Pandora 2016 Annual Report Download - page 64

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percentage of the advertising revenue attributable to our computer platform were€34%€in both the€eleven months ended
December 31, 2013€and the€twelve months ended€December€31, 2014, primarily due to an increase in advertising revenue on
the computer platform as a result of an increase in the average price per ad sold, offset by scheduled rate increases. Estimated
content acquisition costs as a percentage of the advertising revenue attributable to our mobile and other connected devices
platform decreased from€58%€to€53%, primarily due to an increase in advertising revenue on the mobile and other connected
devices platform as a result of an increase in the average price per ad sold and an increase in the number of ads sold. The
decrease in estimated content acquisition costs as a percentage of the advertising revenue attributable to our mobile and other
connected devices platform was also due to the effect of measures we have adopted to manage the growth of mobile content
acquisition costs while minimizing adverse effects on the listener experience, such as adjusting the number of times users can
skip songs during a given listening session, as well as optimizing time-based thresholds whereby music will stop playing after a
certain length of user inactivity with the service, partially offset by scheduled rate increases.
Cost of Revenue—Other
€
Eleven Months
Ended€
€December 31,
Twelve Months
Ended€
€December 31,
Twelve Months Ended€
€December 31,
2013 2014 $€Change 2014 2015 $€Change
(in€thousands) (in€thousands)
Cost of revenue—
Other $42,217 $61,627 $19,410 $61,627 $79,858 $18,231
€
Cost of revenue—other consists primarily of ad and music serving costs, employee-related and facilities and equipment
costs and other costs of ad sales. Ad and music serving costs consist of content streaming, maintaining our internet radio
service and creating and serving advertisements through third-party ad servers. We make payments to third-party ad servers for
the period the advertising impressions are delivered or click-through actions occur, and accordingly, we record this as a cost of
revenue in the related period. Employee-related costs include salaries and benefits associated with supporting music and ad
serving functions. Other costs of ad sales include costs related to music events that are sold as part of advertising arrangements.
For the twelve months ended December€31, 2015 compared to 2014, cost of revenue—other increased $18.2 million or
30%, primarily due to an $11.3 million increase in ad and music serving costs driven by an increase in impressions served and a
$6.7 million increase in employee-related and facilities and equipment costs, which were driven by an approximate 75%
increase in headcount.
For the twelve months ended December 31, 2014 compared to the eleven months ended December 31, 2013, cost of
revenue—other increased by $19.4 million or 46%, primarily due to a $7.3 million increase in employee-related and facilities
and equipment costs, which were driven by an approximate 20% increase in headcount, a $4.2 million increase in ad and music
serving costs driven by an increase in impressions served and a $2.3 million increase in other costs of ad sales related to events
sold as part of advertising arrangements. In addition, the remaining increase in cost of revenue—other was due to the€twelve
months ended€December€31, 2014€having one additional month as compared to the€eleven months ended December 31, 2013.
Cost of Revenue - Ticketing Service
Eleven Months
Ended€
€December 31,
Twelve Months
Ended€
€December 31,
Twelve Months Ended€
€December 31,
2013 2014 $€Change 2014 2015 $€Change
(in€thousands) (in€thousands)
Cost of revenue—
Ticketing service $—$—$—$—$7,121 $7,121
Cost of revenue—ticketing service consists primarily of ticketing revenue share costs, credit card fees and other cost of
revenue and intangible amortization expense. The majority of these costs are related to revenue share costs, which consist of
royalties paid to clients for their share of convenience and order processing fees. Intangible amortization expense is related to
amortization of developed technology acquired in connection with the Ticketfly acquisition.
€
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