REVENUE RECOGNITION

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

We recognize revenue when we satisfy a performance obligation by transferring a promised good or service to a customer. Substantially all of our performance obligations are satisfied at a point in time rather than over time. We offer goods and services through our online marketplaces in three primary categories: Local, Goods and Travel. Refer to Note 20, Segment Information, for revenue summarized by reportable segment and category.

Product revenue is earned from direct sales of merchandise inventory to customers through our Goods category and includes any related shipping fees. Service revenue primarily represents the net commissions earned from selling goods or services on behalf of third-party merchants. Those transactions generally involve a customer's purchase of a voucher through one of our online marketplace that can be redeemed by the customer with a third-party merchant for goods or services (or for discounts on goods or services). To a lesser extent, service revenue also includes commissions earned when customers make purchases with retailers using digital coupons accessed through our websites and mobile applications.

In connection with most of our product and service revenue transactions, we collect cash from credit card payment processors shortly after a sale occurs. For transactions in which we earn commissions when customers make purchases with retailers using digital coupons accessed through our websites and mobile applications, we generally collect payment from affiliate networks on terms ranging from 30 to 150 days.

On January 1, 2018, we adopted ASC Topic 606 using the modified retrospective method. Beginning on January 1, 2018, results are presented in accordance with the revised policies, while prior period amounts are not adjusted and continue to be reported in accordance with our historical policies. The adoption of Topic 606 did not significantly impact our presentation of revenue on a gross or net basis. Refer to Note 2, Summary of Significant Accounting Policies, for additional information about our revenue recognition accounting policies and the impact of adopting Topic 606.

Contract Balances

A substantial majority of our deferred revenue relates to product sales for which revenue will be recognized as the products are delivered to customers, generally within one week following the balance sheet date. Our deferred revenue was $18.0 million, $25.5 million and $25.8 million as of December 31, 2019, December 31, 2018 and January 1, 2018. The amount of revenue recognized for the years ended December 31, 2019 and 2018 that was included in the deferred revenue balance at the beginning of the period was $25.4 million and $25.1 million.

The following table summarizes the activity in the liability for customer credits for the years ended December 31, 2019 and 2018 (in thousands):



	Customer Credits
Balance as of January 1, 2018	$	19,414
Credits issued	126,874
Credits redeemed ⁽¹⁾	(112,161		)
Breakage revenue recognized	(18,802		)
Foreign currency translation	(207		)
Balance as of December 31, 2018	15,118
Credits issued	115,031
Credits redeemed ⁽¹⁾	(102,682		)
Breakage revenue recognized	(13,699		)
Foreign currency translation	(4		)
Balance as of December 31, 2019	$	13,764

(1)

Customer credits can be redeemed through our online marketplaces for goods or services provided by a third-party merchant or for merchandise inventory sold by us. When customer credits are redeemed for goods or services provided by a third-party merchant, service revenue is recognized on a net basis as the difference between the carrying amount of the customer credit liability derecognized and the amount due to the merchant for the related transaction. When customer credits are redeemed for merchandise inventory sold by us, product revenue is recognized on a gross basis equal to the amount of the customer credit liability derecognized. Customer credits are primarily used within one year of issuance.

Cost of Obtaining Contracts

Deferred contract acquisition costs are presented within the following line items of the consolidated balance sheets as of December 31, 2019 and 2018 (in thousands):



	December 31,
	2019	2018
Prepaid expenses and other current assets	2,501	2,923
Other non-current assets	10,133	11,285

For the years ended December 31, 2019 and 2018, we amortized $20.4 million and $25.2 million of deferred contract acquisition costs and did not recognize any impairment losses in relation to the deferred costs.