America Online 2010 Annual Report Download - page 53

Table of Contents
AOL INC.
PART II—ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
included declines in outside services costs of $47.2 million due to a $30.0 million decline related to reduced consulting and lower outsourced call center
expenses and $17.2 million decline related to the transition to internally developed ad serving technology beginning in the first quarter of 2009. Depreciation
and amortization expense declined by $40.2 million, which includes declines in depreciation of capitalized software associated with our subscription access
service. We also had declines in customer billing and collection costs of $27.6 million for the year ended December 31, 2009 due to the decline in domestic
AOL-brand access subscribers. Partially offsetting the decreases described above was an increase in personnel costs of $48.4 million resulting from the
decision not to pay most annual bonuses for 2008.
Selling, General and Administrative
Selling, general and administrative expenses decreased $43.8 million for the year ended December 31, 2010 as compared to the year ended
December 31, 2009. The decrease was due to declines in external legal costs and other legal matters of $25.1 million, a decline related to the resolution of a
French value-added tax matter in 2009 of $14.7 million, declines in bad debt expense of $14.5 million due to improved collections on aged balances including
the impact of the decline in subscribers. The decrease also included declines in personnel costs of $12.6 million related to reduced headcount, declines in
depreciation and amortization expenses of $6.6 million and a $5.2 million decline related to a business tax expense recorded in 2009. Personnel cost declines
included a reduction of $43.0 million related to reduced headcount as a result of our 2009 restructuring initiatives, partially offset by an increase in equity-
based compensation expense of $17.9 million and an increase in recruiting expenses of $11.2 million including Patch. These decreases were partially offset by
an increase in marketing costs of $23.3 million primarily associated with our rebranding efforts and support of our new products and initiatives including
Patch, an increase in consulting costs of $8.2 million and an increase in other corporate costs of $6.5 million.
Selling, general and administrative expenses decreased $105.0 million for the year ended December 31, 2009 as compared to the year ended
December 31, 2008. The decrease was due to declines in marketing costs of $52.3 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 $22.0 million for the year ended December 31, 2008, and personnel related declines of $31.3 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.
Amortization of Intangible Assets
Amortization of intangible assets results primarily from acquired intangible assets including technology, customer relationships and trade names.
Amortization of intangible assets increased $7.4 million for the year ended December 31, 2010 as compared to the year ended December 31, 2009, due to our
reevaluation of the useful lives of certain intangible assets in the fourth quarter of 2009 in connection with our restructuring initiatives, which resulted in
incremental amortization expense of $31.5 million for the year ended December 31, 2010 and $7.4 million for the year ended December 31, 2009. The
increase for the year ended December 31, 2010 was partially offset by a decline of $17.8 million due to certain intangible assets becoming fully amortized in
2009. Amortization of intangible assets decreased $21.1 million for the year ended December 31, 2009 as
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