ServiceMagic 2013 Annual Report Download - page 30

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Table of Contents
Local revenue increased 6% to $ 322.6 million , primarily reflecting growth from HomeAdvisor's operations. HomeAdvisor domestic
revenue grew due to higher average lead acceptance fees. HomeAdvisor international revenue grew due to a 25% increase in accepted service
requests and higher average lead acceptance fees. Local revenue further benefited from the contribution of Felix, a pay-per-call advertising
service acquired August 20, 2012, and higher reseller revenue from CityGrid Media, partially offset by a decline in direct sales revenue.
Media revenue increased 135% to $ 164.8 million
primarily due to the contribution from News_Beast, consolidated beginning June 1, 2012
following the Company's acquisition of a controlling interest, as well as strong growth from Electus and Vimeo.
Cost of revenue
Cost of revenue consists primarily of traffic acquisition costs, which consist of payments made to partners who distribute our B2B
customized browser-based applications, integrate our paid listings into their websites or direct traffic to our websites. These payments include
amounts based on revenue share and other arrangements. Cost of revenue also includes Shoebuy's cost of products sold and shipping and
handling costs, production costs related to media produced by Electus and other businesses within our Media segment, content acquisition costs,
expenses associated with the operation of the Company's data centers, including compensation and other employee-related costs (including
stock-based compensation) for personnel engaged in data center functions, rent, energy and bandwidth costs.
For the year ended December 31, 2013 compared to the year ended December 31, 2012
Cost of revenue in 2013 increased from 2012 primarily due to increases of $16.9 million from Other, $10.1 million from Search &
was primarily due to an increase in the cost of products sold at Shoebuy resulting from increased sales and content acquisition costs from
Tutor.com, which was acquired December 14, 2012. Cost of revenue from Search & Applications increased primarily due to an increase in
content acquisition costs resulting from the acquisition of The About Group and the inclusion of CityGrid Media in the Search & Applications
segment, effective July 1, 2013, partially offset by a decrease of $7.7 million in traffic acquisition costs driven primarily by decreased revenue
from Ask.com. The increase in cost of revenue from Match is primarily due to recent acquisitions. The decrease in cost of revenue from Local is
principally due to the move of CityGrid Media to the Search & Applications segment, partially offset by an increase in traffic acquisition costs
from Felix. As a percentage of revenue, cost of revenue in 2013 decreased from 2012 primarily due to the transition of Newsweek from a print
due to an increase in the proportion of revenue from Websites that resulted from increased online marketing.
For the year ended December 31, 2012 compared to the year ended December 31, 2011
Cost of revenue in 2012 increased from 2011 primarily due to increases of $125.8 million from Search & Applications,$82.7 million from
Media and $17.4 million from Match. The increase in cost of revenue from Search & Applications was primarily due to an increase of $122.0
million in traffic acquisition costs driven by increased revenue from our B2B operations. As a percentage of revenue, traffic acquisition costs at
Search & Applications decreased compared to the prior year due to an increase in the proportion of revenue from Websites that resulted from
increased online marketing. Cost of revenue from Media increased primarily due to News_Beast, consolidated beginning June 1, 2012, and
increased production costs at Electus related to the increase in its revenue. The increase from Match is due to Meetic, which was included for
only part of the prior year, partially offset by a decrease in customer acquisition costs.
25
Years Ended December 31,
2013
$ Change
% Change
2012
$ Change
% Change
2011
(Dollars in thousands)
Cost of revenue $1,000,101
$9,304
1%
$990,797
$236,908
31%
$753,889
As a percentage of
revenue 33%
35%
37%