Travelzoo 2002 Annual Report Download - page 35

Revenues
Our total revenues increased to $9.8 million for the year ended December 31, 2002 from $6.1 million for
the year ended December 31, 2001 and $3.9 million for the year ended December 31, 2000. The increase in
our total revenues was due to an increase in advertising revenues.
‚Advertising. Advertising revenue increased to $9.8 million for the year ended December 31, 2002
from $6.1 million for the year ended December 31, 2001 and $3.9 million for the year ended
December 31, 2000. The increases resulted primarily from an increase in the number of travel
companies advertising on the Travelzoo website and in the Travelzoo Top 20 newsletter.
‚Commissions. Commissions revenue decreased to $304 for the year ended December 31, 2002 from
$6,482 for the year ended December 31, 2001 and $97,451 for the year ended December 31, 2000. The
decreases resulted primarily from replacement of commission-based agreements with advertising
agreements.
Cost of Revenues
Cost of revenues consists of network expenses, including fees we pay for co-location services, depreciation
of network equipment and salary expenses associated with network operations staÅ. Our cost of revenues
increased to $351,000 for the year ended December 31, 2002 from $304,000 for the year ended December 31,
2001 and $282,000 for the year ended December 31, 2000. As a percentage of revenue, cost of revenues
decreased to 4% for the year ended December 31, 2002 from 5% for the year ended December 31, 2001 and
7% for the year ended December 31, 2000. The decreases resulted primarily from an increase in revenues that
was not oÅset by an increase in our network operations costs.
Operating Expenses
‚Sales and Marketing. Sales and marketing expenses consist primarily of advertising and promotional
expenses, public relations expenses, conference expenses, and salary expenses associated with sales and
marketing staÅ. Sales and marketing expenses increased to $5.7 million for the year ended Decem-
ber 31, 2002 from $3.3 million for the year ended December 31, 2001 and $1.5 million for the year
ended December 31, 2000. The increases in sales and marketing expenses was due to the decision by
our management to hire more experienced sales personnel and increases of the Company's advertising
of the Travelzoo brand. For the years ended December 31, 2002 and 2001, advertising expenses
accounted for 69% and 69%, respectively, of sales and marketing expenses. Advertising activities during
the two periods were of the same type (i.e. online advertising).
‚General and Administrative. General and administrative expenses consist primarily of compensation
for administrative and executive staÅ, fees for professional services, rent, bad debt expense, amortiza-
tion of intangible assets and general oÇce expense. General and administrative expenses increased to
$2.3 million for the year ended December 31, 2002 from $1.4 for the year ended December 31, 2001
and $1.2 million for the year ended December 31, 2000. General and administrative expenses increased
primarily due to increases in expenses for oÇce space. General and administrative expenses for the year
ended December 31, 2001 include a credit of $128,000 for a reduction to the bad debt reserve
principally due to the collection of a doubtful account.
‚Merger Expenses. Merger expenses consist of expenses relating to the registration statement and
proxy statement Ñled with the SEC relating to the merger of Travelzoo.com Corporation into
Travelzoo Inc. Merger expenses decreased to $55,000 for the year ended December 31, 2002 from
$333,000 for the year ended December 31, 2001 and $231,000 for the year ended December 31, 2000.
The expenses consisted mostly of fees for professional services, primarily legal and accounting.
Intangible Assets
As of December 31, 2002, our long-lived assets include intangible assets of $212,000. The intangible
assets consist of the weekend.com and the weekends.com Internet domain names. During 2002, we evaluated
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