Expedia 2012 Annual Report Download - page 63
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The increase in agency revenue in 2012 and 2011 was primarily due to growth in our corporate travel
business and agency hotel business, partially offset by a decline in agency air revenue.
Cost of Revenue
Year ended December 31, % Change
2012 2011 2010 2012 vs 2011 2011 vs 2010
($ in millions)
Customer operations $ 441 $ 363 $ 322 21% 13%
Credit card processing 281 241 221 17% 9%
Data center and other 177 157 142 14% 11%
Total cost of revenue $ 899 $ 761 $ 685 18% 11%
% of revenue 22.3% 22.1% 22.6%
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, destination supply,
and stock-based compensation.
In 2012, the primary drivers of the increase in cost of revenue expense were higher credit card processing
costs related to our merchant bookings growth and higher headcount costs related to our VIA Travel acquisition
as well as our global customer and supply operations, partially offset by an increase in credit card rebates.
In 2011, the primary drivers of the increase in cost of revenue expense were higher call and data center costs
as well as higher credit card processing costs related to our merchant transaction growth, partially offset by credit
card rebates.
Selling and Marketing
Year ended December 31, % Change
2012 2011 2010 2012 vs 2011 2011 vs 2010
($ in millions)
Direct costs $1,309 $1,121 $ 949 17% 18%
Indirect costs 412 354 286 17% 24%
Total selling and marketing $1,721 $1,475 $1,235 17% 19%
% of revenue 42.7% 42.8% 40.7%
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 global supply organization, Egencia and our various Leisure brands and
stock-based compensation costs.
Selling and marketing expenses increased $246 million in 2012 compared to 2011 driven by increases in
online marketing and mobile download spend at Hotels.com and Brand Expedia as well as higher affiliate
marketing expenses at EAN and higher personnel expenses driven by additional headcount across our supply
organization and several brands.
Selling and marketing expenses increased $240 million in 2011 compared to 2010 driven by increases in
online, offline and affiliate marketing expenses as well as higher personnel expenses across most of our brands
and supply organization.
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