Priceline 2011 Annual Report Download - page 51

Download and view the complete annual report

Please find page 51 of the 2011 Priceline annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 111

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111

50
Operating Expenses
Advertising
Online Advertising
% of Total Gross Profit
Offline Advertising
% of Total Gross Profit
Year Ended
December 31,
($000)
2010
$ 552,140
28.9%
$ 35,714
1.9%
2009
$ 365,381
29.0%
$ 36,270
2.9%
Change
51.1 %
(1.5)%
Offline advertising expenses consist primarily of: (1) the expenses associated with domestic television, print and radio
advertising; and (2) the cost for creative talent, production costs and agency fees for television, print and radio advertising. For
the year ended December 31, 2010, offline advertising expenses were generally flat compared to the same period in 2009.
Online advertising expenses primarily consist of the costs of (1) search engine keyword purchases; (2) affiliate programs;
(3) banner and pop-up advertisements; and (4) e-mail campaigns. For the year ended December 31, 2010, online advertising
expenses increased over the same period in 2009, primarily to support increased gross bookings for Booking.com, Agoda and
priceline.com, as well as the inclusion of online advertising expense for TravelJigsaw since its acquisition in May 2010.
Sales and Marketing
Sales and Marketing
% of Total Gross Profit
Year Ended
December 31,
($000)
2010
$ 116,303
6.1%
2009
$ 81,238
6.4%
Change
43.2%
Sales and marketing expenses consist primarily of (1) credit card processing fees associated with merchant
transactions; (2) fees paid to third-parties that provide call center, website content translations and other services; (3) provisions
for credit card chargebacks; and (4) provisions for bad debt primarily related to agency hotel commission receivables. For the
year ended December 31, 2010, sales and marketing expenses, which are substantially variable in nature, increased over the
same period in 2009, primarily due to increased credit card processing fees, third-party service costs and bad debt provision
associated with increased gross booking volumes.
Personnel
Personnel
% of Total Gross Profit
Year Ended
December 31,
($000)
2010
$ 270,071
14.1%
2009
$ 180,152
14.3%
Change
49.9%
Personnel expenses consist of compensation to our personnel, including salaries, bonuses, taxes, employee health
benefits and stock-based compensation. For the year ended December 31, 2010, personnel expenses increased over the same
period in 2009, primarily due to increased headcount to support the growth of our business, higher bonus accruals reflecting our
strong operating performance, and the inclusion of TravelJigsaw since its acquisition in May 2010. Stock-based compensation
expense was approximately $68.2 million for the year ended December 31, 2010 and $40.7 million for the year ended
December 31, 2009. Stock-based compensation for the year ended December 31, 2010 includes charges amounting to $13.4
million, representing the cumulative impact of adjusting the estimated probable outcome at the end of the performance period
for certain outstanding unvested performance share units.