Transactions with Related Parties and Parent Company Investment

6 Months Ended

Jun. 30, 2014

Related Party Transactions [Abstract]

Transactions with Related Parties and Parent Company Investment

12.  Transactions with Related Parties and Parent Company Investment

The condensed combined financial statements include direct costs of Rightside incurred by Demand Media on our behalf and an allocation of certain general corporate costs incurred by Demand Media. Direct costs include finance, legal, human resources, technology development, and other services and have been determined based on a direct basis when identifiable, with the remainder allocated on a pro rata basis calculated as a percentage of our revenue, headcount or expenses to Demand Media’s consolidated results. General corporate costs include, but are not limited to, executive oversight, accounting, internal audit, treasury, tax, and legal. The allocations of general corporate costs are based primarily on estimated time incurred and/or activities associated with us. Management believes the allocations of corporate costs from Demand Media are reasonable. Costs incurred by Demand Media to complete the spin‑off have not been allocated to us. However, the condensed combined financial statements may not include all of the costs that would have been incurred had we been a stand‑alone company during the periods presented and may not reflect our financial position, results of operations and cash flows had we been a stand‑alone company during the periods presented. Costs incurred and allocated by Demand Media were included in the condensed combined statements of operations as follows (in thousands):

	Three months ended				Six months ended
	June 30,				June 30,
	2014		2013		2014		2013
Service costs	$	2,729	$	2,675	$	5,332	$	5,305
Sales and marketing		506		595		1,419		1,127
Product development		1,008		346		2,100		716
General and administration		4,414		4,978		9,742		9,794
Total allocated expenses	$	8,657	$	8,594	$	18,593	$	16,942

The table above includes allocated stock‑based compensation of $0.2 million and $1.5 million for the three months ended June 30, 2014 and 2013 and $0.7 million, respectively, and $3.0 million for the six months ended June 30, 2014 and 2013, respectively, for the employees of Demand Media whose cost of services was partially allocated to us.