ServiceMagic 2014 Annual Report Download - page 36

Table of Contents
September 24, 2012, and CityGrid, following its move from the eCommerce segment to the Search & Applications segment. The About Group
revenue increased $108.4 million to $138.6 million in 2013, as it was not in the full prior year period. Applications revenue grew 8% to
$818.0 million, driven by increased contributions from existing and new B2C products.
The Match Group revenue increased 13% to $805.4 million driven by a 10% increase in Dating revenue. Dating North America and Dating
International revenue increased 10% to $523.7 million and 12% to $264.5 million, respectively. The growth in Dating revenue was driven by
increased paid subscribers. North America and International paid subscribers increased 18% and 23%, respectively. International revenue also
benefited from the contribution of Twoo, which was acquired January 4, 2013. International revenue in 2012 was negatively impacted by the write-
off of $5.2 million of deferred revenue in connection with the acquisition of Meetic. Non-
dating revenue increased to $17.2 million due primarily to
the contribution from Tutor.com, an online tutoring solution acquired December 14, 2012.
Media revenue increased 17% to $191.4 million primarily due to strong growth from Electus and Vimeo.
eCommerce revenue decreased 8% to $422.1 million due to the move of CityGrid described above, partially offset by increased sales at
HomeAdvisor and ShoeBuy.
Cost of revenue
Cost of revenue consists primarily of traffic acquisition costs and includes 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 (including stock-based compensation) and other employee-related costs for
personnel engaged in data center functions, rent, energy and hosting fees.
For the year ended December 31, 2014 compared to the year ended December 31, 2013
Cost of revenue in 2014 decreased from 2013 primarily due to decreases of $135.3 million from Search & Applications and $12.3 million
from eCommerce, partially offset by an increase of $32.9 million from The Match Group. The Search & Applications decrease was primarily due to
a reduction of $154.5 million in traffic acquisition costs driven primarily by lower revenue from our B2B operations, partially offset by the
acquisition of the ValueClick O&O website businesses and the move of CityGrid from the eCommerce segment to the Search & Applications
segment. The eCommerce decrease was primarily due to the move of CityGrid, partially offset by an increase in the cost of products sold at
ShoeBuy resulting from increased sales. The Match Group increase was primarily due to the acquisition of The Princeton Review and increases in
revenue share payments made in connection with in-app purchases sold through Dating's mobile products and hosting fees. As a percentage of
revenue, cost of revenue in 2014 decreased from 2013 primarily due to an increase in the proportion of Websites revenue that resulted from
increased online marketing due to the acquisition of the ValueClick O&O website businesses and strong growth from About.com.
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 $12.7 million from The Match Group and $10.1 million from
Search & Applications, partially offset by a decrease of $8.4 million from eCommerce. The Match Group increase is primarily due to various
acquisitions at Dating and an increase in content acquisition costs from Tutor.com, which was acquired December 14, 2012. The Search &
Applications increase was primarily due to an increase in content acquisition costs resulting from the acquisition of The About Group and the move
of CityGrid from the eCommerce segment to the Search & Applications segment, partially offset by a decrease of $7.7 million in traffic acquisition
costs driven primarily by decreased revenue from Ask.com. The eCommerce decrease was primarily due to the move of CityGrid, partially offset
by increases in revenue share payments at HomeAdvisor and cost of products sold at ShoeBuy resulting from increased sales. As a percentage of
revenue, cost of revenue in 2013 decreased from 2012 primarily due to the transition of Newsweek from a print business to a digital only
publication in December 2012 (which was subsequently sold in August 2013) and a decrease in traffic acquisition costs due to an increase in the
proportion of Websites revenue that resulted from increased online marketing.
26
Years Ended December 31,
2014
$ Change % Change 2013 $ Change % Change 2012
(Dollars in thousands)
Cost of revenue $883,176 $(120,545) (12)% $1,003,721 $12,033 1% $991,688
As a percentage of revenue 28%
33% 35%