Incredimail 2010 Annual Report Download - page 35

Revenues
We generate our revenues primarily from two major sources: (i) advertising, primarily through search generated revenues and other
services, and (ii) software products and solutions, licensing our IncrediMail® Premium, email software, other add-
on subscriptions and licenses
and our anti-
spam solution. In addition, we generate revenues from advertising in our email client, our content database and on our website. The
following table shows our revenues by category (in thousands of US Dollars):
Cost of Revenues
Our cost of revenues consists primarily of salaries and related expenses, license fees and payments for content and server maintenance,
all related to our product revenues and communicating with our users. Our revenues relating to advertising, primarily search, do not have direct
cost associated with them.
Research and Development Expenses
Our research and development expenses consist primarily of salaries and other personnel-
related expenses for employees primarily
engaged in research and development activities. We expect our research and development expenditures, which have increased nominally
compared to last year, although decreasing as percentage of sales in 2010, to continue and increase at a moderate rate, while decreasing as a
percentage of sales. The nominal increase will enable us to enrich our product pipeline going forward.
Selling and Marketing Expenses
Our selling and marketing expenses consist of customer acquisition expenses, salaries and other personnel-
related expenses for
employees primarily engaged in marketing activities, credit card commissions and fees to our payment gateway providers that provide secure
Internet payment processes. Credit card commissions vary between 1.9% and 5.6% based on the credit card, currency of payment and location of
clearing agency. Having completed the initial market penetration of HiYo, our instant messaging add-
on, in 2008, we reduced the level of
expenditure for customer acquisition at the onset of 2009, remaining at that level in 2010. As part of our growth strategy for 2011, we intend to
significantly increase customer acquisition costs in 2011, both nominally and as a percentage of sales, in order to increase the number of
downloads, users and revenue generated.
General and Administrative Expenses (“G&A”)
Our general and administrative expenses consist primarily of salaries and other personnel-
related expenses for executive, accounting
and administrative personnel, professional fees and other general corporate expenses. In order to facilitate our strategy for accelerated organic
and non-
organic growth in 2011 and beyond, the Company has enhanced its management team with experienced professionals, capable of taking
the Company to the next level. In the latter half of 2010, the Company engaged a new experienced CEO, created a Corporate Development
department and hired a VP of Corporate Development and enhanced the other administrative functions with experienced personnel. As a result,
G&A expenses have increased in 2010, compared to 2009, particularly in the second half of the year. We expect to complete this effort in the
first half of 2011 and thereafter expect G&A expenses to increase only moderately to accommodate the Company’s growth.
Year Ended December 31,
2008
2009
2010
Advertising, primarily through search, and other services
$
12,748
$
20,478
$
24,093
Products
9,158
6,717
5,404
Total revenues
$
21,906
$
27,195
$
29,497
28