Travelzoo 2005 Annual Report Download - page 47

‚Unsubscribes: Subscribers who were removed from our list throughout the quarter either as a result of
their requesting removal, or based on periodic list maintenance after we determined that the e-mail
address was likely no longer valid.
‚Balance: This is the number of subscribers at the end of the quarter, computed by taking the previous
quarter's subscriber balance, adding new subscribers during the current quarter, and subtracting
unsubscribes during the current quarter.
North America:
Average Cost per
Acquisition of a New
Period Subscriber New Subscribers Unsubscribes Balance
Q1 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1.62 693,872 (213,423) 3,962,625
Q2 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1.58 924,902 (172,403) 4,715,124
Q3 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1.52 1,108,045 (248,964) 5,574,205
Q4 2003 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2.17 869,286 (240,907) 6,202,584
Q1 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2.23 920,063 (185,151) 6,937,496
Q2 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2.58 858,899 (634,702) 7,161,693
Q3 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1.26 1,298,962 (602,628) 7,858,027
Q4 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1.70 694,026 (406,316) 8,145,737
Q1 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2.59 659,459 (475,938) 8,329,258
Q2 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2.62 806,734 (533,109) 8,602,883
Q3 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $3.19 740,768 (422,868) 8,920,783
Q4 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2.41 729,460 (273,389) 9,376,854
Europe:
Average Cost per
Acquisition of a New
Period Subscriber New Subscribers Unsubscribes Balance
Q3 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1.65 127,857 (5,577) 140,153
Q4 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2.02 174,514 (16,898) 297,769
In North America, we have noted a general trend of increasing cost per new subscriber over the last few
years, driven by a gradual increase in online advertising rates by our media suppliers as well as increased
activity from competitors using similar forms of online advertising for their own marketing eÅorts. The decline
in new subscriber acquisition costs for North America in Q3 2004 and Q4 2005 reÖect the eÅect of new
advertising campaigns which were tested at that time. We do not consider these declines in new subscriber
costs to be indicative of a longer-term trend or to indicate that our subscriber costs are likely to stay at this
level or are likely to decline further.
The operational impact of increased acquisition cost is higher absolute marketing expenses and
potentially higher relative marketing expenses as a percentage of revenue. Going forward we expect continued
upward pressure on online advertising rates and continued activity from competitors, which will likely increase
our cost per new subscriber over the long term. The eÅect on operations is that greater absolute and relative
marketing expenditure may be necessary to continue to grow the reach of our publications. It is possible that
the factors driving subscriber acquisition cost increases can be partially or completely oÅset by new or
improved methods of subscriber acquisition using techniques which are under evaluation. Thus we are not able
to meaningfully predict the short-term quarterly trend in the cost of acquiring new subscribers.
Interest Income
Interest income consists primarily of interest earned on cash, cash equivalents and investments. Our
interest income increased to $961,000 for the year ended December 31, 2005 from $126,000 for the year ended
December 31, 2004 primarily as a result of increased interest income due to increased cash and short term
investments from the issuance of common stock in a private placement transaction in 2004 and also from
higher interest rates.
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