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2014 2013
CostofRevenues    
Service $ 19,687 $ 15,422
Product  5,516  5,694
Insurance  3,210  2,685
PhotoStamps  4,493  3,699
Totalcostofrevenues $ 32,906 $ 27,500
Costaspercentageofassociatedrevenue    
Service 17%  16%
Product 33%  34%
Insurance 35%  36%
PhotoStamps 82%  79%
Totalcostasapercentageoftotalrevenues 22%  22%
TABLE OF CONTENTS
Cost of Revenue
Thefollowingtableshowscostofrevenuesandcostofrevenuesasapercentageofitsassociatedrevenuefortheperiodsindicated
(inthousandsexceptpercentage):
Costofservicerevenueprincipallyconsistsofthecostofcustomerservice,certainpromotionalexpenses,systemoperatingcosts,
creditcardprocessingfeesandcustomermisprintsthatdonotqualifyforreimbursementfromtheUSPS.Costofproductrevenue
principallyconsistsofthecostofproductssoldthroughourMailing&ShippingSuppliesStoreandtherelatedcostsofshippingand
handling.Thecostofinsurancerevenueprincipallyconsistsofparcelinsuranceofferingcosts.CostofPhotoStampsrevenue
principallyconsistsofthefacevalueofpostage,customerservice,imagereviewcosts,andprintingandfulfillmentcosts.
Costofservicerevenueincreased28%to$19.7millionin2014from$15.4millionin2013.Theincreaseincostofservice
revenuewasprimarilyattributabletohighercustomerservicecosttosupportourgrowingcustomerbase,higherpromotionalexpense
andhighervariablecostsassociatedwithourgrowthinrevenue.Promotionalexpense,whichrepresentsamaterialportionoftotalcost
ofservicerevenue,isexpensedintheperiodinwhichacustomerqualifiesforthepromotionwhiletherevenueassociatedwiththe
acquiredcustomerisearnedoverthecustomer'slifetime.Asaresult,promotionalexpensefornewlyacquiredcustomersmayexceed
therevenueearnedfromthosecustomersinthatperiod.Promotionalexpenseincreased28%to$3.1millionin2014from$2.4million
in2013.Theincreaseinpromotionexpensein2014wasprimarilyduetohighercustomeracquisitioninandanadjustmenttoour
redemptionassumptionin2013.
Costofproductrevenuedecreased3%to$5.5millionin2014from$5.7millionin2013.Costofproductrevenueasapercentage
ofproductrevenuedecreasedfrom34%in2013to33%in2014.Thedecreaseincostofproductrevenuewasprimarilyattributableto
decreasedfulfillmentcosts.
Costofinsurancerevenueincreased20%to$3.2millionin2014from$2.7millionin2013.Thepercentageincreaseincostof
insurancerevenuewasconsistentwiththepercentageincreaseininsurancerevenue.Costofinsurancerevenueasapercentageof
insurancerevenuedecreasedfrom36%in2013to35%in2014.Theincreaseincostofinsurancerevenuewasconsistentwiththe
increaseininsurancerevenue.
CostofPhotoStampsrevenueincreased21%to$4.5millionin2014from$3.7millionin2013.CostofPhotoStampsrevenueasa
percentageofPhotoStampsrevenueincreasedfrom79%in2013to82%in2014.Theincreasewasprimarilyattributabletothe
increaseinPhotoStampsrevenuefromhighvolumebusinessorders.ThedecreaseinPhotoStampsrevenueasapercentageof
PhotoStampsrevenuewasprimarilyduetohigherhighvolumebusinessorderscomparedtoPhotoStampsordersthroughourwebsite
in2014.HighvolumebusinessordershavealoweraveragerevenueperPhotoStampssheetthanwebsiteordersbuthavethesame
associatedcosts.
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