NOTE 5. CONTINGENT EARN-OUT CONSIDERATION

Two of our recent acquisitions include contingent consideration, the fair value of which was estimated on the acquisition date as the present value of the expected future contingent payments; determined using a probability-weighted discounted cash flow based on probabilities of possible future payments. The unobservable inputs used in the determination of the fair value of the contingent consideration include assumptions as to the ability of the acquired businesses to meet the targets and discount rates used in the calculation. Should the actual results of the acquired business increase or decrease as compared to our estimate and assumptions, the fair value of the contingent consideration obligations would increase or decrease, up to the contracted limit, as applicable. The fair value measurement includes revenue forecasts which are a Level 3 measurement as discussed in Note 14 to our Condensed Consolidated Financial Statements. Any changes in the estimated fair value of contingent earn-out consideration, up to the contractual amounts, will be reflected in our results of operations in future periods as they are identified. Any changes in the fair value of the contingent earn-out consideration may materially impact and cause volatility in our future operating results.

On December 10, 2013, we recorded an estimate of contingent earn-out consideration payable upon achievement of page view milestones over a two year period related to our acquisition of Twitchy.com. Using a probability-weighted discounted cash flow model, we estimated the fair value of the $1.2 million total contingent earn-out consideration at the present value of $0.6 million as of the closing date. During each of the three month periods ending March 31, 2014 and June 30, 2014, we observed actual page views that were slightly higher than those expected at the time of our projections. We increased our page view estimates and revised the probability-weighted discounted cash flow model for the updated projections. We recorded a $0.1 million increase in the estimated fair value of the contingent earn-out consideration for the three months ending March 31, 2014 and $0.1 million for the three months ending June 30, 2014, which is reflected in our results of operations for three and six months ending June 30, 2014. We will review our estimates quarterly over the remaining earn-out period of 1.50 years.

On January 10, 2014, we recorded an estimate of contingent earn-out consideration payable upon achievement of certain revenue benchmarks over a three year period related to the acquisition of the Eagle entities. Using a probability-weighted discounted cash flow model, we recorded the estimated fair value of the $8.5 million total contingent earn-out consideration at the present value of $2.0 million as of the closing date. There were no changes in our estimates as of the three months ending March 31, 2014. During the three month period ending June 30, 2014, we observed actual revenues that were higher than those projected in our original estimates. We increased our revenue estimates and revised the probability-weighted discounted cash flow model for the updated projections. We recorded a $0.2 million increase in the estimated fair value of the contingent earn-out consideration for the three months ending June 30, 2014, which is reflected in our results of operations for this period. We will review our estimates quarterly over the remaining earn-out period of 2.75 years.

The following table reflects the changes in the present value of our acquisition related contingent earn-out consideration for the three and six months ended June 30, 2014: