LinkedIn 2012 Annual Report Download - page 58

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were partially offset by a decrease in taxes of $5.0 million as we continue to pass through VAT and sales
tax to our customers.
Cost of revenue increased $36.6 million in 2011 compared to 2010. The increase was primarily
attributable to increases in headcount related expenses of $16.7 million, web hosting service expenses of
$7.4 million, facilities and related costs of $4.7 million and direct costs of $4.3 million.
Sales and Marketing
Our sales and marketing expenses primarily consist of salaries, benefits, stock-based compensation,
travel expense and incentive compensation for our sales and marketing employees. In addition, sales and
marketing expenses include customer acquisition marketing, branding, advertising, public relations costs,
and commissions paid to agencies, as well as allocated facilities and other supporting overhead costs. We
plan to continue to invest heavily in sales and marketing to expand our global footprint, grow our current
customer accounts and continue building brand awareness. Consistent with our investment philosophy for
2013, we expect sales and marketing expenses to increase and be our largest expense on an absolute basis
and increase slightly as a percentage of revenue.
Year Ended Year Ended
December 31, December 31,
2012 2011 % Change 2011 2010 % Change
($ in thousands)
Sales and marketing ............... $324,896 $164,703 97% $164,703 $58,978 179%
Percentage of net revenue ........... 33% 32% 32% 24%
Headcount (at period end): .......... 1,468 844 74% 844 313 170%
Sales and marketing expenses increased $160.2 million in 2012 compared to 2011. The increase was
primarily attributable to an increase in headcount related expenses of $126.9 million as we expanded our
field sales organization. We also experienced increases in facilities and related costs of $12.8 million,
marketing and public relations expenses of $7.6 million, consulting services expenses of $6.0 million and
agency commissions of $4.4 million.
Sales and marketing expenses increased $105.7 million in 2011 compared to 2010. The increase was
primarily attributable to an increase in headcount related expenses of $83.5 million as we expanded our
field sales organization. We also experienced increases in marketing and public relations expenses of
$8.2 million, facilities and related costs of $7.8 million and consulting and outside services expenses of
$5.0 million. Sales and marketing expenses increased as a percentage of revenue in 2011 compared to
2010 primarily due to building out our global sales organization.
Product Development
Our product development expenses primarily consist of salaries, benefits and stock-based
compensation for our engineers, product managers and developers. In addition, product development
expenses include outside services and consulting, as well as allocated facilities and other supporting
overhead costs. We believe that continued investment in features, software development tools and code
modification is important to attaining our strategic objectives. Consistent with our investment philosophy
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