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Cost of Revenues
Cost of revenues is primarily comprised of costs associated with data and voice transmission, DIDs, network operations, customer
service, online processing fees and equipment depreciation. The increase in cost of revenues from 2010 to 2011 was primarily due to an increase
in costs associated with businesses acquired in and subsequent to 2010 that resulted in additional network operations and customer service costs
as the customer base increased. Cost of revenues as a percentage of revenues decreased from 2009 to 2010 primarily due to increased efficiency
of network operations, customer service and reduced depreciation.
Operating Expenses
Sales and Marketing.
Our sales and marketing costs consist primarily of Internet-
based advertising, sales and marketing; personnel costs; and other business
development-related expenses. Our Internet-based advertising relationships consist primarily of fixed cost and performance-based (cost-per-
impression, cost-per-click and cost-per-
acquisition) advertising relationships with an array of online service providers. We have a disciplined
return-on-investment approach to our Internet-
based advertising and marketing spend. Advertising cost for the year ended December 31, 2011,
2010 and 2009 was $45.4 million, $36.3 million and $28.3 million, respectively. The increase in sales and marketing expenses from 2010 to
2011was primarily due to increased marketing worldwide for recently acquired brands and increased personnel associated with businesses
acquired in and subsequent to 2010. The increase in sales and marketing expenses from 2009 to 2010 was primarily due to increased marketing
worldwide to enhance the acquisition of free customers for telephony-
based services and increased personnel and severance costs associated
with businesses acquired in fiscal 2010.
Research, Development and Engineering .
Our research, development and engineering costs consist primarily of personnel-
related expense. The increase in research, development
and engineering costs from 2010 to 2011 was primarily due to increased personnel costs associated with businesses acquired in and subsequent
to 2010, including associated integration work, and the development of new features and systems enhancements. The increase in research,
development and engineering costs from 2009 to 2010 was primarily due to increased personnel and severance costs associated with businesses
acquired in 2010.
General and Administrative.
(in thousands, except
percentages)
2011
2010
2009
Percentage
Change
2011 versus
2010
Percentage
Change
2010 versus
2009
Cost of Revenues
$
60,613
$
44,086
$
44,730
37%
(1)%
As a percent of revenue
18%
17%
18%
(in thousands, except
percentages)
2011
2010
2009
Percentage
Change
2011 versus
2010
Percentage
Change
2010 versus
2009
Sales and Marketing
$
59,066
$
46,332
$
37,006
27%
25%
As a percent of revenue
18%
18%
15%
(in thousands, except
percentages)
2011
2010
2009
Percentage
Change
2011 versus
2010
Percentage
Change
2010 versus
2009
Research, Development
and Engineering
$
16,373
$
12,827
$
11,657
28%
10%
As a percent of revenue
5%
5%
5%
(in thousands, except
percentages)
2011
2010
2009
Percentage
Change
2011 versus
2010
Percentage
Change
2010 versus
2009
General and
Administrative
$
58,157
$
48,226
$
45,275
21%
7%