ServiceMagic 2011 Annual Report Download - page 35

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Table of Contents
Other is principally due to Electus and Notional, which were not in the full prior year period, as well as increased operating expenses associated
with Vimeo, partially offset by the cost savings related to certain businesses that have been sold or shutdown. General and administrative
expense at ServiceMagic increased primarily due to higher compensation and other employee-related costs. The increase from Search is
primarily due to an increase in compensation and other employee-related costs at Mindspark and employee termination costs associated with the
Ask.com restructuring that took place in the fourth quarter of 2010, partially offset by a decrease in litigation related expenses.
Product development expense
Product development expense consists primarily of compensation and other employee-related costs (including stock-based compensation)
that are not capitalized for personnel engaged in the design, development, testing and enhancement of product offerings and related technology.
Product development expense in 2011 increased from 2010 primarily due to increases of $7.7 million from Match and $1.3 million from
Search. The increase from Match is primarily due to an increase in compensation and other employee-related costs due, in part, to recent
acquisitions as well as an increase in headcount. Contributing to the increase at Search is a decrease in costs being capitalized in the current year
period, partially offset by lower compensation and other employee-related costs due, in part, to staff reductions that took place during the fourth
quarter of 2010 associated with the Ask.com restructuring.
Product development expense in 2010 increased from 2009 primarily due to increases of $3.3 million from Match and $2.3 million from
Search. Contributing to the increase at Match is an increase in compensation and other employee-related costs driven by growth in headcount
related to recent acquisitions. The increase from Search is primarily due to the inclusion in 2010 of employee termination costs associated with
the Ask.com restructuring.
Depreciation
Depreciation in 2011 decreased from 2010 primarily due to the write-off of certain assets in the prior year period, partially offset by the
write-off of $4.9 million in capitalized software costs in the third quarter of 2011 associated with the exit from the Company's direct sponsored
listings business.
Depreciation in 2010 increased from 2009 primarily due to the write-off of certain capitalized software costs associated with the Ask.com
restructuring.
32
Years Ended December 31,
2011
$ Change
% Change
2010
$ Change
% Change
2009
(Dollars in thousands)
Product development
expense
$78,760
$13,663
21%
$65,097
$7,254
13%
$57,843
As a percentage of
revenue
4%
(15) bp
4%
(32) bp
4%
Years Ended December 31,
2011 $ Change
% Change
2010 $ Change
% Change
2009
(Dollars in thousands)
Depreciation
$56,719
$(7,178)
(11)%
$63,897
$2,506
4%
$61,391
As a percentage of
revenue
3%
(115) bp
4%
(65) bp
5%