Expedia 2005 Annual Report Download - page 43

In 2005, the increase in selling and marketing expense was primarily due to growth in personnel costs,
including costs associated with the PSG team expansion and destination services staffing assumed in our
acquisitions, offset by a decrease in offline marketing spend for certain businesses and keyword search
efficiencies. Selling and marketing expense in 2004 includes a favorable adjustment for the reversal of
$6.4 million associated with the resolution of a contractual dispute.
In 2004, the increase in selling and marketing expense was primarily due to higher search-related
costs and increased marketing volume, offset by a favorable adjustment related to the reversal of
$6.4 million associated with the resolution of a contractual dispute. Higher costs of traffic acquisition
online and greater emphasis on international businesses also contributed to higher expenses. Our
international businesses have higher selling and marketing costs compared to revenue as they are in early
development stages compared to our U.S. businesses. Acquisitions also contributed to the increase in
selling and marketing expense.
While we remain focused on optimizing the efficiency of our various selling and marketing channels,
we expect the absolute amounts spent in selling and marketing to increase over time due to continued
expansion of our international businesses, reduced opportunities for offline spend efficiencies, inflation in
search-related and other traffic acquisition vehicles, increased marketing volumes and increased fixed costs
associated with the increase in staffing in our market management area. In 2006, we expect selling and
marketing expense to increase as a percentage of revenue as we continue to support and invest in our
brand portfolio.
General and Administrative
Year Ended December 31, % Change
2005 2004 2003 2005 vs 2004 2004 vs 2003
($ in thousands)
General and administrativeÏÏÏÏÏÏ $211,515 $160,965 $113,633 31% 42%
% of revenue (as reported)ÏÏÏÏÏÏ 10% 9% 5%
% of revenue (on a comparable
net basis) ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 10% 9% 8%
General and administrative expense consists primarily of (1) personnel-related costs for support
functions that include our executive leadership, finance, legal, tax and human resources and (2) fees for
external professional services including legal, tax and accounting.
In 2005, the increase in general and administrative expense was primarily due to acquisitions, an
increase in our use of professional services and costs to build our executive teams and supporting staff
levels largely in connection with being a stand-alone public company. In addition, we incurred one-time
expenses specifically related to the Spin-Off. We expect absolute amounts spent on corporate personnel
and professional services to increase over time as we add personnel and continue incurring incremental
costs as a stand-alone public company.
In 2004, the increase in general and administrative expense was primarily due to increased personnel
in administrative functions, such as legal, tax, accounting and information technology and acquisitions. In
addition, due to the increasing complexity of our businesses, we utilized external professional services for
legal, tax and accounting to a greater extent in 2004 than in 2003.
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