America Online 2009 Annual Report Download - page 53

Table of Contents
personnel-related costs as a result of reduced headcount. Other costs of revenues included a decrease in other personnel and related overhead costs of $97
million as a result of reduced headcount, declines in non-network depreciation and amortization of $47 million, declines in costs associated with customer
billing and collections of $24 million due to the decline in subscribers and lower content royalties of $21 million. Also contributing to the decline in
personnel-related costs described above was our decision not to pay most annual bonuses for 2008. Partially offsetting these declines were increases in TAC.
TAC increased 14% to $687 million for the year ended December 31, 2008, as compared to $604 million for the year ended December 31, 2007, due to a new
product distribution agreement resulting in TAC of $106 million, additional TAC of $92 million related to revenues generated by the acquisitions completed
in 2007 and other increases in TAC consistent with the other Third Party Network advertising growth of $27 million previously discussed, partially offset by
the wind-down of the contract with the major customer described above, which resulted in a decline of $160 million.
Costs of revenues as a percentage of revenues were 55% and 51% in the years ended December 31, 2008 and 2007, respectively. The increase in costs
of revenues as a percentage of revenues for the year ended December 31, 2008, as compared to the year ended December 31, 2007, was a result of declines in
our subscription revenues and advertising revenues exceeding the decline in costs to deliver such revenues.
Selling, General and Administrative
Selling, general and administrative expenses decreased 17% to $538.0 million for the year ended December 31, 2009, as compared to $644.8 million for
the year ended December 31, 2008 due to declines in marketing costs of $52.9 million, reflecting reduced payments to marketing partners due to the decline in
domestic AOL-brand access subscribers and reduced spending due to cost savings initiatives. Further contributing to the decline in selling, general and
administrative expenses for the year ended December 31, 2009, as compared to the year ended December 31, 2008 were decreases in consulting costs of $33.1
million, partially due to the costs incurred in 2008 associated with Time Warner's evaluation of various strategic alternatives related to our business, which
were $22 million for the year ended December 31, 2008, and personnel related declines of $32.2 million due to reduced headcount. Partially offsetting the
decline was an increase of $14.7 million for the year ended December 31, 2009 related to the resolution of a French value-added tax matter associated with
our historical European access service businesses and an increase in personnel related costs of $15.4 million for the year ended December 31, 2009, resulting
from the decision not to pay most annual bonuses for 2008.
Selling, general and administrative expenses decreased to $644.8 million for the year ended December 31, 2008, a 33% decline as compared to the year
ended December 31, 2007, of which $34 million was attributable to the sale of our German access service business. The remaining decrease was due to a
decline in marketing costs of $127 million, which was related to reduced subscriber acquisition marketing efforts as part of the strategic shift announced in
2006, and a reduction in personnel and related overhead costs of $88 million, due partially to reduced headcount and our decision not to pay most annual
bonuses for 2008. Selling, general and administrative expenses for the year ended December 31, 2008 also included $22 million of external costs incurred in
connection with Time Warner's evaluation of various strategic alternatives related to us, including the previously contemplated separation of AOL into
separate businesses, which more than offset a $20 million decline in other outside consulting expenses.
Amortization of Intangible Assets
Amortization of intangible assets results primarily from acquired intangible assets including technology, customer relationships and trade names.
Amortization of intangibles declined 13% to $144.7 million for the year ended December 31, 2009, as compared to $166.2 million for the year ended
December 31, 2008, due to certain intangible assets becoming fully amortized at the end of 2008, partially offset by an increase in our acquired intangible
assets resulting from the acquisition of Bebo, Inc. in early 2008. Amortization of intangible assets increased $70.3 million for the year ended December 31,
2008, a 73% increase as compared to the year ended December 31, 2007, due primarily to a significant increase in our acquired intangible assets resulting
from the acquisitions of Bebo, Inc. in early 2008 and the acquisitions of Quigo Technologies, Inc. and TACODA, Inc. in late 2007.
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