Overstock.com 2014 Annual Report Download - page 46

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Table of Contents
The following table reflects our sales and marketing expenses for the years ended December 31, 2014 and 2013 (in thousands):






Sales and marketing expenses
$ 109,461
$ 91,609
$ 17,852
19.5%
Sales and marketing expenses as a percent of net revenues
7.3%
7.0%
The 29 basis point increase in sales and marketing expenses as a percentage of revenue for the year ended December 31, 2014, as compared to 2013,
was primarily due to increased spending in the sponsored search and display ad marketing channels due to driving a higher proportion of our sales through
those channels. These trends may continue depending on the proportion of our sales through these channels.
Sales and marketing expenses include stock-based compensation expense of $336,000 and $167,000 for the years ended December 31, 2014 and
2013, respectively.
Costs associated with our discounted shipping and other promotions, such as coupons, are not included in marketing expense. Rather, they are
accounted for as a reduction of revenue and therefore affect sales and gross margin. We consider discounted shipping and other promotions, such as our
policy of free shipping on orders over $50, as an effective marketing tool, and intend to continue to offer them as we deem appropriate as part of our overall
marketing plan.

We seek to invest efficiently in technology, including web services, customer support solutions, website search, expansion of new and existing
product categories, and in investments in technology to enhance the customer experience, improve our process efficiency and support and expand our
logistics infrastructure. We expect to continue to increase our technology expenses to support these initiatives and these increases may be material.
We have noted an increase in the frequency and variety of cyber attacks on our Website. The impact of these attacks, their costs, and the costs
incurred to protect our Website against future attacks have not been material. However, we consider the threat from cyber attacks to be serious and will
continue to incur costs relating to them.
The following table reflects our technology expenses for the years ended December 31, 2014 and 2013 (in thousands):






Technology expenses
$ 86,258
$ 71,788
$ 14,470
20.2%
Technology expenses as a percent of net revenues
5.8%
5.5%
The $14.5 million increase in technology costs for the year ended December 31, 2014, as compared to 2013, was primarily due to an increase in
staff-related costs of $7.6 million, increased depreciation of $3.7 million, and a $1.5 million increase in technical consulting.
We continue to seek opportunities for growth by expanding our international sales and distribution footprint, through our crypto-initiatives, and
through other means. As a result of these initiatives, we expect to continue to incur additional technology and G&A expenses, including possible
investments in other technology companies. These expenses or investments may be material, and, coupled with the seasonality of our business, may lead to
reduced income as compared to prior periods or to losses in some periods.
Technology expenses include stock-based compensation expense of $751,000 and $352,000 for the years ended December 31, 2014 and 2013,
respectively.
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