Yahoo 2014 Annual Report Download - page 66

mobile and search as well as merit-based increases in salaries, increases in costs from a shift in
location of employees, increases in benefits, increased headcount from acquisitions, and increases in
incentive compensation. The increase in stock-based compensation expense for the year ended
December 31, 2014 was attributable to an increase in the number of awards being expensed at a
higher fair value and an increase in expense related to equity assumed and granted related to
acquisitions.
Product development expenses for the year ended December 31, 2013 increased $123 million, or 14
percent, as compared to 2012. For the year ended December 31, 2013, the increase was primarily
attributable to a decline in capitalizable projects of $65 million, as well as an increase in facilities and
equipment expense of $24 million, stock based compensation expense of $9 million, compensation
costs of $11 million due to an increase in headcount in the function, and travel and entertainment
expense of $6 million. The increase in stock based compensation in the product development
function was due to an increase in the number of awards granted at a higher fair value.
Product development expenses represented approximately 26 percent of GAAP revenue for the year
ended December 31, 2014, compared to 22 percent and 18 percent in 2013 and 2012, respectively.
General and Administrative
General and administrative expenses consist primarily of compensation-related expenses (including
stock-based compensation expense) related to other corporate departments and fees for
professional services.
General and administrative expenses for the year ended December 31, 2014 increased $5 million, or 1
percent, as compared to 2013, due to increases in stock-based compensation expense of $16 million,
outside service provider expense of $3 million, facilities and equipment expense of $3 million, and
compensation costs of $2 million. These increases were partially offset by a decline in depreciation
and amortization expense of $4 million, benefits related to net gains on disposal of assets of $9
million and business tax refunds received of $6 million. The increase in stock-based compensation
expense for the year ended December 31, 2014 was attributable to an increase in the number of
awards being expensed at a higher fair value.
General and administrative expenses for the year ended December 31, 2013 increased $29 million, or
5 percent, as compared to 2012. The increase in expenses in the general and administrative function
was due to increases in facilities and equipment expense of $20 million due to investments in office
space and our global employee experience, compensation costs of $13 million due to an increase in
headcount in the function, and stock-based compensation expense of $20 million due to an increase
in the number of awards granted at a higher fair value, including performance-based awards. This
was partially offset by a decline of $20 million in legal costs.
General and administrative expenses represented approximately 12 percent of GAAP revenue for the
year ended December 31, 2014, compared to 12 percent and 11 percent in 2013 and 2012, respectively.
Amortization of Intangibles
We have purchased, and expect to continue purchasing, assets and/or businesses, which may include
the purchase of intangible assets. Intangible assets include customer, affiliate, and advertiser-related
relationships and tradenames, trademarks and domain names. Amortization of developed technology
and patents is included in the cost of revenue—other, and not in amortization of intangibles.
Amortization of intangibles for the year ended December 31, 2014 increased $22 million, or 49
percent, as compared to 2013, primarily driven by amortization of intangible assets related to Tumblr,
which we acquired in the second quarter of 2013.
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