Travelzoo 2003 Annual Report Download - page 40

Ñnancial metrics for two reasons: First, to monitor the progress that the Company is making to increase the
reach of its products. Second, to evaluate if the Company is able to convert higher reach into higher revenues.
Year Ended December 31, Year-over-Year
2003 2002 Growth
Subscribers:
Travelzoo Top 20 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 6,120,000 3,467,000 76%
NewsÖash ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,667,000 0 N/A
Weekend.comÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,220,000 726,000 305%
Page views of selected sections of Travelzoo website:
Homepage ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 21,532,000 12,814,000 68%
Front pages of destination categories ÏÏÏÏÏÏÏÏÏÏÏÏÏ 41,025,000 28,515,000 44%
Management believes that the increase in reach of its products in the year ended December 31, 2003 was
in line with its strategy and goals.
The Company's revenues for the year ended December 31, 2003 increased by 83% from the previous year.
Substantially all revenues were generated from the Travelzoo website and the Travelzoo Top 20 newsletter.
The number of subscribers of the Travelzoo Top 20 newsletter increased by 76%. Page views of selected
sections of the Travelzoo website increased by 68% and 44%. Management believes that the data for the years
ended December 31, 2003 and 2002 indicate that the Company was able to generate higher revenues as reach
increased.
Revenues
Our total revenues increased to $18.0 million for the year ended December 31, 2003 from $9.8 million for
the year ended December 31, 2002. This represents an increase of 83%. Total revenues for the year ended
December 31, 2002 increased to $9.8 million from $6.1 million for the year ended December 31, 2001. This
represents an increase of 60%. The increase in both years was primarily due to an increase in the number of
advertisers. In addition, the increase was due to an increase in our advertising rates.
Average revenue per employee increased to $461,000 for the year ended December 31, 2003 and to
$379,000 for the year ended December 31, 2002 from $324,000 for the year ended December 31, 2001.
Cost of Revenues
Cost of revenues consists of network expenses, including fees we pay for co-location services, depreciation
of network equipment and salary expenses associated with network operations staÅ. Our cost of revenues
increased to $399,000 for the year ended December 31, 2003 and to $351,000 for the year ended December 31,
2002 from $304,000 for the year ended December 31, 2001. As a percentage of revenue, cost of revenues
decreased to 2% for the year ended December 31, 2003 from 4% for the year ended December 31, 2002 and
5% for the year ended December 31, 2001. The decreases resulted primarily from an increase in revenues that
was not oÅset by an increase in our network operations costs.
Operating Expenses
Sales and Marketing
Sales and marketing expenses consist primarily of advertising and promotional expenses, public relations
expenses, conference expenses, and salary expenses associated with sales and marketing staÅ. Sales and
marketing expenses increased to $9.6 million for the year ended December 31, 2003 and to $5.7 million for the
year ended December 31, 2002 from $3.3 million for the year ended December 31, 2001. The increase in sales
and marketing expenses in both years was primarily due to increases of our advertising campaigns. The goal of
our advertising was to acquire new subscribers for our e-mail products and to increase brand awareness for
Travelzoo. For the years ended December 31, 2003, 2002, and 2001, advertising expenses accounted for 71%,
69%, and 69%, respectively, of sales and marketing expenses. Advertising activities during these three year
periods consisted primarily of online advertising. The increase in sales and marketing expenses in the years
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