Loss from operations was $1.4 million in the three months ended September 30, 2008, compared to loss from operations of $3.0 million in the three months ended September 30, 2007. This decrease in loss from operations was the result of the $3.0 million reduction in operating costs and expenses noted above, offset by the $1.4 million decrease in total revenue noted above. Loss from operations was $4.7 million in the nine months ended September 30, 2008, compared to loss from operations of $9.8 million in the nine months ended September 30, 2007. This decrease in loss from operations was the result of the $9.2 million reduction in operating costs and expenses noted above, offset by the $4.1 million decrease in total revenue noted above. The net reduction in loss from operations due to the closure of our international offices was approximately $0.4 million and $1.6 million, respectively, in the three and nine months ended September 30, 2008. The net reduction in loss from operations due to non-recurring severance and related costs was approximately $0.5 million in the nine months ended September 30, 2008.
Management expects that revenue will decrease for the remainder of fiscal 2008 in comparison to fiscal 2007, primarily as a result of general economic conditions, anticipated decreases in subscription services revenue due to reductions in our paid subscriber base, anticipated decreases in advertising services revenue due to the effects of turnover in our advertising sales group, the discontinuance of local advertising sales and the closure of our international offices, partially offset by an increase in advertising services revenue due to marketing and advertising services to be provided to Regent.
We expect our operating loss will continue to decrease for the remainder of fiscal 2008 in comparison to fiscal 2007 due to the non-recurrence in fiscal 2008 of impairment charges recognized in fiscal 2007. However, we expect to incur additional expenses for the remainder of fiscal 2008 as we continue to modify our web applications in conjunction with the re-launch of our Gay.com website.
Results of Operations
Revenue
Advertising Services. We derive advertising revenue from advertising contracts in which we typically undertake to deliver a minimum number of impressions to users over a specified time period for a fixed fee. Advertising services revenue was $1.7 million in the three months ended September 30, 2008, a decrease of 29% from the three months ended September 30, 2007. Advertising services revenue was $4.6 million in the nine months ended September 30, 2008, a decrease of 33% from the nine months ended September 30, 2007. These decreases in advertising services revenue were due to turnover in our advertising sales group, the discontinuance of local advertising sales and the closure of our international offices in conjunction with our July 2007 reorganization plan, offset partially by $0.7 million and $1.0 million of advertising revenue in the three and nine months ended September 30, 2008, respectively, related to marketing and advertising services provided to Regent as part of the Marketing Agreement with Regent.
For the remainder of fiscal 2008, we expect advertising services revenue to decrease in comparison to fiscal 2007 due to the effects of turnover in our advertising sales group, the discontinuance of local advertising sales and the closure of our international offices, offset partially by marketing and advertising services to be provided to Regent. We expect the percentage of our overall revenue attributable to advertising services to increase slightly in 2008 as a result of decreases in our subscription services revenue.
Subscription Services. We derive subscription services revenue from paid membership subscriptions to our online media properties. Our subscription services revenue was $3.3 million in the three months ended September 30, 2008, a decrease of 16% from the three months ended September 30, 2007. Our subscription services revenue was $10.6 million in the nine months ended September 30, 2008, a decrease of 14% from the nine months ended September 30, 2007. These decreases in subscription services revenue were due primarily to a reduction in the number of online subscribers to our Gay.com website and, to a lesser extent, to the closure of our international offices in conjunction with our July 2007 reorganization plan.
For the remainder of fiscal 2008, we expect total subscription services revenue to decrease in comparison to fiscal 2007, as a result of a reduction in online subscribers.
Transaction Services. Transaction services revenue includes revenue generated from the sale of products through our transaction-based websites. Our transaction services revenue totaled $0.1 million and $0.1 million in the three months ended September 30, 2008 and 2007, respectively. Our transaction services revenue totaled $0.2 million and $0.4 million in the nine months ended September 30, 2008 and 2007, respectively. These decreases in transactions services revenue were due to the discontinuance of our transaction-based website Kleptomaniac.com.
For the remainder of fiscal 2008, we expect transaction services revenue to continue to decrease slightly in comparison to fiscal 2007.

