These results support the Company's position that Internet polling is a replacement technology for telephone polling with a methodology that is faster, less expensive, and more accurate through the use of statistically weighted Internet samples that create an accurate picture of the entire population. We sell our multi-client research products on a periodic subscription basis, typically quarterly or annually. Revenue under fixed fee arrangements is recognized on a percentage of completion method based on the ratio of costs incurred to total estimated costs. This revenue includes amounts billed to our clients to cover subcontractor costs and other direct expenses. Provision for estimated contract losses, if any, is made in the period such losses are determined.
Gross profit represents revenue less variable project costs and associated direct labor.
Variable project costs related to market research utilizing traditional methodologies include interviewer payroll, subcontractor charges, participant incentives, telecommunication charges and mailing costs. In contrast, variable costs related to Internet-based market research are nominal. Direct labor costs consist primarily of survey design, analysis, and reporting costs and are comparable for both traditional and Internet-based methodologies. We anticipate that our gross profit will continue to increase as the percentage of revenue we generate from Internet-based products and services increases. Operating expenses consist of Internet database development costs, sales and marketing, and general and administrative expenses.