ServiceMagic 2012 Annual Report Download - page 30

Table of Contents
For the year ended December 31, 2012 compared to the year ended December 31, 2011
Search & Applications Operating Income Before Amortization increased 53% to $313.1 million, benefiting from the higher revenue noted
above and a decrease of $10.5 million in depreciation, partially offset by increases of $187.2 million in selling and marketing expense and
$122.0 million in traffic acquisition costs. The decrease in depreciation is due to certain fixed assets becoming fully depreciated in 2011 and the
write-off of $4.9 million in capitalized software costs associated with the exit of the Company's direct sponsored listings business in 2011. The
increase in selling and marketing expense is driven primarily by increased online marketing expenditures related to Ask.com and existing B2C
downloadable applications. The increase in traffic acquisition costs is primarily due to increased revenue from our B2B operations.
Match Operating Income Before Amortization increased 44% to $225.8 million, primarily due to the contribution from Meetic and higher
Core revenue noted above. Operating Income Before Amortization, excluding Meetic, was impacted by increases in selling and marketing
expense and product development expense, partially offset by decreases in cost of revenue and general and administrative expense. The increase
in selling and marketing expense is primarily due to an increase in offline marketing spend. Product development expense increased from 2011
primarily due to an increase in compensation and other employee-related costs due, in part, to an increase in headcount. The decrease in cost of
revenue is primarily due to lower customer acquisition costs. The decrease in general and administrative expense is primarily due to the
inclusion in the prior year of $4.0 million in transaction fees associated with the Meetic acquisition.
Media Operating Income Before Amortization loss increased by $29.0 million to a loss of $44.8 million reflecting the consolidation of
News_Beast beginning June 1, 2012. Included in the results of News_Beast is $7.0 million in restructuring costs related to its transition to a
digital only publication.
For the year ended December 31, 2011 compared to the year ended December 31, 2010
Search & Applications Operating Income Before Amortization increased 46% to $205.0 million, benefiting from the higher revenue noted
above and decreases of $10.9 million in general and administrative expense, $10.3 million in depreciation, and lower product development
expense as a percentage of revenue, partially offset by increases of $111.2 million in traffic acquisition costs and $66.8 million in selling and
marketing expense. The decrease in general and administrative expense is primarily due to a decrease in compensation and other employee-
related costs, lower professional fees, including a decrease in litigation related expenses, and the inclusion in 2010 of lease termination costs
associated with the Ask.com restructuring. The decrease in depreciation is due to the write-off of certain assets in the prior year, partially offset
by the write-off of $4.9 million in capitalized software costs in the third quarter of 2011 associated with the exit from our direct sponsored
listings business. As a percentage of revenue, product development expense decreased primarily due to staff reductions that took place during the
fourth quarter of 2010. The increase in traffic acquisition costs is primarily due to the increase in revenue. As a percentage of revenue, traffic
acquisition costs increased over the prior year due to an increase in the proportion of revenue from our B2B customized browser-based
applications and other arrangements with third parties who direct traffic to our websites. The increase in selling and marketing expense is driven
primarily by increased online marketing expenditures related to Ask.com and new B2C downloadable applications.
Match Operating Income Before Amortization increased 28% to $156.3 million, primarily due to the higher Core and Developing revenue
noted above, partially offset by losses at Meetic resulting from the write-off of $32.6 million of deferred revenue in connection with its
acquisition. Operating Income Before Amortization was further impacted by increases in selling and marketing expense, general and
administrative expense and product development expense. The increase in selling and marketing expense is due to an increase of $22.7 million in
advertising and promotional expenditures primarily related to offline and online marketing spend associated with the OurTime.com website and
an advertising agreement entered into during the second quarter of 2010 with Yahoo. General and administrative expense increased from 2010,
primarily due to $4.0 million in transaction fees associated with the Meetic acquisition, as well as operating expenses from OkCupid, which was
not in the prior year. The increase in product development expense is primarily due to an increase in compensation and other employee-related
costs related to an increase in headcount.
Local Operating Income Before Amortization increased 165% to $28.3 million, primarily due to profitability at CityGrid Media in the
current year as compared to a loss in the prior year.
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