2/24/2018 S-1 Table of Contents Our revenue is driven primarily by the number of paying users and the price we charge for access to our platform, which varies based on the type of plan to which a customer subscribes. We generate over 90% of our revenue from self­serve channels. No customer represented more than 1% of our revenue in the periods presented. Cost of revenue and gross margin Cost of revenue. Our cost of revenue consists primarily of expenses associated with the storage, delivery, and distribution of our platform for both paying users and Basic users. These costs, which we refer to as infrastructure costs, include depreciation of our servers located in co­location facilities that we lease and operate, rent and facilities expense for those datacenters, network and bandwidth costs, support and maintenance costs for our infrastructure equipment, and payments to third­party datacenter service providers. Cost of revenue also includes costs, such as salaries, bonuses, benefits, travel­related expenses, and stock­based compensation, which we refer to as employee­related costs, for employees whose primary responsibilities relate to supporting our infrastructure and delivering user support. Other non­employee costs included in cost of revenue include credit card fees related to processing customer transactions, and allocated overhead, such as facilities, including rent, utilities, depreciation on leasehold improvements and other equipment shared by all departments, and shared information technology costs. In addition, cost of revenue includes amortization of developed technologies, professional fees related to user support initiatives, and property taxes related to the datacenters. We plan to continue increasing the capacity and enhancing the capability and reliability of our infrastructure to support user growth and increased use of our platform. We expect that cost of revenue, excluding the impact of certain stock­based compensation charges described in “—Significant Impacts of Stock­Based Compensation”, will increase in absolute dollars in future periods. In addition, as a result of certain stock­based compensation charges described in “—Significant Impacts of Stock­Based Compensation,” we expect our cost of revenue to increase significantly in absolute dollars in the quarter during which we complete this offering. Gross margin. Gross margin is gross profit expressed as a percentage of revenue. Our gross margin may fluctuate from period to period based on the timing of additional capital expenditures and the related depreciation expense, or other increases in our infrastructure costs, as well as revenue fluctuations. As we continue to increase the utilization of our internal infrastructure, we generally expect our gross margin, excluding the impact of certain stock­based compensation charges described in “—Significant Impacts of Stock­Based Compensation”, to remain relatively constant in the near term and to increase modestly in the long term. Taking into account these charges, we expect our gross margin to decrease significantly in the quarter during which we complete this offering. Operating expenses Research and development. Our research and development expenses consist primarily of employee­related costs for our engineering, product, and design teams, and allocated overhead. Additionally, research and development expenses include internal development­related third­party hosting fees. We have expensed almost all of our research and development costs as they were incurred. We plan to continue to hire employees for our engineering, product, and design teams to support our research and development efforts. We expect that research and development costs will increase in absolute dollars in future periods and, excluding the impact of certain stock­based compensation charges described in “—Significant Impacts of Stock­Based Compensation”, vary from period to period as a percentage of revenue. Sales and marketing. Our sales and marketing expenses relate to both self­serve and outbound sales activities, and consist primarily of employee­ related costs, brand campaign fees, lead generation fees, and allocated overhead. Sales commissions earned by our outbound sales team and the related payroll taxes, as well as commissions earned by third­party resellers that we consider to be incremental and recoverable costs of 68 https://www.sec.gov/Archives/edgar/data/1467623/000119312518055809/d451946ds1.htm 76/235