TripAdvisor 2012 Annual Report Download - page 55

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Cost of Revenue
Cost of revenue consists of expenses that are closely correlated or directly related to revenue generation,
including ad serving fees, flight search fees, credit card fees and data center costs.
Year ended December 31, % Change
2012 2011 2010 2012 vs. 2011 2011 vs. 2010
($ in millions)
Cost of revenue ..................................... $12 $11 $ 7 11.0% 48%
% of revenue ....................................... 1.6% 1.7% 1.5%
2012 vs. 2011
Cost of revenue increased $1 million during the year ended December 31, 2012 when compared to the same
period in 2011, primarily due to increased credit card merchant fees.
2011 vs. 2010
Cost of revenue increased $4 million during the year ended December 31, 2011 when compared to the same
period in 2010, primarily due to increased data center costs in support of higher site traffic and increased credit
card merchant fees.
Selling and Marketing
Sales and marketing expenses primarily consist of direct costs, including search engine marketing, or SEM,
other traffic acquisition costs, syndication costs and affiliate program commissions, brand advertising and public
relations. In addition, our indirect sales and marketing expense consists of personnel and overhead expenses,
including salaries, commissions, benefits, stock-based compensation expense and bonuses for sales, sales
support, customer support and marketing employees.
Year ended December 31, % Change
2012 2011 2010 2012 vs. 2011 2011 vs. 2010
($ in millions)
Direct costs ........................................ $177 $137 $ 88 29% 57%
Personnel and overhead .............................. 89 72 52 25% 36%
Total selling and marketing ....................... $266 $209 $140 27% 49%
% of revenue ...................................... 34.9% 32.8% 29.0%
2012 vs. 2011
Direct selling and marketing costs increased $40 million during the year ended December 31, 2012 when
compared to the same period in 2011, primarily due to increased search engine marketing costs, brand
advertising costs and investments in social media costs. We increased our spending on social media in the year
ended December 31, 2012 compared to the same period in 2011, in order to increase social engagement on our
websites. Personnel and overhead costs increased $17 million during the year ended December 31, 2012 when
compared to the same period in 2011, primarily due to an increase in headcount to support business growth,
including international expansion.
2011 vs. 2010
Direct selling and marketing costs increased $49 million during the year ended December 31, 2011 when
compared to the same period in 2010, primarily due to increased search engine marketing costs and other traffic
acquisition costs. Personnel and overhead costs increased $20 million during the year ended December 31, 2011
when compared to the same period in 2010, primarily due to an increase in headcount to support business
growth, including international expansion.
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