ServiceMagic 2009 Annual Report Download - page 44

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Table of Contents
Operating income increased 12% to $84.7 million in 2009, primarily due to the increase in Operating Income Before Amortization
described above and a decrease of $10.7 million in amortization of non-cash marketing, partially offset by an increase of $4.3 million in
amortization of intangibles, relating primarily to the acquisition of PeopleMedia.
For the year ended December 31, 2008 compared to the year ended December 31, 2007
Revenue grew 5% to $365.5 million, reflecting a 2% increase in both international subscribers and revenue per subscriber, and 6% and 3%
growth in North America subscribers and revenue per subscriber, respectively. The growth in international subscribers was driven by expansion
in several markets, most notably the United Kingdom and Japan, partially offset by declines in Spain and Germany. Domestically,
Chemistry.com continued to grow subscribers during 2008.
Operating Income Before Amortization increased 16% to $91.3 million, growing at a faster rate than revenue primarily due to lower traffic
acquisition costs as a percentage of revenue due to more favorable economic terms under agreements with certain domestic distribution partners,
partially offset by increased marketing spend and increased compensation and other employee-related costs related to product development. In
2008, Match experienced increases in advertising expenses associated with television advertising and online marketing related to Chemistry.com
and various international marketing campaigns. The increase in compensation and other employee-related costs related to product development
is due in part to an approximate 30% increase in average headcount as the company continued to make improvements to the site's features and
functionality.
Operating income increased 15% to $75.5 million primarily due to the increase in Operating Income Before Amortization described above
and a decrease in amortization of intangibles, partially offset by an increase of $4.0 million in amortization of non-cash marketing.
ServiceMagic
For the year ended December 31, 2009 compared to the year ended December 31, 2008
Revenue grew 26% to $155.8 million, benefiting from a 20% increase in service requests to a growing and more active service provider
network and a shift in mix to higher value service requests driven, in part, by increased marketing efforts. During 2009, ServiceMagic
experienced a 25% increase in the number of times service requests are accepted by a service professional. A service request can be transmitted
to and accepted by more than one service professional. Revenue further benefited from a combined $8.2 million contribution from ServiceMagic
International, acquired October 29, 2008, and Market Hardware, acquired January 23, 2009. Excluding the results of these acquisitions, revenue
grew 19%.
Operating Income Before Amortization decreased 19% to $21.3 million, despite the increase in revenue noted above, reflecting increases of
$25.1 million in selling and marketing expense and $9.1 million in general and administrative expense. The increase in selling and marketing
expense is primarily driven by an increase in advertising and promotional expenditures associated with online marketing. The growth in service
requests during the year from paid channels outpaced the growth in free requests as a result of the increase in online marketing. Also
contributing to the increase in selling and marketing expense is an increase in compensation and other employee-related costs, due in part, to the
continued expansion of its sales force. The increase in general and administrative expense is primarily due to increases of $4.6 million and
$1.8 million in compensation and other employee-related costs related to recent acquisitions and bad debt expense, respectively.
Operating income decreased 44% to $13.4 million, primarily due to the decrease in Operating Income Before Amortization described
above, the impact in 2009 of $5.0 million in amortization of
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