Enom 2014 Annual Report Download - page 50

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47
Marketplaces Revenue
Marketplaces revenue increased by $21.1 million, a 147% increase to $35.4 million for the year ended December 31, 2014, as
compared to $14.3 million for the same period in 2013. The number of transactions increased 158% to 715,343 in the year ended
December 31, 2014 from 277,442 from the prior year period, driven primarily by a full year of results for Society6, which we acquired
in June 2013. Average revenue per transaction was $49.47 for the year ended December 31, 2014, decreasing by 4% as compared to
$51.65 in the prior year period due to a mix shift that includes lower priced product offerings on Society6.
Cost and Expenses
Operating costs and expenses were as follows (in thousands):
Year ended December 31, % Change
2014 2013 2012 2014 to 2013 2013 to 2012
Service costs (exclusive of amortization of
intangible assets) ....................................................... $ 43,325 $ 51,274 $ 54,304 -16% -6%
Product costs ............................................................. 26,058 9,882 - 164% N/A
Sales and marketing .................................................. 20,046 36,275 38,948 -45% -7%
Product development ................................................. 29,387 32,185 31,190 -9% 3%
General and administrative ....................................... 50,179 53,014 54,082 -5% -2%
Goodwill impairment charge ..................................... 232,270 - - N/A N/A
Amortization of intangible assets .............................. 38,316 36,519 32,402 5% 13%
Service Costs
Service costs for the year ended December 31, 2014 decreased by approximately $7.9 million, or 16%, to $43.3 million
compared to $51.3 million in the same period in 2013. The decrease was primarily due to a $2.8 million decrease in depreciation
expense, a decrease of $2.4 million in ad serving costs, a decrease of $1.0 million in personnel related costs, including stock-based
compensation, a $1.8 million decrease in traffic acquisition cost (“TAC”), a $1.7 million decrease in newly created content and a $0.1
million decrease in information technology expense. These factors were partially offset by a $1.9 million increase in content
remediation related expenses.
Service costs for the year ended December 31, 2013 decreased by approximately $3.0 million, or 6%, to $51.3 million compared
to $54.3 million in the same period in 2012. The decrease is primarily due to a $3.3 million decrease in content related expenses
primarily associated with our YouTube Channels agreement, a $2.8 million decrease in TAC and a $1.4 million decrease in
depreciation. These factors were partially offset by an increase of $3.1 million in personnel related costs, including stock-based
compensation and a $1.6 million increase in ad serving costs.
Product Costs
Product costs for the year ended December 31, 2014 increased by $16.2 million, or 164%, to $26.1 million compared to product
costs of $9.9 million for the year ended December 31, 2013, primarily due to increased costs related to the higher volume of products
sold on Society6. The year ended December 31, 2014 represented a full year of product costs related to Society6, which was acquired
in June 2013.
Sales and Marketing
Sales and marketing expenses decreased by $16.2 million, to $20.0 million for the year ended December 31, 2014 from $36.3
million for the same period in 2013. The decrease in expense was driven by a $13.1 million decrease in personnel and related costs,
primarily due to our strategic shift away from direct advertising sales, a $2.6 million reduction in marketing and branding activities
and a $0.5 million decrease in software licensing fees.
Sales and marketing expenses decreased $2.7 million, or 7%, to $36.3 million for the year ended December 31, 2013 from $38.9
million for the same period in 2012. The decrease is primarily due to a $1.3 million decrease in marketing and consulting activities, a
$1.2 million decrease in personnel related costs, including stock-based compensation expense and a $0.1 million decrease in
depreciation.