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For the twelve months ended December€31, 2015 compared to 2014, product development expenses increased $31.4
million or 59%, primarily due to a $29.2 million increase in employee-related and facilities and equipment costs, which were
driven by an approximate 115% increase in headcount and a $1.3 million increase in professional fees.
For the twelve months ended December 31, 2014 compared to the eleven months ended December 31, 2013, product
development expenses increased by $21.9 million€or€70%, primarily due to a $18.1 million increase in employee-related and
facilities and equipment costs, which were driven by an approximate 35% increase in headcount. In addition, the remaining
increase in product development expenses was due to the€twelve months ended December€31, 2014€having one additional
month as compared to the€eleven months ended December 31, 2013.
€
Sales and Marketing
€
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)
Sales and marketing $169,005 $277,330 $108,325 $277,330 $398,169 $120,839
€
Sales and marketing consists primarily of employee-related and facilities and equipment costs, including salaries,
commissions and benefits related to employees in sales, sales support, marketing, advertising and music maker group
departments. In addition, sales and marketing expenses include transaction processing commissions on subscription purchases
through mobile app stores, external sales and marketing expenses such as brand marketing, advertising, direct response and
search engine marketing costs, public relations expenses, costs related to music events, agency platform and media
measurement expenses, infrastructure costs and amortization expense related to acquired intangible assets.
We expect sales and marketing expenses to increase as we hire additional personnel to build out our sales and sales
support teams, particularly as we continue to build out our local market sales team. While we have historically relied on the
success of viral marketing to expand consumer awareness of our service, in 2014 we began to launch marketing campaigns to
increase consumer awareness and expand our listener base and in 2015, we began to launch advertising campaigns. We
anticipate that we will continue to utilize these types of marketing and advertising campaigns in the future. As such, we
anticipate higher overall levels of sales and marketing expense going forward.
For the twelve months ended December€31, 2015 compared to 2014, sales and marketing expenses increased $120.8
million or 44%, primarily due to a $54.0 million increase in employee-related and facilities and equipment costs, which were
driven by an approximate 40% increase in headcount, a $45.3 million increase in brand marketing, advertising, direct response
and search costs, which were driven by advertising campaigns that were launched in the twelve months ended December 31,
2015, an $11.2 million increase in transaction processing commissions on subscription purchases through mobile app stores, a
$5.3 million increase in costs related to music events, a $2.2 million increase in professional fees, a $1.4 million increase in
agency platform and media measurement expenses and a $1.1 million increase in amortization expense related to acquired
intangible assets.
For the twelve months ended December 31, 2014 compared to the eleven months ended December 31, 2013, sales and
marketing expenses increased by $108.3 million or€64%, primarily due to a $64.5 million increase in employee-related and
facilities and equipment costs, which were driven by an approximate 30% increase in headcount, a $10.3 million increase in
brand marketing, advertising, direct response and search costs, a $9.0 million increase in transaction processing commissions
on subscription purchases through mobile app stores, a $2.3 million increase in agency platform and media measurement
expenses, a $1.9 million increase in costs related to music events and a $1.2 million increase in public relations expenses. In
addition, the remaining increase in sales and marketing expenses was due to the€twelve months ended December 31,
2014€having one additional month as compared to the€eleven months ended December 31, 2013.
€
General and Administrative
€
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