eBay 2010 Annual Report Download - page 68

Payments cost of net revenues increased $183.9 million, or 18%, in 2009 compared to 2008. The increase in
cost of net revenues was primarily due to the inclusion of costs attributable to Bill Me Later as well as the impact
from our growth in net TPV. Payments cost of net revenues as a percentage of Payments net revenues increased
during 2009 compared to 2008 due primarily to the impact of lower take rates and increased investment in our
site operations, partially offset by a more favorable geographic and payment processor mix.
Communications
On November 19, 2009, we completed the sale of Skype to an investor group. Accordingly, Skype’s cost of
net revenue is not consolidated in our 2010 results.
Communications cost of net revenues increased $6.7 million or 2%, in 2009 compared to 2008. The increase
in cost of net revenues was due to an increase in SkypeOut minutes. Communications cost of net revenues as a
percentage of Communications net revenues decreased in 2009 compared to 2008 due primarily to higher volume
and changes in product mix.
Summary of Operating Expenses, Non-Operating Items and Provision for Income Taxes
The following table summarizes changes in operating expenses, non-operating items and provision for
income taxes:
Year Ended December 31,
Change from
2008 to 2009
Change from
2009 to 2010
2008 2009 2010 in Dollars in % in Dollars in %
(In thousands, except percentage changes)
Sales and marketing ..... $1,881,551 $1,885,677 $1,946,815 $ 4,126 — % $ 61,138 3%
Product development .... 725,600 803,070 908,434 77,470 11% 105,364 13%
General and
administrative ........ 998,871 1,418,389 1,079,383 419,518 42% (339,006) (24)%
Provision for transaction
and loan losses ....... 347,453 382,825 392,240 35,372 10% 9,415 2%
Amortization of acquired
intangible assets ...... 234,916 262,686 189,727 27,770 12% (72,959) (28)%
Restructuring .......... 49,119 38,187 21,437 (10,932) (22)% (16,750) (44)%
Interest and other income
(expense), net ........ 107,882 1,422,385 44,876 1,314,503 1,218% (1,377,509) (97)%
Provision for income
taxes ............... (404,090) (490,054) (297,486) (85,964) 21% 192,568 (39)%
Sales and Marketing
Sales and marketing expenses consist primarily of advertising costs and marketing programs (both online
and offline), employee compensation, contractor costs, facilities costs and depreciation on equipment. Online
marketing expenses represent traffic acquisition costs in various channels such as paid search, affiliates
marketing and display advertising. Offline advertising includes brand campaigns, buyer/seller communications
and general public relations expenses.
Sales and marketing expense increased by $61.1 million, or 3% in 2010 compared to 2009. The increase
was due primarily to higher employee-related expenses (including consultant costs, facility costs and equipment-
related costs), marketing program costs and costs attributable to Gmarket, partially offset by the exclusion of
costs attributable to Skype. A significant portion of our sales and marketing expense is attributable to our efforts
to enhance our online marketing programs, primarily paid search, in order to drive traffic to our Marketplaces
and Payments websites.
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