This is from management discussion and analysis. I thought I'd emphasize this part to clear some confusion.
The Company offers its technologies on a self-serve basis for indirect agency customers ("Indirect”) or service on top of the technology basis for direct advertisers’ customers ("Direct").
While a direct advertiser customer will utilize the Company’s technologies for its own advertising campaigns, an indirect ad-agency customer will utilize the Company’s technologies for its customers’ advertising campaigns.
For a direct advertiser customer, revenues are recognized as the services rendered based on the media budget managed by the Company during the period. A determination is made to recognize revenue on a gross or net basis based on an assessment of whether the Company is acting as the principal or an agent in the transaction. The Company is acting as the principal in these arrangements and therefore revenue earned and costs incurred are recognized on a gross basis as: (1) The Company bears credit risks related to the media buying, as it is contractually required to pay media channels within a negotiated period of time, regardless of whether the Company’s clients pay the Company on time, or at all. Moreover, in some cases the Company’s clients have or may develop higher-risk credit profiles, which may subject the Company to even greater credit risk especially when the Company’s payment cycles to the media channels is relatively short; (2) The Company has full discretion in establishing the price to its customers and sole control of the Costs of the media buying prices, including the campaigns, accounts and media channels’ budget allocation; (3) The Company has the power to use its own advertising technologies and expertise in order to manipulate the media buying process, which is critical to the fulfillment of the customer deliverables; and (4) The Company holds full responsibility
towards its clients with regards to the campaigns management and fulfillment.