Yahoo 2008 Annual Report Download - page 43

See Note 1—“The Company and Summary of Significant Accounting Policies” and Note 12—“Employee
Benefits” in the Notes to the consolidated financial statements, as well as our Critical Accounting Policies,
Judgments, and Estimates, for additional information about stock-based compensation.
Traffic Acquisition Costs (“TAC”). TAC consist of payments made to Affiliates and payments made to companies
that direct consumer and business traffic to Yahoo! Properties. We enter into agreements of varying duration that
involve TAC. There are generally three economic structures of the Affiliate agreements: fixed payments based on a
guaranteed minimum amount of traffic delivered, which often carry reciprocal performance guarantees from the
Affiliate; variable payments based on a percentage of our revenues or based on a certain metric, such as number of
searches or paid clicks; or a combination of the two. We expense TAC under two different methods. Agreements
with fixed payments are expensed ratably over the term the fixed payment covers, and agreements based on a
percentage of revenues, number of paid introductions, number of searches, or other metrics are expensed based on
the volume of the underlying activity or revenues multiplied by the agreed-upon price or rate.
Compensation, Information Technology, Depreciation and Amortization, and Facilities Expenses. Compensation
expense consists primarily of salary, bonuses, commissions, and stock-based compensation expense. Information
and technology expense includes telecom usage charges and data center operating costs. Depreciation and
amortization expense consists primarily of depreciation of server equipment and information technology assets
and amortization of developed or acquired technology and intellectual property rights. Facilities expense consists
primarily of building maintenance costs, rent expense, and utilities.
The changes in operating costs and expenses for the year ended December 31, 2008 compared to the year ended
December 31, 2007 are comprised of the following (in thousands):
Compensation
Information
Technology
Depreciation and
Amortization Facilities TAC Other Total
Cost of revenues ........... $25,103 $53,828 $120,115 $ 2,689 $(46,786) $ 29,655 $184,604
Sales and marketing ........ (47,736) (444) (905) 17,010 — (14,969) (47,044)
Product development ....... 90,679 10,830 16,505 25,525 — (5,990) 137,549
General and administrative . . . (13,864) 1,643 14,650 (30,898) — 100,174 71,705
Amortization of intangibles . . — — (19,527) — — — (19,527)
Restructuring charges, net . . . — — — — — 106,854 106,854
Goodwill impairment
charge ................. — — — — — 487,537 487,537
Total .................... $54,182 $65,857 $130,838 $ 14,326 $(46,786) $703,261 $921,678
The changes in operating costs and expenses for the year ended December 31, 2007 compared to the year ended
December 31, 2006 are comprised of the following (in thousands):
Compensation
Information
Technology
Depreciation and
Amortization Facilities TAC Other Total
Cost of revenues ............ $ 20,691 $41,347 $114,524 $ 2,154 $(9,224) $ (6,457) $163,035
Sales and marketing ......... 226,932 (654) (626) 13,779 — 48,667 288,098
Product development ........ 240,114 9,861 14,458 6,249 — (19,591) 251,091
General and administrative . . . 35,954 705 8,532 10,000 — 49,442 104,633
Amortization of intangibles . . . — — (17,709) — — — (17,709)
Total ..................... $523,691 $51,259 $119,179 $32,182 $(9,224) $ 72,061 $789,148
Compensation Expense. Total compensation expense increased approximately $54 million for the year ended
December 31, 2008, as compared to 2007. Total compensation expense increased approximately $524 million for
the year ended December 31, 2007, as compared to 2006. These increases are primarily due to increases in our
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