eBay 2001 Annual Report Download - page 30

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Operating Expenses
Sales and Marketing
Percent Percent
1999 Change 2000 Change 2001
(in thousands, except percent changes)
Sales and marketing ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $96,239 73% $166,767 52% $253,474
As a percentage of net revenues ÏÏÏÏÏ 43% 39% 34%
Sales and marketing expenses for both the online and oÉine businesses comprise primarily employee
compensation for our category development and marketing staÅ, advertising, tradeshow and other
promotional costs, certain trust and safety programs and corporate overhead allocations.
The successive year-over-year growth in absolute dollars was primarily the result of growth in online
and oÉine advertising, employee compensation costs, costs associated with the use of outside services and
consultants, additional costs associated with acquired businesses, and miscellaneous user and promotional
costs. Our online advertising eÅorts target the acquisition of registered users through promotional
agreements with Internet portals and other online service providers, while our oÉine advertising is spent
primarily on television and print media placements. Sales and marketing expenses are expected to increase
in absolute dollars, and to decrease as a percentage of net revenues in 2002. See ""Note 11 Ì
Commitments and Contingencies Ì Advertising to the Consolidated Financial Statements.''
Product Development
Percent Percent
1999 Change 2000 Change 2001
(in thousands, except percent changes)
Product developmentÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $24,847 125% $ 55,863 35% $ 75,288
As a percentage of net revenues ÏÏÏÏÏ 11% 13% 10%
Product development expenses consist primarily of employee compensation, payments to outside
contractors, depreciation on equipment used for development and corporate overhead allocations. We
anticipate that we will continue to devote signiÑcant resources to product development in the future as we
add new features and functionality to the eBay service.
Our product development expenses increased in absolute dollars primarily as a result of an increase in
employee compensation costs. We signiÑcantly increased the size of our product development staÅ from
173 in 1999, to 203 in 2000 and to 320 in 2001. Expenses related to contractors and consultants employed
within product development as well as maintenance and depreciation costs for equipment used in research
and development also increased. The increase in these costs results from the development of additional site
features and functionality such as eBay Stores, eBay Checkout, enhanced payment features and expanded
search capabilities. Product development expenses are expected to increase in absolute dollars in 2002, as
we develop new site features and functionality and continue to improve and expand operations both
domestically and internationally. However, we expect product development expenses in 2002 to remain
generally consistent with 2001 levels as a percentage of net revenues in 2002.
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