Vistaprint 2008 Annual Report Download - page 49

source of traffic to our websites. Typically, we use various advertising campaigns to increase
the number and quality of shoppers entering our websites. The number of website sessions
varies from month to month depending on variables such as product campaigns and
advertising channels used.
‰Conversion rates. The conversion rate is the number of customer orders divided by the total
number of sessions during a specific period of time. Typically, we strive to increase conversion
rates of customers entering our websites in order to increase the number of customer orders
generated. Conversion rates have fluctuated in the past and we anticipate that they will
fluctuate in the future due to, among other factors, the type of advertising campaigns and
marketing channels used.
‰Average order value. Average order value is total bookings for a given period of time divided
by the total number of customer orders recorded during that same period of time. We seek to
increase average order value as a means of increasing total revenue. Average order values
have fluctuated in the past and we anticipate that they will fluctuate in the future depending
upon the type of products promoted during a period and promotional discounts offered. For
example, among other things, seasonal product offerings, such as holiday cards, can cause
changes in average order values.
We believe the analysis of these metrics provides us with important information on customer
buying behavior, advertising campaign effectiveness and the resulting impact on overall revenue
trends and profitability. While we continually seek and test ways to increase revenue, we also attempt
to increase the number of customer acquisitions and to grow profits. As a result, fluctuations in these
metrics are usual and expected. Because changes in any one of these metrics may be offset by
changes in another metric, no single factor is determinative of our revenue and profitability trends and
we assess them together to understand their overall impact on revenue and profitability.
Cost of Revenue. Cost of revenue consists of materials used to generate printed products,
payroll and related expenses for printing personnel, supplies, depreciation of equipment used in the
printing process, postage and shipping costs, website hosting costs and other miscellaneous related
costs of products sold by us. Prior to September 2006, cost of revenue also included costs paid to a
third-party print supplier.
Technology and development expense. Technology and development expense consists
primarily of payroll and related expenses for software engineering and content development,
amortization of capitalized software and website development costs, information technology
operations, website hosting, equipment depreciation, patent amortization and miscellaneous
technology infrastructure-related costs. These expenses also include amortization of capitalized
purchase costs related to content images used in our graphic design software which are capitalized
and amortized over their useful lives of approximately two years. Costs associated with the
development of software for internal-use are capitalized if the software is expected to have a useful life
beyond one year and are amortized over the software’s useful life, which is estimated to be two years.
Costs associated with preliminary stage software development, repair, maintenance or the
development of website content are expensed as incurred.
Marketing and selling expense. Marketing and selling expense consists of advertising and
promotional costs as well as wages and related payroll benefits for our employees engaged in sales,
marketing and public relations activities. Advertising costs consist of various online and print media,
such as the purchase of key word search terms, e-mail and direct mail promotions and various
strategic alliances. Our advertising efforts target the acquisition of new customers and repeat orders
from existing customers. Advertising costs are generally expensed as incurred. Marketing and selling
expense also includes the salaries and related payroll benefits, overhead, and outside services related
to our customer design, sales and services support center operations and global partnerships
Form 10-K
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