Expedia 2009 Annual Report Download - page 56

In 2008, the primary drivers of the increase in cost of revenue expense were an increase in customer
operation costs primarily due to an increase in transaction volumes during 2008 versus 2007, an increase of credit
card processing fees due to the increase in merchant bookings and an increase in promotions expense.
Selling and Marketing
Year ended December 31, % Change
2009 2008 2007 2009 vs 2008 2008 vs 2007
($ in millions)
Direct costs ......................... $ 747 $ 826 $762 (10)% 8%
Indirect costs ........................ 280 279 233 0% 20%
Total selling and marketing ........... $1,027 $1,105 $ 995 (7)% 11%
% of revenue ........................ 34.8% 37.6% 37.3%
Selling and marketing expense primarily relates to direct costs, including traffic generation costs from
search engines and internet portals, television, radio and print spending, private label and affiliate program
commissions, public relations and other costs. The remainder of the expense relates to indirect costs, including
personnel and related overhead in our Partner Services Group (“PSG”), the TripAdvisor Media Network, Egencia
and Expedia Local Expert and stock-based compensation costs.
Selling and marketing expenses decreased $78 million in 2009 compared to 2008 due to lower offline brand
spending for our global websites, lower online spend as well as lower private label and affiliate expenses
associated with the lower overall travel demand environment. Offline and online advertising spend decreased
primarily as a result of a lower cost advertising environment, our investments in search engine optimization and
marketing, and costs for other customer value enhancements that stimulate demand but do not impact selling and
marketing expense such as fee reductions and loyalty programs. These decreases were partially offset by an
increase in direct costs for Venere. We expect selling and marketing expense to increase as a percentage of
revenue in 2010 in part due to approximately $20 million in relocation and other costs related to the opening of a
global headquarters for our lodging supply group.
In 2008, selling and marketing expense increased $110 million primarily due to a $64 million increase in
direct costs resulting from an increase in online marketing primarily driven by increase spend related to the
expansion of our TripAdvisor Media Network as well as increased expenses at our international points of sale,
offset slight by a decrease in other direct marketing. Indirect costs included in selling and marketing expense
increased $46 million primarily due to increased headcount in the TripAdvisor Media Network, PSG, Egencia
and European points of sale.
Technology and Content
Year ended December 31, % Change
2009 2008 2007 2009 vs 2008 2008 vs 2007
($ in millions)
Personnel and overhead ................ $167 $156 $144 7% 9%
Depreciation and amortization of
technology assets ................... 68 48 35 42% 37%
Other .............................. 85 84 67 2% 24%
Total technology and content .......... $320 $288 $246 11% 17%
% of revenue ........................ 10.8% 9.8% 9.2%
Technology and content expense includes product development and content expense, as well as information
technology costs to support our infrastructure, back-office applications and overall monitoring and security of
our networks, and is principally comprised of personnel and overhead, depreciation and amortization of
technology assets including hardware, and purchased and internally developed software, and other costs
including licensing and maintenance expense and stock-based compensation.
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