eBay 2011 Annual Report Download - page 67

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Sales and marketing expense increased by $488.2 million , or 25% in 2011 compared to 2010 . The increase in sales and marketing expense
was due primarily to higher marketing program costs, employee-related expenses (including consultant costs, facility costs and equipment-related
costs) and the impact from acquisitions, primarily GSI.
Sales and marketing expense increased by $61.1 million, or 3% in 2010 compared to 2009 . The increase was due primarily to higher
employee-related expenses (including consultant costs, facility costs and equipment-related costs), marketing program costs and costs attributable
to Gmarket, partially offset by the exclusion of costs attributable to Skype.
Product Development
Product development expenses consist primarily of employee compensation, contractor costs, facilities costs and depreciation on equipment.
Product development expenses are net of required capitalization of major site and other product development efforts, including the development of
our next generation platform architecture, migration of certain platforms, seller tools and Payments services projects. Our top technology priorities
involve search, catalog, mobile, platform and user experience. Capitalized site and product development costs were $170.8 million , $135.4
million and $105.4 million in 2011 , 2010 and 2009 , respectively, and are primarily reflected as a cost of net revenues when amortized in future
periods.
Product development expenses increased by $326.7 million , or 36% , in 2011 compared to 2010 The increase was due primarily to higher
employee-related costs (including consultant costs, facility costs and equipment-related costs) driven by increased investment in our top
technology priorities and the impact from acquisitions.
Product development expenses increased by $105.4 million, or 13%, in 2010 compared to 2009 . The increase was due primarily to an
increase in employee-related and consultant costs driven by increased investment in our top technology priorities and the inclusion of a full fiscal
year of costs attributable to Gmarket (acquired June 2009), partially offset by the exclusion of costs attributable to Skype.
General and Administrative
General and administrative expenses consist primarily of employee compensation, contractor costs, facilities costs, depreciation of
equipment, employer payroll taxes on employee stock-based compensation, legal expenses, insurance premiums and professional fees. Our legal
expenses, including those related to various ongoing legal proceedings, may fluctuate substantially from period to period.
General and administrative expenses increased $284.8 million , or 26% , in 2011 compared to 2010 . The increase was due primarily to an
increase in payroll and related expenses and the impact from acquisitions. The increase in 2011 was also due in part to an increase in professional
service fees, including those relating to acquisitions.
General and administrative expenses decreased $339.0 million, or 24%, in 2010 compared to 2009 . The decrease was due primarily to a
charge of $343.2 million related to the settlement of a lawsuit between Skype, Joltid and entities controlled by Joltid's founders in 2009, exclusion
of costs attributable to Skype following the sale and higher costs associated with our acquisition and divestiture activities in fiscal 2009. The
decreases were partially offset by higher employee-related and consultant costs as well as a full fiscal year of costs attributable to Gmarket.
Provision for Transaction and Loan Losses
Provision for transaction and loan losses consists primarily of transaction loss expense associated with our customer protection programs,
fraud, chargebacks and merchant credit losses; bad debt expense associated with our accounts receivable balance; and loan reserves associated
with our loan receivables balance. We expect our provision for transaction and loan loss expense to fluctuate depending on many factors,
including macroeconomic conditions, our customer protection programs and the impact of regulatory changes.
Provision for transaction and loan losses increased by $124.4 million , or 32% , in 2011 compared to 2010 . This increase was due primarily
to higher transaction volume and higher transaction loss rates, partially offset by improvements in loan loss and bad debt rates. Transaction loss
rates increased due primarily to strategic risk management decisions designed to improve the user experience and drive growth as well as the
expansion of our protection programs. Our loan loss and bad debt rates declined due to continued improvements in charge-off rates.
Provision for transaction and loan losses increased by $9.4 million, or 2%, in 2010 compared to 2009 . The increase was due primarily to
the ongoing roll-out of eBay's buyer protection program and increases in transaction volume, partially offset by improvements in PayPal's
transaction loss rate, bad debt rates and loan loss rates. PayPal's transaction loss rate declined due
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