Yahoo 2010 Annual Report Download - page 41

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The changes in operating costs and expenses for the year ended December 31, 2009 compared to the year ended
December 31, 2008 are comprised of the following (in thousands):
Compensation
Information
Technology
Depreciation and
Amortization TAC Facilities Other Total
Cost of revenue .............. $ (12,822) $(26,064) $(34,517) $(32,088) $ (2,226) $ (43,899) $ (151,616)
Sales and marketing .......... (202,630) (827) 541 — (19,441) (95,606) (317,963)
Product development ......... (14,735) (188) 34,462 — (6,367) (24,791) (11,619)
General and administrative ..... (50,767) (110) (3,228) — 5,492 (76,171) (124,784)
Amortization of intangibles .... — — (48,444) — — — (48,444)
Restructuring charges, net ...... — — — — — 20,047 20,047
Goodwill impairment charge . . . — — — — — (487,537) (487,537)
Total ...................... $(280,954) $(27,189) $(51,186) $(32,088) $(22,542) $(707,957) $(1,121,916)
Compensation Expense. Total compensation expense decreased approximately $201 million for the year ended
December 31, 2010, compared to 2009. The decrease was primarily driven by a decrease in stock-based
compensation expense due to recently granted stock-based compensation awards having a lower grant date fair
value than stock-based compensation awards currently vesting. The decline in stock-based compensation was
offset by increased salaries and wages from increased average headcount, primarily in the product development
and sales and marketing functions. For the year ended December 31, 2010, we recorded reimbursements from
Microsoft of $200 million, for employee costs, for which there were no similar reimbursements in 2009. For the
year ended December 31, 2010, the net impact of the reimbursements by Microsoft for our cost of running search
was a reduction in compensation expense of $117 million, compared to 2009. Total compensation expense
decreased approximately $281 million for the year ended December 31, 2009, compared to 2008. The decrease
was primarily due to decreases in our average total headcount across all functions, primarily in the sales and
marketing function, as a result of our cost reduction initiatives.
Information Technology Expenses. Information technology expenses decreased $76 million for the year ended
December 31, 2010, compared to 2009. The decline for the year ended December 31, 2010 was primarily due to
reimbursements recorded from Microsoft of $95 million for information technology costs, for which there were no
similar reimbursements in 2009. For the year ended December 31, 2010, the net impact of the reimbursements by
Microsoft for our cost of running search was a reduction in information technology expense of $95 million compared
to 2009. Information technology expenses decreased $27 million for the year ended December 31, 2009, compared to
2008. The decreases were due to decreased telecom usage as well as decreased equipment spending.
Depreciation and Amortization Expenses. Depreciation and amortization expenses decreased $82 million for the
year ended December 31, 2010, compared to 2009. The decline was primarily due to decreased amortization
expense for intangible assets associated with divested business lines as well as fully amortized intangible assets
acquired in prior years. For the year ended December 31, 2010, we recorded reimbursements from Microsoft of
$26 million for depreciation and amortization costs, for which there were no similar reimbursements in 2009. For
the year ended December 31, 2010, the net impact of the reimbursements by Microsoft for our cost of running
search was a reduction in depreciation and amortization expense of $26 million compared to 2009. Depreciation
and amortization expenses decreased $51 million for the year ended December 31, 2009, compared to 2008. The
decrease was due to decreased amortization expense for fully amortized intangible assets acquired in prior years
slightly offset by increased investments in information technology assets and server equipment.
TAC. TAC decreased $41 million for the year ended December 31, 2010, compared to 2009. The decrease was
primarily due to the change in the recording of TAC in the fourth quarter of 2010 due to the Search Agreement
with Microsoft as we no longer incur TAC for transitioned markets. We now receive an 88 percent revenue share
in the transitioned markets as Microsoft is the primary obligor to the advertisers. The decrease was offset by
increases in TAC due to a new Affiliate in the Asia Pacific segment added in the fourth quarter of 2009 as well as
increases in revenue from Affiliate sites. TAC decreased $32 million for the year ended December 31, 2009,
compared to 2008. The decrease was primarily driven by the impact of foreign currency rate fluctuations, offset
by changes in Affiliate mix and a small increase in average TAC rates.
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