Priceline.com (PCLN)

Cost of Revenues

For the three months ended March 31, 2009, cost of revenues consisted primarily of: (1) the cost of Name Your Own Price® hotel rooms from our suppliers, net of applicable taxes, (2) the cost of Name Your Own Price® airline tickets from our suppliers, net of the federal air transportation tax, segment fees and passenger facility charges imposed in connection with the sale of airline tickets; and (3) the cost of Name Your Own Price® rental cars from our suppliers, net of applicable taxes.  Cost of revenues for the three months ended March 31, 2009 increased by 14.3%, compared to the same period in 2008, due primarily to the increase in merchant revenue discussed above.  Merchant price-disclosed hotel revenues in the U.S. and at Agoda are recorded in merchant revenues net of the amounts paid to suppliers and therefore, there is no associated cost of revenues for merchant price-disclosed hotel revenues.

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Cost of Revenues

For the year ended December 31, 2008, cost of revenues consisted primarily of: (1) the cost of Name Your Own Price® hotel rooms from our suppliers, net of applicable taxes, (2) the cost of Name Your Own Price® airline tickets from our suppliers, net of the federal air transportation tax, segment fees and passenger facility charges imposed in connection with the sale of airline tickets; and (3) the cost of Name Your Own Price® rental cars from our suppliers, net of applicable taxes.  Cost of revenues for the year ended December 31, 2008 increased by 20.6%, compared to the same period in 2007, due primarily to the increase in merchant revenue discussed above.  Merchant price-disclosed hotel revenues in the U.S. and at Agoda are recorded in merchant revenues net of the amounts paid to suppliers and therefore, there is no associated cost of revenues for merchant price-disclosed hotel revenues.

Agency revenues are recorded at their net amount, which are amounts received less amounts paid to suppliers, if any, and therefore, there are no costs of agency revenues.

59

Cost of Revenues

For
the year ended December 31, 2008, cost of revenues consisted primarily of:
(1) the cost of Name Your Own Price® hotel rooms from our suppliers, net of
applicable taxes, (2) the cost of Name
Your Own Price® airline tickets from our suppliers, net of the
federal air transportation tax, segment fees and passenger facility charges
imposed in connection with the sale of airline tickets; and (3) the cost
of Name Your Own Price® rental cars from our suppliers, net of
applicable taxes.  Cost of revenues for
the year ended December 31, 2008 increased by 20.6%, compared to the same
period in 2007, due primarily to the increase in merchant revenue discussed
above.  Merchant price-disclosed hotel
revenues in the U.S. and at Agoda are recorded in merchant revenues net of the
amounts paid to suppliers and therefore, there is no associated cost of revenues
for merchant price-disclosed hotel revenues.

Agency
revenues are recorded at their net amount, which are amounts received less
amounts paid to suppliers, if any, and therefore, there are no costs of agency
revenues.

59

Cost of Revenues

During the year ended December 31, 2007, cost of revenues entirely reflect merchant Name Your Own Price® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue while retail transactions are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

For the year ended December 31, 2007, cost of revenues consisted primarily of: (1) the cost of opaque hotel rooms from our suppliers, net of applicable taxes, (2) the cost of opaque airline tickets from our suppliers, net of the federal air transportation tax, segment fees and passenger facility charges imposed in connection with the sale of airline tickets; and (3) the cost of opaque rental cars from our suppliers, net of applicable taxes.  Cost of revenues for the year ended December 31, 2007 increased 6.6%, compared to the same period in 2006, due primarily to the increase in merchant revenue discussed above.  Merchant price-disclosed hotel revenues are recorded at their net amounts, which are amounts received less amounts paid to suppliers and therefore, there are no associated costs of merchant price-disclosed hotel revenues.

67

Cost of Revenues

During the year ended December 31, 2007, cost of revenues entirely
reflect merchant Name Your Own Price® transactions, whose revenues are recorded
“gross” with a corresponding cost of revenue while retail transactions are
recorded “net” with no corresponding cost of revenues.

Cost of
Revenues

For the year ended December 31, 2007, cost of revenues consisted
primarily of: (1) the cost of opaque hotel rooms from our suppliers, net
of applicable taxes, (2) the cost of opaque airline tickets from our
suppliers, net of the federal air transportation tax, segment fees and
passenger facility charges imposed in connection with the sale of airline
tickets; and (3) the cost of opaque rental cars from our suppliers, net of
applicable taxes.  Cost of revenues for
the year ended December 31, 2007 increased 6.6%, compared to the same
period in 2006, due primarily to the increase in merchant revenue discussed
above.  Merchant price-disclosed hotel
revenues are recorded at their net amounts, which are amounts received less
amounts paid to suppliers and therefore, there are no associated costs of
merchant price-disclosed hotel revenues.

67

Cost of Revenues

For the three and nine months ended September 30, 2008, cost of revenues consisted primarily of: (1) the cost of Name Your Own Price^® hotel rooms from our suppliers, net of applicable taxes, (2) the cost of Name Your Own Price^® airline tickets from our suppliers, net of the federal air transportation tax, segment fees and passenger facility charges imposed in

27

Cost of Revenues

For the three and six months ended June 30, 2008, cost of revenues consisted primarily of: (1) the cost of Name Your Own Price^® hotel rooms from our suppliers, net of applicable taxes, (2) the cost of Name Your Own Price^® airline tickets from our suppliers, net of the federal air transportation tax, segment fees and passenger facility charges imposed in connection with the sale of airline tickets; and (3) the cost of Name Your Own Price^® rental cars from our suppliers, net of applicable taxes.  Cost of revenues for the three and six months ended June 30, 2008 increased by 31.0% and 26.8%, compared to the same periods in 2007, respectively, due primarily to the increase in merchant revenue discussed above.  Merchant price-disclosed hotel revenues in the U.S. and at Agoda are recorded at their net amounts, which are amounts received less amounts paid to suppliers and therefore, there are no associated costs of merchant price-disclosed hotel revenues.

