Expedia 2013 Annual Report Download - page 64

In 2013, the increase in cost of revenue expense was primarily driven by higher net credit card processing
costs (including fraud and charge backs) of $77 million related to our merchant bookings. In addition, higher
customer operations expenses drove an additional $38 million of the increase driven in large part by higher
headcount costs related to our VIA Travel acquisition.
In 2012, the increase in cost of revenue expense was primarily driven by an increase of $78 million in
customer operations expenses, of which higher headcount costs related to our VIA Travel acquisition as well as
our global customer organizations accounted for approximately 80% of the total increase, as well as $40 million
in higher credit card processing costs, net of credit card rebates, related to our merchant bookings growth.
Selling and Marketing
Year ended December 31, % Change
2013 2012 2011 2013 vs 2012 2012 vs 2011
($ in millions)
Direct costs $1,724 $1,309 $1,121 32% 17%
Indirect costs 472 412 354 15% 17%
Total selling and marketing $2,196 $1,721 $1,475 28% 17%
% of revenue 46.0% 42.7% 42.8%
Selling and marketing expense primarily relates to direct costs, including traffic generation costs from
search engines and internet portals, television, radio and print spending, private label and affiliate program
commissions, public relations and other costs. The remainder of the expense relates to indirect costs, including
personnel and related overhead in our various Leisure brands, global supply organization and Egencia as well as
stock-based compensation costs.
Selling and marketing expenses increased $475 million in 2013 compared to 2012 driven by increases in
direct costs of $415 million, including online and offline marketing expenses. trivago, Brand Expedia and
Hotels.com accounted for the majority of the total direct cost increases. In addition, higher personnel expenses of
$60 million also contributed to the increase and were driven by the addition of trivago headcount as well as
increased headcount across our lodging supply organization, eLong and other Leisure brands. Acquisitions,
primarily trivago, added approximately 9% to year-on-year selling and marketing expense growth.
Selling and marketing expenses increased $246 million in 2012 compared to 2011 driven by increases in
direct costs of $188 million, including online marketing and mobile download spend at Hotels.com and Brand
Expedia as well as higher affiliate marketing expenses at EAN, and higher personnel expenses of $58 million
driven by additional headcount across our supply organization and several brands.
Technology and Content
Year ended December 31, % Change
2013 2012 2011 2013 vs 2012 2012 vs 2011
($ in millions)
Personnel and overhead $ 308 $ 263 $ 200 17% 31%
Depreciation and amortization of technology assets 158 116 84 37% 38%
Other 112 106 97 6% 10%
Total technology and content $ 578 $ 485 $ 381 19% 27%
% of revenue 12.1% 12.0% 11.0%
Technology and content expense includes product development and content expense, as well as information
technology costs to support our infrastructure, back-office applications and overall monitoring and security of
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