Stockholders' Equity

Common Stock

As of September 30, 2013, the Company had 54,123,328 common shares issued and outstanding. As of December 31, 2012, the Company had 55,948,924 shares issued and outstanding. The par value for common shares was $0.001.

Preferred Stock

As of September 30, 2013 and December 31, 2012, the Company had zero preferred shares issued and outstanding. The par value for preferred shares was $0.001.

Stock-Based Compensation

The Company follows FASB ASC 718-10, “Stock Compensation,” which addresses the accounting for transactions in which an entity exchanges its equity instruments for goods or services, with a primary focus on transactions in which an entity obtains employee services in share-based payment transactions. ASC 718-10 requires measurement of the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). Incremental compensation costs arising from subsequent modifications of awards after the grant date must be recognized.

The following table summarizes stock-based compensation expense related to employee stock options under ASC 718-10 included in Company’s Statements of Operations for the three and nine months ended September 30, 2013 and 2012 (amounts in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Cost of revenue	$	635	$	428	$	1,557	$	1,130
Sales and marketing expense	844		822		2,159		2,113
Product development expense	1,241		807		2,922		2,206
General and administrative expense	1,078		795		3,111		2,197
Total stock based compensation included in costs and expenses	$	3,798	$	2,852	$	9,749	$	7,646

The per share weighted average fair value of stock options granted during the three and nine months ended September 30, 2013 was $4.82 and $5.25, respectively. The per share weighted average fair value of stock options granted during the three and nine months ended September 30, 2012 was $8.78 and $8.23, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Dividend yield	0.0	%	0.0	%	0.0	%	0.0	%
Risk-free interest rate	1.38% - 1.39%		0.58% - 0.62%		0.65% - 1.39%		0.58% - 0.87%
Expected life (in years)	5		5		5		5
Historical volatility	59.84% - 59.85%		59.7% - 60.3%		56.68% - 60.06%		59.7% - 60.8%

A description of the methods used in the significant assumptions used to estimate the fair value of stock-based compensation awards follows:

Dividend yield – The Company uses 0% as it has never issued dividends and does not anticipate issuing dividends in the near term.

Risk-free interest rate – The Company uses the market yield on U.S. Treasury securities at five years with constant maturity, representing the current expected life of stock options in years.

Expected life – The Company uses historical data to estimate the expected life of a stock option.

Historical volatility – The Company uses a trailing five year from grant date to determine volatility.

During 1998, the Company established the Stock Option and Restricted Stock Purchase Plan (the “1998 Plan”). Under the 1998 Plan, the Board of Directors could issue incentive stock options or nonqualified stock options to purchase up to 5,850,000 shares of common stock. The 2000 Stock Incentive Plan (the “2000 Plan”) succeeded the 1998 Plan. Under the 2000 Plan, the options which had been outstanding under the 1998 Plan were incorporated in the 2000 Plan increasing the number of shares available for issuance under the plan by approximately 4,150,000, thereby reserving for issuance 10,000,000 shares of common stock in the aggregate.

The Company established the 2009 Stock Incentive Plan (as amended and restated, the “2009 Plan”) as a successor to the 2000 Plan. Under the 2009 Plan, the options which had been outstanding under the 2000 Plan were incorporated into the 2009 Plan and the Company increased the number of shares available for issuance under the plan by 6,000,000. The Company amended the 2009 stock incentive plan (the “Amended 2009 Plan”) effective June 7, 2012. The Amended 2009 Plan increased the number of shares authorized for issuance under the plan by an additional 4,250,000, thereby reserving for issuance 23,817,744 shares of common stock in the aggregate. Options to acquire common stock granted thereunder have ten-year terms. As of September 30, 2013, approximately 15,000,000 shares of common stock were reserved for issuance under the 2009 Plan (taking into account all option exercises through September 30, 2013). As of September 30, 2013, there was approximately $33.4 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of approximately 2.0 years.

In March 2000, the Company adopted the 2000 Employee Stock Purchase Plan with 450,000 shares of common stock initially reserved for issuance (the “2000 ESPP”). The 2000 ESPP expired on its terms on the last day of April 2010.

In June 2010, our stockholders approved the 2010 Employee Stock Purchase Plan with 1,000,000 shares of common stock initially reserved for issuance. As of September 30, 2013, approximately 726,000 shares of common stock were reserved for issuance under the Employee Stock Purchase Plan (taking into account all share purchases through September 30, 2013).

A summary of the Company’s stock option activity and weighted average exercise prices follows:



	Options		Weighted Average Exercise Price
Options outstanding at December 31, 2012	9,841,479		$	11.06
Options granted	2,121,200		10.38
Options exercised	(446,107	)	5.94
Options cancelled	(1,384,530	)	13.05
Options outstanding at September 30, 2013	10,132,042		10.87
Options exercisable at September 30, 2013	4,451,913		$	8.54

The total value of stock options exercised during the nine months ended September 30, 2013 was approximately $2.1 million. The total intrinsic value of options exercisable at September 30, 2013 was approximately $11.9 million. The total intrinsic value of nonvested options at September 30, 2013 is approximately $0.5 million. The total intrinsic value of all outstanding options at September 30, 2013 is $12.5 million.

A summary of the status of the Company’s nonvested shares as of December 31, 2012, and changes during the nine months ended September 30, 2013 is as follows:



	Options		Weighted Average Grant- Date Fair Value
Nonvested Shares at December 31, 2012	6,621,251		$	6.84
Granted	2,121,200		5.25
Vested	(1,677,792	)	6.03
Cancelled	(1,384,530	)	6.72
Nonvested Shares at September 30, 2013	5,680,129		$	6.90