Expedia 2009 Annual Report Download - page 55

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by a 6% decrease in revenue per room night. Revenue per room night decreased due to changes in foreign
exchange rates and a 2% decrease in worldwide ADRs.
Worldwide air revenue increased 2% in 2008 compared to 2007 due to a 2% increase in revenue per air
ticket. Tickets sold were flat for the year as an 8% growth in the first half of the year was offset by an 8% decline
in the second half of the year due to lower passenger volumes as a result of carrier capacity cuts and softer
consumer demand.
Our remaining worldwide revenue other than hotel and air revenue discussed above increased by 29% in
2008 compared to 2007 primarily due to increases in our advertising and media revenue and car rental revenue.
In addition to the above segment and product revenue discussion, our revenue by business model is as
follows:
Year ended December 31, % Change
2009 2008 2007 2009 vs 2008 2008 vs 2007
($ in millions)
Revenue by Business Model
Merchant .......................... $2,005 $2,004 $1,915 0% 5%
Agency ............................ 639 651 567 (2)% 15%
Advertising and media ................ 311 282 183 10% 55%
Total revenue ..................... $2,955 $2,937 $2,665 1% 10%
Our merchant revenue for 2009 compared to 2008 was relatively flat as increases in car revenue were offset
by decreases in air revenue. The increase in merchant revenue for 2008 compared to 2007 was driven by an
increase in hotel revenue primarily due to higher room nights stayed, partially offset by lower ADRs.
Agency revenue decreased for 2009 compared to 2008 due to a decrease in air revenue primarily resulting
from our Expedia.com U.S. booking fee removal and decreased agency package revenue, partially offset by
higher hotel revenue related to Venere and higher car revenue. Agency revenue increased for 2008 compared to
2007 due to increases in air, hotel and car revenue.
Advertising and media revenue increased in 2009 compared to 2008 primarily due to a 21% increase in
advertising revenue at our Leisure transaction-based websites as well as a 6% increase at TripAdvisor Media
Network. Advertising and media revenue increased in 2008 compared to 2007 primarily due to increased revenue
at TripAdvisor Media Network.
Cost of Revenue
Year ended December 31, % Change
2009 2008 2007 2009 vs 2008 2008 vs 2007
($ in millions)
Customer operations ................. $293 $295 $267 (1)% 11%
Credit card processing ................ 178 200 189 (11)% 6%
Data center and other ................. 136 144 109 (5)% 31%
Total cost of revenue ............... $607 $639 $565 (5)% 13%
% of revenue ....................... 20.5% 21.7% 21.2%
Cost of revenue primarily consists of (1) customer operations, including our customer support and telesales
as well as fees to air ticket fulfillment vendors, (2) credit card processing, including merchant fees, charge backs
and fraud, and (3) other costs, primarily including data center costs to support our websites, certain promotions,
destination supply, and stock-based compensation.
In 2009, the primary drivers of the decrease in cost of revenue expense were a decrease in credit card
processing costs as a result of our technology investments, lower promotions expense and air fulfillment
efficiencies primarily resulting from bringing some of our air ticket fulfillment operations in-house. We expect
cost of revenue to decrease as a percentage of revenue in 2010.
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