Classmates.com 2010 Annual Report Download - page 69

Table of Contents
Cost of Revenues.
Consolidated cost of revenues increased by $202.5 million, or 94%, to $417.4 million for the year ended December 31,
2009, compared to $214.9 million for the year ended December 31, 2008. The increase of $202.5 million was primarily due to a $216.5 million
increase in cost of revenues associated with our FTD segment as a result of including FTD cost of revenues for the entire period for the year
ended December 31, 2009 whereas such costs were included only from August 26, 2008 (date of acquisition) in the prior-year period. The
increase was also due to a $1.6 million increase in depreciation expense for the year ended December 31, 2009, compared to the prior-year
period. The increase was partially offset by decreases in cost of revenues associated with our Communications and Content & Media segments.
Consolidated cost of revenues increased to 42.2% of consolidated revenues for the year ended December 31, 2009, compared to 32.1% for the
prior-
year period primarily as a result of including FTD for the entire period for the year ended December 31, 2009 since our FTD segment has a
higher cost of revenues as a percentage of its revenues compared to the other segments. Cost of revenues related to our FTD, Content & Media
and Communications segments constituted 79.5%, 8.6% and 12.0%, respectively, of our total segment cost of revenues for the year ended
December 31, 2009, compared to 52.0%, 19.9% and 28.1%, respectively, for the year ended December 31, 2008.
Sales and Marketing Expenses. Consolidated sales and marketing expenses increased by $30.6 million, or 18%, to $202.8 million for the
year ended December 31, 2009, compared to $172.2 million for the year ended December 31, 2008. The increase of $30.6 million was primarily
due to a $59.1 million increase in sales and marketing expenses associated with our FTD segment as a result of including FTD sales and
marketing expenses for the entire period for the year ended December 31, 2009 whereas such expenses were included only from August 26,
2008 (date of acquisition) in the prior-year period. The increase was also due to a $0.7 million increase in depreciation expense for the year
ended December 31, 2009, compared to the prior-year period. The increase was partially offset by decreases in sales and marketing expenses
associated with our Communications and Content & Media segments. Consolidated sales and marketing expenses as a percentage of
consolidated revenues decreased to 20.5% for the year ended December 31, 2009, compared to 25.7% for the prior-year period primarily as a
result of including FTD for the entire period for the year ended December 31, 2009 since our FTD segment has lower sales and marketing
expenses as a percentage of its revenues compared to the other segments. Sales and marketing expenses related to our FTD, Content & Media
and Communications segments constituted 43.9%, 36.6% and 19.5%, respectively, of total segment sales and marketing expenses for the year
ended December 31, 2009, compared to 17.8%, 47.6% and 34.6%, respectively, for the year ended December 31, 2008.
Technology and Development Expenses. Consolidated technology and development expenses increased by $7.6 million, or 14%, to
$64.2 million for the year ended December 31, 2009, compared to $56.5 million for the year ended December 31, 2008. The increase of
$7.6 million was primarily due to an $8.2 million increase in technology and development expenses associated with our FTD segment as a result
of including FTD technology and development expenses for the entire period for the year ended December 31, 2009 whereas such expenses were
included only from August 26, 2008 (date of acquisition) in the prior-year period. The increase was also due to an increase in technology and
development expenses related to our Content & Media segment and an increase of $1.5 million in depreciation expense, partially offset by a
decrease in technology and development expenses in our Communications segment. Consolidated technology and development expenses as a
percentage of consolidated revenues decreased to 6.5% for the year ended December 31, 2009, compared to 8.4% for the prior-year period
primarily as a result of including FTD for the entire period for the year ended December 31, 2009 since our FTD segment has lower technology
and development expenses as a percentage of its revenues compared to the other segments. Technology and development expenses related to our
FTD, Content & Media and Communications segments constituted 21.2%, 45.7% and 33.1%, respectively, of total segment technology and
development expenses for the year ended
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