Agency revenues are recorded at their net amount, which are amounts received less amounts paid to suppliers, if any, and therefore, there are no costs of agency revenues.

Cost of Revenues

During the three months ended March 31, 2008, cost of revenues entirely reflect merchant Name Your Own Price® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue while retail transactions are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the three and nine months ended September 30, 2007, cost of revenues entirely reflect Name Your Own Price® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue while retail transactions are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the three and six months ended June 30, 2007, cost of revenues entirely reflect Name Your Own Price^® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue while retail transactions are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the year ended December 31, 2006, cost of revenues increased 3.9%, compared to the same period in 2005, due primarily to the fact that merchant revenues increased comparably in the same period.  Cost of revenues entirely reflect merchant Name Your Own Price® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue while retail transactions are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the year ended December 31,
2006, cost of revenues increased 3.9%, compared to the same period in 2005, due
primarily to the fact that merchant revenues increased comparably in the same
period.  Cost of revenues entirely
reflect merchant Name Your Own Price® transactions, whose revenues are recorded “gross”
with a corresponding cost of revenue while retail transactions are recorded “net”
with no corresponding cost of revenues.

Cost of Revenues

During the three and nine months ended September 30, 2007, cost of revenues entirely reflect Name Your Own Price^® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue while retail transactions are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the three and six months ended June 30, 2007, cost of revenues entirely reflect Name Your Own Price® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue while retail transactions are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the three months ended March 31, 2007, cost of revenues increased 7.1%, compared to the same period in 2006, due primarily to an increase in merchant revenues in the same period.  Cost of revenues entirely reflect Name Your Own Price® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue while retail transactions are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the year ended December 31, 2005, cost of revenues decreased by 3.0%, compared to the same period in 2004, due primarily to a shift in the mix of revenue from merchant services toward agency services that have higher gross margins.  Merchant Name Your Own Price® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue, represented a smaller percentage of transactions as compared to retail transactions which are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the three and nine months ended September 30, 2006, cost of revenues increased 6.2% and 1.0%, respectively, compared to the same periods in 2005, due primarily to the fact that merchant revenues increased comparably in the same periods.  Cost of revenues entirely reflect merchant Name Your Own Price® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue while retail transactions are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the three and six months ended June 30, 2006, cost of revenues was generally flat compared to the same periods in 2005, due primarily to the fact that merchant revenues were generally flat in the same periods.  Cost of revenues entirely reflect merchant Name Your Own Price® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue while retail transactions are recorded “net” with no corresponding cost of revenues.

29

Cost of Revenues

During the three months ended March 31, 2006, cost of revenues decreased by 3.4%, compared to the same period in 2005, due primarily to a shift in the mix of revenue from merchant services toward agency services that have higher gross margins. Merchant Name Your Own Price® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue, represented a smaller percentage of transactions as compared to retail transactions which are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the twelve months ended December 31, 2004, cost of revenues decreased by approximately $1.5 million, over the same period in 2003, due primarily to a shift in the mix of revenue generated by services that produce higher gross margins.  Specifically, our opaque hotel service, which produces the highest gross margins of our four principal opaque offerings, represented a higher percentage of total opaque revenues in 2004 as compared to 2003.  Conversely, our opaque airline service, which produces lower gross margins, declined significantly on a year-over-year basis, and therefore represented a substantially lower percentage of total opaque revenues in 2004 as compared to 2003.  Cost of revenues grew at a slower rate than revenues because opaque transactions, whose revenues

60

Cost of Revenues

During the three and nine months ended September 30, 2005, cost of revenues decreased by approximately 3.2% and 2.7%, respectively, over the same periods last year, due primarily to a shift in the mix of revenue from merchant services toward agency services that have higher gross margins.  Merchant Name Your Own Price^® transactions, whose revenues are recorded “gross” with a corresponding cost of revenue, represented a smaller percentage of transactions as compared to retail transactions which are recorded “net” with no corresponding cost of revenues.

Cost of Revenues

During the three and six months ended June 30, 2005, cost of revenues decreased by approximately $4.3 million and $9.4 million, respectively, over the same periods last year, due primarily to a shift in the mix of revenue toward services that have higher gross margins.  Cost of revenues declined because opaque transactions, whose revenues are recorded “gross” with a corresponding cost of revenue, represented a smaller percentage of transactions as compared to retail transactions which are recorded “net” with no corresponding cost of revenues.

26

Cost of Revenues

During the three months ended March 31, 2005, cost of revenues decreased by approximately $5.1 million, over the same period last year, due primarily to a shift in the mix of merchant revenue generated by services that have higher gross margins. Cost of revenues declined because opaque transactions, whose revenues are recorded gross with a corresponding cost of revenue, represented a smaller percentage of transactions as compared to retail transactions which are recorded net with no corresponding cost of revenues.

Cost of Revenues

During the twelve months ended December 31, 2004, cost of revenues decreased by approximately $1.5 million, over the same period in 2003, due primarily to a shift in the mix of revenue

51