Priceline 2010 Annual Report Download - page 130

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56
Other Revenues
Other revenues during the year ended December 31, 2009 consisted primarily of advertising. Other
revenues for the year ended December 31, 2009 increased 24.6% compared to the same period in 2008, primarily as
a result of higher online advertising revenues and increased traffic.
Cost of Revenues and Gross Profit
Year Ended
December 31,
($000)
2009 2008 Change
Cost of Revenues ..........................
.
$1,077,449 $928,835 16.0%
% of Merchant Revenues ........
.
74.4% 76.2%
Cost of Revenues
For the year ended December 31, 2009, cost of revenues consisted primarily of: (1) the cost of Name Your
Own Price® hotel room reservations from our suppliers, net of applicable taxes, (2) the cost of Name Your Own
Price® rental cars from our suppliers, net of applicable taxes; and (3) the cost of Name Your Own Price® airline
tickets from our suppliers, net of the federal air transportation tax, segment fees and passenger facility charges
imposed in connection with the sale of airline tickets. Cost of revenues for the year ended December 31, 2009
increased by 16.0%, compared to the same period in 2008, primarily due to the increase in merchant revenue
discussed above. Merchant price-disclosed hotel revenues in the U.S. and at Agoda are recorded in merchant
revenues net of the amounts paid to suppliers and therefore, there is no associated cost of revenues for merchant
price-disclosed hotel revenues. Cost of revenues as a percentage of their associated merchant revenues decreased
primarily due to the increase in merchant price-disclosed hotel revenues, which are recorded on a “net” basis.
Agency revenues are recorded at their net amount, which are amounts received less amounts paid to
suppliers, if any, and therefore, there are no costs of agency revenues.
Gross Profit
Year Ended
December 31,
($000)
2009 2008 Change
Gross Profit ...................................
.
$1,260,763 $955,971 31.9%
Gross Margin ............................
.
53.9% 50.7%
Total gross profit for the year ended December 31, 2009 increased by 31.9% compared to the same period
in 2008, primarily as a result of increased revenue discussed above. Total gross margin (gross profit expressed as a
percentage of total revenue) increased during the year ended December 31, 2009, compared to the same period in
2008, because Name Your Own Price® revenues, which are recorded “gross” with a corresponding cost of revenue,
represented a smaller percentage of total revenues compared to retail, price-disclosed revenues which are primarily
recorded “net” with no corresponding cost of revenues. Because Name Your Own Price® transactions are reported
“gross” and retail transactions are primarily recorded on a “net” basis, we believe that gross profit has become an
increasingly important measure of evaluating growth in our business. Our international operations accounted for
approximately $848.6 million of our gross profit for the year ended December 31, 2009, which compares to
approximately $615.8 million for the same period in 2008. Gross profit attributable to our international operations
increased, on a local currency basis, by approximately 46% in the year ended December 31, 2009, compared to the
same period in 2008.