Zynga 2011 Annual Report Download - page 43

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Table of Contents
Cost of Revenue and Operating Expenses
Cost of revenue. Our cost of revenue consists primarily of web hosting and data center costs related to operating our games, including:
depreciation and amortization; consulting costs primarily related to third-party provisioning of customer support services; payment processing
fees; and salaries, benefits and stock-
based compensation for our customer support and infrastructure teams. Our infrastructure team includes our
network operations and payment platform teams. Credit card processing fees, allocated facilities costs and other supporting overhead costs are
also included in cost of revenue. We expect cost of revenue to increase for the foreseeable future as we expand our data center capacity and
headcount associated with player support.
Research and development. Our research and development expenses consist primarily of salaries, benefits and stock-based compensation
for our engineers and developers. In addition, research and development expenses include outside services and consulting, as well as allocated
facilities and other supporting overhead costs. We believe continued investment in enhancing existing games and developing new games, and in
software development tools and code modification, is important to attaining our strategic objectives. As a result, we expect research and
development expenses to increase in absolute dollars for the foreseeable future as we grow our business.
Sales and marketing. Our sales and marketing expenses consist primarily of player acquisition costs, which are advertisements designed to
drive players into our games, salaries, benefits and stock-based compensation for our sales and marketing employees and fees paid to
consultants. In addition, sales and marketing expenses include general marketing, branding, advertising and public relations costs, as well as
allocated facilities and other supporting overhead costs. We plan to continue to invest in sales and marketing to grow our player base and
continue building brand awareness. As a result, we expect sales and marketing expenses to increase in absolute dollars for the foreseeable future
as we grow our business.
General and administrative. Our general and administrative expenses consist primarily of salaries, benefits and stock-based compensation
for our executive, finance, legal, information technology, human resources and other administrative employees. In addition, general and
administrative expenses include outside consulting, legal and accounting services, charitable donations and facilities and other supporting
overhead costs not allocated to other departments. General and administrative expenses also include gains and losses associated with legal
settlements. We expect that our general and administrative expenses will increase in absolute dollars for the foreseeable future as we continue to
grow our business and incur additional expenses associated with being a publicly-traded company.
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