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Development expense increased $10.8 million in 2010 after declin- ing $1.9 million in 2009. The increase in 2010 is mainly because of higher salaries, bonus, and compensation-related expense for our development teams. Development expense from recent acquisitions also contributed to the increase, but to a lesser extent. We had approximately 760 employees included in development expense as of December 31, 2010 compared with 540 as of December 31, 2009. In 2010, we capitalized approximately $0.8 million of operating expense for software development, partially offsetting the increase. The majority of the decline in 2009 was driven by lower bonus expense, partially offset by incremental costs from acquisitions. 

As a percentage of revenue, development cost was up slightly from the same periods in 2009 and 2008. 

## Sales and Marketing Expense 

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Sales and marketing expense increased $23.7 million in 2010, after declining $9.9 million in 2009. Higher sales commission expense, which rose $7.8 million in 2010, was the largest factor behind the increase. Commission expense rose partly because of improved sales activity. In addition, we recognized more expense in 2010 because of a change in our U.S. sales commission structure. Under this new commission plan, we record the entire commission expense in the quarter in which it is incurred. Under the previous commission structure, we recognized the commission expense over the term of the customer contract. Other costs in this category, including sala- ries and bonuses, and, to a lesser extent, advertising, marketing, and travel, also increased. 

Approximately one-fourth of the increase in sales and marketing expense was related to recent acquisitions. 

Sales and marketing expense decreased $9.9 million in 2009. Lower bonus expense and advertising and marketing were the two largest factors driving this change, with each contributing about 40% of the decline. We reduced advertising and marketing from higher levels in 2008 because of the challenging business environment. In 2009, we also discontinued three of the publications we previously published in the first quarter of each year— Morningstar Funds 500 , 

Morningstar Stocks 500 , and Morningstar ETFs 150 —and therefore didn’t incur costs to promote these publications. Reduced spending on travel, training, and conferences also contributed to the decrease, but to a lesser extent. 

As a percentage of revenue, sales and marketing expense increased about 2.2 percentage points in 2010, following a slight decrease in 2009. 

## General and Administrative Expense 

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General and administrative (G&A) expense increased $9.2 million in 2010 following a decline of $1.9 million in 2009. Bonus expense, salaries, and other compensation-related expense contributed to the increase in 2010, as did incremental expense related to acquisi- tions. G&A expense in 2010 also includes $2.0 million related to a previously announced separation agreement between Morningstar and the former head of Morningstar Associates. 

While most G&A expense rose in 2010, certain G&A expense recorded in 2009 did not recur in 2010, including the $6.1 million of operating expense related to adjusting the tax treatment of certain stock options as well as $1.8 million of operating expense recorded to G&A expense for the deposit penalty. Expenses related to liabil- ities for vacant office space were $2.2 million lower in 2010. 

In 2009, G&A expense decreased $1.9 million. Most of the decline reflects lower bonus expense. Decreases in travel, training, and conferences also contributed to lower expense in this area, but to a lesser extent. These cost reductions were partially offset by the operating expense related to the two matters mentioned above, which contributed $7.9 million to general and administrative expense in 2009. 

As a percentage of revenue, G&A expense decreased 0.8 percentage points in 2010 and increased 0.5 percentage points in 2009. 

