eBay 2010 Annual Report Download - page 69

Sales and marketing expenses increased by $4.1 million in 2009 compared to 2008. The slight increase was
due primarily to the inclusion of costs attributable to Gmarket, Bill Me Later and Den Blå Avis and BilBasen as
well as increases in employee related expenses and professional services costs. The increases were partially
offset by cost reductions in marketing programs as we continued to focus on customer retention (for which
certain associated expenses are recorded as a reduction in revenue instead of sales and marketing expense) rather
than customer acquisition.
Product Development
Product development expenses consist primarily of employee compensation, contractor costs, facilities costs
and depreciation on equipment. Product development expenses are net of required capitalization of major site and
other product development efforts, including the development of our next generation platform architecture,
migration of certain platforms, seller tools and Payments services projects. Capitalized site and product
development costs were $135.4 million, $105.4 million and $112.7 million in 2010, 2009 and 2008, respectively,
and are primarily reflected as a cost of net revenues when amortized in future periods.
Product development expenses increased by $105.4 million, or 13%, in 2010 compared to 2009. The
increase was due primarily to an increase in employee-related and consultant costs driven by increased
investment in our top technology priorities (search, catalog, mobile, platform, and user experience) and the
inclusion of a full fiscal year of costs attributable to Gmarket (acquired June 2009), partially offset by the
exclusion of costs attributable to Skype.
Product development expenses increased $77.5 million, or 11%, in 2009 compared to 2008. The increase
was due primarily to an increase in employee-related and consultant costs driven by increased investment in our
top technology priorities (search, catalog, platform and user experience).
General and Administrative
General and administrative expenses consist primarily of employee compensation, contractor costs, facilities
costs, depreciation of equipment, employer payroll taxes on employee stock-based compensation, legal expenses,
insurance premiums and professional fees. Our legal expenses, including those related to various ongoing legal
proceedings, may fluctuate substantially from period to period.
General and administrative expenses decreased $339.0 million, or 24%, in 2010 compared to 2009. The
decrease was due primarily to a charge of $343.2 million related to the settlement of a lawsuit between Skype,
Joltid and entities controlled by Joltid’s founders in 2009, exclusion of costs attributable to Skype following the
sale and higher costs associated with our acquisition and divestiture activities in fiscal 2009. The decreases were
partially offset by higher employee-related and consultant costs as well as a full fiscal year of costs attributable to
Gmarket.
General and administrative expenses increased $419.5 million, or 42%, in 2009 compared to 2008. The
increase was due primarily to a charge of $343.2 million related to the settlement of a lawsuit in 2009 between
Skype, Joltid and entities controlled by Joltid’s founders and higher costs associated with our acquisition and
divestiture activities primarily related to the sale of Skype and the acquisition of Gmarket. General and
administrative expenses also increased due to the inclusion of costs attributable to Gmarket, Bill Me Later and
Den Blå Avis and BilBasen. The increases were partially offset by lower contractor costs and a reduction in
certain international indirect taxes.
Provision for Transaction and Loan Losses
Provision for transaction and loan losses consists primarily of bad debt expense associated with our
accounts receivable balance, loan reserves associated with our Bill Me Later principal loan receivable balance
and PayPal transaction loss expense and losses resulting from our customer protection programs.
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