significant unobservable inputs such as cash flow projections and discount rates.

The Company's other financial instruments not carried at fair value consist primarily of accounts receivable, restricted cash, accounts payable, accrued merchant and supplier payables and accrued expenses. The carrying values of these assets and liabilities approximate their respective fair values as of June 30, 2017 and December 31, 2016 due to their short-term nature.