Classmates.com 2009 Annual Report Download - page 74

Table of Contents
Classmates Media Cost of Revenues.
Classmates Media cost of revenues increased by $1.6 million, or 4.1%, to $41.1 million, for the year
ended December 31, 2008, compared to $39.5 million for the year ended December 31, 2007. Classmates Media cost of revenues as a percentage
of Classmates Media revenues decreased to 17.9% for the year ended December 31, 2008, compared to 20.4% for the prior-year period. The
increase of $1.6 million was primarily related to a $2.6 million increase in customer support, overhead and personnel-related costs associated
with our online social networking services as a result of growth in the business and an increase in headcount, partially offset by decreased costs
associated with our online loyalty marketing service. The decrease in cost of revenues as a percentage of revenues was mainly due to a reduction
in the weighted-average cost of points for our online loyalty marketing service and a greater percentage of revenues generated from higher
margin services.
Classmates Media Sales and Marketing Expenses.
Classmates Media sales and marketing expenses increased by $2.9 million, or 3.7%, to
$81.9 million, for the year ended December 31, 2008, compared to $78.9 million for the year ended December 31, 2007. Classmates Media sales
and marketing expenses as a percentage of Classmates Media revenues decreased to 35.6% for the year ended December 31, 2008, compared to
40.8% for the prior-
year period. The increase of $2.9 million was the result of a $3.3 million increase in marketing costs related to acquiring new
online social networking and online loyalty marketing members, partially offset by a $0.3 million decrease in personnel- and overhead-related
expenses. The decrease as a percentage of Classmates Media revenues was mainly due to lower customer acquisition cost.
Classmates Media Technology and Development Expenses. Classmates Media technology and development expenses increased by
$6.0 million, or 37.2%, to $22.0 million, for the year ended December 31, 2008, compared to $16.0 million for the year ended December 31,
2007. Classmates Media technology and development expenses as a percentage of Classmates Media revenues increased slightly to 9.5% for the
year ended December 31, 2008, compared to 8.3% for the prior
-year period. The increase in expenses was primarily due to a $5.0 million
increase in personnel-related expenses resulting from increased headcount to develop new features related to our online social networking
services and a $0.9 million increase in overhead expenses.
Classmates Media General and Administrative Expenses. Classmates Media general and administrative expenses increased by
$7.2 million, or 23.5%, to $38.0 million, for the year ended December 31, 2008, compared to $30.8 million for the year ended December 31,
2007. Classmates Media general and administrative expenses as a percentage of Classmates Media revenues remained relatively stable, with a
slight increase to 16.5% for the year ended December 31, 2008, compared to 15.9% for the prior-year period. The increase was primarily related
to a $6.2 million increase in personnel-related expenses, the expensing of $3.9 million in deferred transaction-related costs relating to the
proposed IPO of CMC in the second quarter of 2008 and an increase in overhead-related costs of $2.2 million. These increases were partially
offset by a $3.3 million non-income tax dispute settlement and a $1.9 million decrease in consulting expenses related to audit and executive
search fees incurred in the year ended December 31, 2007 related to our then-proposed IPO of CMC.
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