Overstock.com 2015 Annual Report Download - page 55

We use a variety of methods to target our consumer audience, including online campaigns, such as advertising through keywords, product listing
ads, display ads, search engines, affiliate marketing programs, social coupon websites, portals, banners, e-mail, direct mail and viral and social media
campaigns. We also do brand advertising through television, radio, print ads, and event sponsorships.
The following table reflects our sales and marketing expenses for the years ended December 31, 2015 and 2014 (in thousands):
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Sales and marketing expenses
$ 124,468
$ 109,461
$ 15,007
13.7%
Sales and marketing expenses as a percent of net revenues
7.5%
7.3%
The 20 basis point increase in sales and marketing expenses as a percentage of revenue for the year ended December 31, 2015, as compared to the
same period in 2014, was primarily due to increased spending in the display ad and brand marketing channels.
Sales and marketing expenses include stock-based compensation expense of $217,000 and $336,000 for the years ended December 31, 2015 and
2014, 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 constantly evaluate where we spend our sales and marketing dollars. From time to time, certain competitors may bid up the cost of certain
marketing channels, such as paid keywords. At such times, we may reduce the amounts we spend in those marketing channels, which may lead to decreased
visitors to our site for a time. In Q4 2015, the number of unique visitors to our site decreased by approximately 8% as compared to Q4 2014, in part we
believe as a result of such changes.
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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 may increase our technology expenses to support these initiatives and these increases may be material.
We have noted increases in the frequency and variety of cyber attacks on our Website. The impact of these attacks and the costs we incur 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, 2015 and 2014 (in thousands):
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Technology expenses
$ 98,533
$ 86,258
$ 12,275
14.2%
Technology expenses as a percent of net revenues
5.9%
5.8%
The $12.3 million increase in technology costs for the year ended December 31, 2015, as compared to the same period in 2014, was primarily due to
an increase in depreciation of $6.1 million and an increase in staff-related costs of $4.9 million.
Technology expenses include stock-based compensation expense of $646,000 and $751,000 for the years ended December 31, 2015 and 2014,
respectively.
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