FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

The Company categorizes its financial instruments measured at fair value into a fair value hierarchy that prioritizes the inputs used in determining the fair value of the asset or liability. The three levels of the fair value hierarchy are:


•	Level 1: Observable inputs obtained from independent sources, such as quoted prices for identical assets and liabilities in active markets.

•

Level 2: Other inputs that are observable directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are derived principally from or corroborated by observable market data. The fair value of the Company's Level 2 financial assets are primarily obtained from observable market prices for identical underlying securities that may not be actively traded. Certain of these securities may have different market prices from multiple market data sources, in which case an average market price is used.


•	Level 3: Unobservable inputs for which there is little or no market data and require the Company to develop its own assumptions, based on the best information available in the circumstances, about the assumptions market participants would use in pricing the assets or liabilities. See below for a discussion of fair value measurements made using Level 3 inputs.

The following tables present the Company's financial instruments that are measured at fair value on a recurring basis:



	March 31, 2014
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value Measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	426,050	$	—	$	—		$	426,050
Commercial paper	—		184,005		—			184,005
Time deposits	—		54,623		—			54,623
Marketable securities:
Corporate debt securities	—		33,961		—			33,961
Equity securities	5,582		—		—			5,582
Long-term investments:
Auction rate security	—		—		9,150			9,150
Marketable equity security	10,218		—		—			10,218
Total	$	441,850	$	272,589	$	9,150		$	723,589

Liabilities:
Contingent consideration arrangements	$	—	$	—	$	(48,758	)	$	(48,758	)



	December 31, 2013
	Quoted Market Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Total Fair Value Measurements
	(In thousands)
Assets:
Cash equivalents:
Money market funds	$	698,307	$	—	$	—		$	698,307
Commercial paper	—		12,000		—			12,000
Time deposits	—		32,325		—			32,325
Marketable securities:
Corporate debt security	—		1,008		—			1,008
Equity securities	4,996		—		—			4,996
Long-term investments:
Auction rate security	—		—		8,920			8,920
Marketable equity securities	11,711		—		—			11,711
Total	$	715,014	$	45,333	$	8,920		$	769,267

Liabilities:
Contingent consideration arrangements	$	—	$	—	$	(45,828	)	$	(45,828	)

The following table presents the changes in the Company's financial instruments that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3):



	Three Months Ended March 31,
	2014					2013
	Auction Rate Security		Contingent Consideration Arrangements			Auction Rate Security		Contingent Consideration Arrangements
	(In thousands)
Balance at January 1	$	8,920	$	(45,828	)	$	8,100	$	(1,909	)
Total net gains (losses):
Included in earnings (unrealized)	—		27			—		(1,458		)
Included in other comprehensive income (loss)	230		(363		)	480		—
Fair value at date of acquisition	—		(2,835		)	—		(41,387		)
Settlements	—		241			—		177
Balance at March 31	$	9,150	$	(48,758	)	$	8,580	$	(44,577	)

Auction rate security

The Company's auction rate security is valued by discounting the estimated future cash flow streams of the security over the life of the security. Credit spreads and other risk factors are also considered in establishing fair value. The cost basis of the auction rate security is $10.0 million, with gross unrealized losses of $0.9 million and $1.1 million at March 31, 2014 and December 31, 2013, respectively. The unrealized losses are included in "Accumulated other comprehensive loss" in the accompanying consolidated balance sheet. At March 31, 2014, the auction rate security is rated A-/WR and matures in 2035. The Company does not consider the auction rate security to be other-than-temporarily impaired at March 31, 2014, due to its high credit rating and because the Company does not intend to sell this security, and it is not more likely than not that the Company will be required to sell this security, before the recovery of its amortized cost basis, which may be maturity.

Contingent Consideration Arrangements

As of March 31, 2014, there are five contingent consideration arrangements related to recent business acquisitions. Four of the contingent consideration arrangements have limits as to the maximum amount that can be paid; the maximum contingent payments related to these arrangements is $138.3 million and the fair value of these four arrangements at March 31, 2014 is $47.4 million. The fair value of the one contingent consideration arrangement without a limit on the maximum amount is $1.4 million at March 31, 2014. The contingent consideration arrangements are generally based upon earnings performance and/or operating metrics. The Company primarily uses probability-weighted analyses to determine the amount of the gross liability, and, to the extent the arrangement is long-term in nature, applies a discount rate which captures the risks associated with the obligation. The amount of scenarios in the probability-weighted analyses can vary; generally, more scenarios are prepared for longer duration and more complex arrangements.

The most significant contingent consideration arrangement relates to the January 2013 acquisition of Massive Media, NV, which operates Twoo.com. The Twoo.com contingent consideration arrangement is payable in three annual installments beginning in 2014. The 2014, 2015 and 2016 payments are based upon 2013 EBITDA, EBITDA for 2014 and monthly active users of Twoo.com at December 31, 2014 and EBITDA for 2015 and monthly active users of Twoo.com at December 31, 2015, respectively. The aggregate amount of these payments cannot exceed €83.2 million ($114.8 million at March 31, 2014). The estimate of the fair value for the Twoo.com arrangement is based upon the Company's multi-scenario forecasts of Twoo.com's earnings for 2013, 2014 and 2015 and the number of users at December 31, 2014 and December 31, 2015, and the Company's estimate of the probability of each scenario occurring. These multi-scenario forecasts and related probability assessments were based primarily on management's internal projections and strategic plans, with limited additional consideration given to growth trends of similarly situated businesses. The fair value of this arrangement is determined using a discount rate of 15%.

The fair value of the contingent consideration arrangements are sensitive to changes in the forecasts of earnings and/or the relevant operating metrics and changes in discount rates. The Company remeasures the fair value of the contingent consideration arrangements each reporting period, and changes are recognized in “General and administrative expense” in the accompanying consolidated statement of operations. The contingent consideration arrangement liability at March 31, 2014 includes a current portion of $8.0 million and non-current portion of $40.8 million, which are included in “Accrued expenses and other current liabilities” and “Other long-term liabilities,” respectively, in the accompanying consolidated balance sheet.

Assets measured at fair value on a nonrecurring basis

The Company's non-financial assets, such as goodwill, intangible assets and property and equipment, as well as equity and cost method investments, are adjusted to fair value only when an impairment charge is recognized. Such fair value measurements are based predominantly on Level 3 inputs.

Cost method investments

At March 31, 2014 and December 31, 2013, the carrying values of the Company's investments accounted for under the cost method totaled $144.8 million and $137.3 million, respectively, and are included in "Long-term investments" in the accompanying consolidated balance sheet. The Company evaluates each cost method investment for impairment on a quarterly basis and recognizes an impairment loss if a decline in value is determined to be other-than-temporary. If the Company has not identified events or changes in circumstances that may have a significant adverse effect on the fair value of a cost method investment, then the fair value of such cost method investment is not estimated, as it is impracticable to do so.

Financial instruments measured at fair value only for disclosure purposes

The following table presents the carrying value and the fair value of financial instruments measured at fair value only for disclosure purposes:



	March 31, 2014						December 31, 2013
	Carrying Value			Fair Value			Carrying Value			Fair Value
	(In thousands)
Liabilities:
Long-term debt	$	(1,080,000	)	$	(1,096,897	)	$	(1,080,000	)	$	(1,058,396	)

The fair value of long-term debt is estimated using market prices or indices for similar liabilities and taking into consideration other factors such as credit quality and maturity, which are Level 3 inputs.