ServiceMagic 2011 Annual Report Download - page 31

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Table of Contents
Refer to Note 15 to the consolidated financial statements for reconciliations by segment of Operating Income Before Amortization to
operating income (loss).
Sources of Revenue
Substantially all of the revenue from our Search segment is derived from online advertising, with most of this revenue attributable to our
paid listing supply agreement with Google Inc. ("Google"). The revenue earned from our Match segment is derived primarily from subscription
fees for its subscription-based online personals services and also from online advertising. ServiceMagic's revenue is derived from fees paid by
members of its network of service professionals for consumer leads, regardless of whether the service professional that receives the lead
ultimately provides the requested service, as well as from one-time fees charged upon enrollment and activation of new service professionals in
its network. The revenue earned by the Media & Other segment is derived from merchandise sales, online advertising and content production.
Strategic Partnerships, Advertiser Relationships and Online Advertising Spend
Our various businesses provide supplier partners with important customer acquisition channels and we believe that the ability of our
supplier partners to reach a large qualified audience through our services is a significant benefit. While we aim to build and maintain strong
relationships with our supplier partners, we may not succeed in these efforts and there is always the risk that certain supplier partners may not
make their products and services available to us in the future.
A significant component of the Company's revenue is attributable to a paid listing supply agreement with Google, which expires on
March 31, 2016. For the years ended December 31, 2011, 2010 and 2009, revenue earned from Google was $970.4 million, $727.9 million and
$561.9 million, respectively. The majority of this revenue was earned by the businesses comprising the Search segment.
We market and offer our products and services directly to consumers through branded websites and membership programs, allowing
consumers to transact directly with us in a convenient manner. We have made, and expect to continue to make, substantial investments in online
and offline advertising to build our brands and drive traffic to our websites and consumers and advertisers to our businesses.
We pay traffic acquisition costs, which consist of payments made to partners who distribute Mindspark's customized browser-based
applications, integrate our paid listings into their websites or direct traffic to our websites. We also pay to market and distribute our services on
third party distribution channels, such as internet portals and search engines. In addition, some of our businesses manage affiliate programs,
pursuant to which we pay commissions and fees to third parties based on revenue earned. These distribution channels might also offer their own
products and services, as well as those of other third parties, which compete with those we offer.
The cost of acquiring new consumers through online and offline third party distribution channels has increased, particularly in the case of
online channels as internet commerce continues to grow and competition in the segments in which IAC's businesses operate increases.
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