ServiceMagic 2009 Annual Report Download - page 43

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Table of Contents
For the year ended December 31, 2008 compared to the year ended December 31, 2007
Revenue grew 3% to $765.5 million, primarily due to improved economics associated with the renewed paid listing supply agreement with
Google, which resulted in an increase in revenue per query across most proprietary search properties. Revenue also benefited from an increase in
both queries and revenue per query at Ask.com internationally and Fun Web Products. The growth in queries at Ask.com internationally and Fun
Web Products was partially offset by declines in queries at Ask.com in the U.S. due, in part, to significantly lower marketing spend in 2008
versus 2007. Offsetting these increases in revenue was a sharp decline in network revenue, resulting from the discontinuation of relationships
with certain partners that took place during 2008 in conjunction with the renewed Google agreement. Proprietary revenue represented 68.6% of
total Search revenue during the year versus 53.8% in 2007. The acquisition of Lexico on July 3, 2008 contributed $10.1 million to revenue in
2008. Citysearch continued to grow users and revenue during the year.
Operating Income Before Amortization increased 60% to $136.3 million, growing at a faster rate than revenue primarily due to the
reduction in the current year of $45.4 million in traffic acquisition costs and a decrease in selling and marketing expense, partially offset by an
increase of $5.8 million in product development expense. Overall traffic acquisition costs during the year decreased as a direct result of a
decrease in network revenue, partially offset by growth in distribution revenue included as a component of proprietary revenue at IAC Search &
Media. As a percentage of revenue, traffic acquisition costs associated with network revenue generated from integrated paid listings are lower
than traffic acquisition costs associated with distribution revenue generated from partners who redirect traffic to the Ask.com landing page.
Contributing to the decrease in selling and marketing expense is a decrease of $13.1 million in advertising and promotional expenditures
partially offset by an increase of $7.0 million in compensation and other employee-
related costs. The increase in product development expense is
primarily due to an increase of $5.7 million in compensation and other employee-related costs, due in part to acquisitions not in the year ago
period and an approximate 8% increase in average headcount at IAC Search & Media.
Operating income increased 260% to $97.5 million, primarily due to the increase in Operating Income Before Amortization described
above and a decrease of $28.7 million in amortization of non-cash marketing, partially offset by an increase of $9.3 million in amortization of
intangibles. The increase in amortization of intangibles resulted principally from an indefinite-lived intangible asset impairment charge of
$9.2 million described above.
Match
For the year ended December 31, 2009 compared to the year ended December 31, 2008
Revenue declined 6% to $342.6 million, reflecting the sale of Match Europe to Meetic on June 5, 2009, partially offset by a $16.5 million
contribution from PeopleMedia, acquired July 13, 2009, and solid growth in the U.S. business. Excluding the results of Match Europe from both
periods and PeopleMedia from the current period, revenue grew 6% during the current year period driven by a 5% increase in U.S. subscribers,
partially offset by a 2% decline in U.S. revenue per subscriber.
Operating Income Before Amortization increased 3% to $94.1 million despite the decrease in revenue noted above, primarily due to
decreases of $20.7 million in cost of revenue and $10.2 million in selling and marketing expense, partially offset by an increase of $3.2 million
in general and administrative expense. Both the decrease in cost of revenue and selling and marketing expense is primarily due to the sale of
Match Europe. Cost of revenue and selling and marketing expense were further impacted by more favorable economic terms under agreements
with certain distribution partners and an increase in advertising and promotional expenditures associated with online marketing, respectively.
The increase in general and administrative expense was principally due to $3.2 million of professional fees related to the sale of Match Europe in
exchange for a 27% investment in Meetic.
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