Classmates.com 2008 Annual Report Download - page 56

Table of Contents
Cost of Revenues
FTD
FTD cost of revenues includes product costs; shipping and delivery costs; costs associated with taking orders; printing and postage costs;
systems installation, training and support costs; data center costs; personnel- and overhead-related costs associated with operating our networks
and data centers; depreciation of network computers and equipment; license fees; costs related to providing customer support; customer billing
for our florist members; fees associated with the storage and processing of customer credit cards and associated bank fees; and domain name
registration fees.
Classmates Media
Classmates Media cost of revenues includes costs of points earned by members of our online loyalty marketing service; data center costs;
personnel- and overhead-related costs associated with operating our networks and data centers; depreciation of network computers and
equipment; license fees; costs related to providing customer support; customer billing and billing support for our pay accounts; fees associated
with the storage and processing of customer credit cards and associated bank fees; and domain name registration fees.
Communications
Communications cost of revenues includes telecommunications and data center costs; personnel- and overhead-
related costs associated with
operating our networks and data centers; depreciation of network computers and equipment; license fees; costs related to providing customer
support; customer billing and billing support for our pay accounts; fees associated with the storage and processing of customer credit cards and
associated bank fees; and domain name registration fees.
Sales and Marketing
Sales and marketing expenses include expenses associated with promoting our products and services and with generating advertising
revenues. Expenses associated with promoting our brands, products and services include advertising and promotion expenses; fees paid to
distribution partners, third-party advertising networks and co-registration partners to acquire new pay and free accounts; personnel and overhead-
related expenses for marketing and sales personnel; and telemarketing costs incurred to acquire and retain pay accounts and up-sell pay accounts
to additional services. Expenses associated with generating advertising revenues include sales commissions and personnel-related expenses. We
have expended significant amounts on sales and marketing, including branding and customer acquisition campaigns consisting of television,
Internet, sponsorships, radio, print, and outdoor advertising, and on retail and other performance-based distribution relationships. Marketing and
advertising costs to promote our products and services are expensed in the period incurred. Advertising and promotion expenses include media,
agency and promotion expenses. Media production costs are expensed the first time the advertisement is run. Media and agency costs are
expensed over the period the advertising runs.
Technology and Development
Technology and development expenses include expenses for product development, maintenance of existing software and technology and
development of new or improved software and technology, including personnel-related expenses for our technology departments and the costs
associated with operating our facility in India. Costs incurred by us to manage and monitor our technology and development activities are
expensed as incurred. Costs relating to the acquisition and development of internal-use software are capitalized and depreciated over their
estimated useful lives, generally three years.
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