Travelzoo 2010 Annual Report Download - page 57

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Europe:
Period
Average Cost per
Acquisition of a New
Subscriber New Subscribers
Subscribers
Removed from
List Balance
Q1 2008 ................... $3.90 362,417 (45,152) 1,698,595
Q2 2008 ................... $4.89 226,156 (31,055) 1,893,696
Q3 2008 ................... $4.52 253,961 (38,418) 2,109,239
Q4 2008 ................... $3.32 160,172 (46,736) 2,222,675
Q1 2009 ................... $3.09 295,450 (40,542) 2,477,583
Q2 2009 ................... $2.74 408,026 (52,491) 2,833,118
Q3 2009 ................... $3.53 541,509 (99,396) 3,275,231
Q4 2009 ................... $3.97 443,280 (117,519) 3,600,992
Q1 2010 ................... $3.65 478,518 (117,617) 3,961,893
Q2 2010 ................... $4.31 400,549 (116,273) 4,246,169
Q3 2010 ................... $2.90 423,310 (144,895) 4,524,584
Q4 2010 ................... $3.30 310,378 (220,941) 4,614,021
In North America, we have noted a general trend of decreasing average cost per acquisition of a new subscriber
(“CPA”) in 2009 compared to 2008 and a decrease in CPA in the second, third and fourth quarters of 2010 from the
first quarter of 2010. The recent quarterly decreases in CPA reflect the effects of new advertising campaigns and
decreases in advertising rates by our media suppliers. We do not consider the decrease in CPA to be indicative of a
longer-term trend or to indicate that our CPA is likely to stay at this level or is likely to decrease further.
In Europe, we see a large fluctuation in the CPA. The average cost fluctuates from quarter to quarter and from
country to country. The decline in CPA in Europe in Q4 2008 reflects the change in the exchange rates between Q3
2008 and Q4 2008 and accounted for $0.51 of the decrease in the CPA. In Q4 2009, a higher proportion of the total
subscribers we acquired were in Germany, where historically, the acquisition costs have been higher compared to
the other countries in Europe. This was the primary reason for the increase in the CPA in Q4 2009 compared to Q3
2009. The decrease in CPA in Q3 2010 from Q2 2010 is in part due to an improved method of subscriber acquisition.
We do not consider the Q3 2010 decrease in CPA to be indicative of a longer-term trend or to indicate that our CPA is
likely to stay at this level or is likely to decrease further.
Future increases in CPA are likely to result in higher absolute marketing expenses and potentially higher
relative marketing expenses as a percentage of revenue. Going forward, we expect continued upward pressure on
online advertising rates and continued activity from competitors, which will likely increase our CPA over the long
term. The effect on operations is that greater absolute and relative marketing expenditure may be necessary to
continue to grow the reach of our publications. However, it is possible that the factors driving subscriber acquisition
cost increases can be partially or completely offset by new or improved methods of subscriber acquisition using
techniques which are under evaluation.
Segment Information
We have presented the business segments based on our organizational structure as of December 31, 2010.
North America
2010 2009 2008
Year Ended December 31,
(In thousands)
Net revenues . . ....................................... $87,858 $77,967 $71,339
Income from operations ................................. 24,998 19,227 21,118
Income from operations as % of revenues.................... 28% 25% 30%
30