Travelzoo 2007 Annual Report Download - page 58

in Europe and Asia Pacific and our plan to expand into other countries in 2008 is expected to result in a significant
increase in our sales and marketing expenses in the foreseeable future.
General and Administrative
General and administrative expenses consist primarily of compensation for administrative and executive staff,
fees for legal and professional services, rent, bad debt expense, payments made to former stockholders of
Travelzoo.com Corporation, amortization of intangible assets and general office expense. General and adminis-
trative expenses increased to $14.8 million for the year ended December 31, 2007 from $9.4 million for the year
ended December 31, 2006 and from $9.1 million for the year ended December 31, 2005. The increase in general and
administrative expenses for the year ended December 31, 2007 compared to the year ended December 31, 2006 was
primarily due to a $2.4 million increase in salary and employee related expenses, a $1.1 million increase in rent and
office expense, and a $929,000 increase in legal and professional service expenses. The increase in general and
administrative expenses for the year ended December 31, 2006 compared to the year ended December 31, 2005 was
primarily due to an increase of $583,000 in rent and office expense and a $377,000 increase in salary expense as
headcount grew and with the expansion to foreign markets and a $243,000 increase in legal and professional service
expenses. These increases were offset by a $1.0 million decrease in expenses related to a program under which the
Company makes cash payments to people who establish that they were former stockholders of Travelzoo.com
Corporation, and who failed to submit requests to convert their shares into Travelzoo Inc. within the required time
period.
We expect our headcount to continue to increase in the future. The Company’s headcount is one of the main
drivers of general and administrative expenses. Therefore, we expect our general and administrative expenses to
continue to increase.
Our strategy to replicate our business model in foreign markets is expected to result in a significant additional
increase in our general and administrative expenses.
The Company recorded expenses of $87,000, $160,000, and $1.2 million in the years ended December 31,
2007, 2006 and 2005, respectively, related to a program under which we make cash payments to people who
establish that they were former stockholders of Travelzoo.com Corporation, and who failed to submit requests to
convert shares into Travelzoo Inc. within the required time period. The expenses are based on the number of actual
valid requests received and the Company’s stock price. The Company expects expenses related to the program to
decrease in future periods due to the expected decrease in the number of actual valid requests received.
Subscriber Acquisition
The table set forth below provides for each quarter in 2005, 2006, and 2007, an analysis of our average cost for
acquisition of new subscribers for our Travelzoo Top 20 newsletter and our Newsflash e-mail alert service for our
North America, Europe, and Asia Pacific operating segments.
The table includes the following data:
•Average Cost per Acquisition of a New Subscriber: This is the quarterly costs of consumer marketing
programs whose purpose was primarily to acquire new subscribers, divided by total new subscribers added
during the quarter.
•New Subscribers: Total new subscribers who signed up for at least one of our e-mail publications
throughout the quarter. This is an unduplicated subscriber number, meaning a subscriber who signed up for
two or more of our publications is only counted once.
•Subscribers Removed From List: Subscribers who were removed from our lists 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 subscribers
removed from list during the current quarter.
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