Operating Costs and Expenses
Cost of Revenue. Cost of revenue primarily consists of payroll and related benefits associated with supporting our subscription-based services, the development and expansion of site operations and support infrastructure and producing and maintaining content for our various websites. Other expenses directly related to generating revenue included in cost of revenue include transaction processing fees, computer equipment maintenance, occupancy costs, co-location and Internet connectivity fees, purchased content and cost of goods sold. Cost of revenue was $2.3 million in the three months ended September 30, 2008, decreasing 10% from cost of revenue of $2.6 million in the three months ended September 30, 2007. Cost of revenue was $6.9 million in the nine months ended September 30, 2008, decreasing 21% from cost of revenue of $8.8 million in the nine months ended September 30, 2007. These decreases were due to an overall decrease in compensation and employee related costs as a result of reduced headcount and non-recurrence of severance related costs, a reduction in expenses due to the closing of our international offices in conjunction with our July 2007 reorganization plan and decreases in consumer marketing, credit card fees and advertising servicing costs. Compensation and employee related costs during the nine months ended September 30, 2007 included severance and other costs related to the departure of our former Chief Technology Officer. Cost of revenue was 45% as a percentage of total revenue for the three months ended September 30, 2008, up from 40% in the three months ended September 30, 2007. This increase was primarily due to increased contract labor expenses in the three months ended September 30, 2008 incurred in conjunction with the re-launch of our Gay.com website. Cost of revenue remained flat at 45% as a percentage of total revenue for the nine months ended September 30, 2008 and 2007.
For the remainder of fiscal 2008, we expect cost of revenue and cost of revenue as a percentage of revenue to increase over fiscal 2007 as we continue to modify our web applications in conjunction with the re-launch of our Gay.com website and as we deploy new networks.
Sales and Marketing. Sales and marketing expense primarily consists of payroll and related benefits for employees involved in sales, advertising client service, customer service, marketing and other support functions; product, service and general corporate marketing and promotions; and occupancy costs. Sales and marketing expenses were $1.5 million in the three months ended September 30, 2008, decreasing 28% from sales and marketing expenses of $2.1 million in the three months ended September 30, 2007. Sales and marketing expenses were $4.7 million in the nine months ended September 30, 2008, decreasing 33% from sales and marketing expenses of $7.0 million in the nine months ended September 30, 2007. Sales and marketing expenses as a percentage of revenue were 30% for the three months ended September 30, 2008, down from 33% in the three months ended September 30, 2007. Sales and marketing expenses as a percentage of revenue were 30% for the nine months ended September 30, 2008, down from 36% in the nine months ended September 30, 2007. These decreases were primarily due to a reduction in expenses related to the closing of our international offices in conjunction with our July 2007 reorganization plan, decreased advertising and market research expenses, decreased compensation and employee related costs as a result of reduced headcount and reduced expenses as a result of the discontinuance of our transaction-based website Kleptomaniac.com.
For the remainder of fiscal 2008, we expect sales and marketing expenses and sales and marketing as a percentage of revenue to vary in comparison to fiscal 2007 depending on the timing of planned advertising to coincide with certain product development milestones.
General and Administrative. General and administrative expense consists primarily of payroll and related benefits for executive, finance, administrative and other corporate personnel, occupancy costs, professional fees, insurance and other general corporate expenses. Our general and administrative expenses were $1.7 million for the three months ended September 30, 2008, decreasing 38% from general and administrative expenses of $2.8 million in the three months ended September 30, 2007. Our general and administrative expenses were $5.4 million for the nine months ended September 30, 2008, decreasing 39% from general and administrative expenses of $8.9 million in the nine months ended September 30, 2007. General and administrative expenses as a percentage of revenue were 34% for the three months ended September 30, 2008, down from 43% in the three months ended September 30, 2007. General and administrative expenses as a percentage of revenue were 35% for the nine months ended September 30, 2008, down from 46% in the nine months ended September 30, 2007. These decreases were due to decreases in legal and accounting expenses, compensation and employee related costs as a result of reduced headcount and non-recurrence of severance related costs, contract labor expense, stock-based compensation expense and a reduction in expenses due to the closing of our international offices in conjunction with our July 2007 reorganization plan. Compensation and employee related costs during the nine months ended September 30, 2007 included severance and other costs related to the departure of our former President and Chief Operating Officer.

For the remainder of fiscal 2008, we expect general and administrative expenses to decrease from fiscal 2007 primarily due to decreased compensation and employee related costs as a result of decreases in headcount and decreased legal costs.
Restructuring. In July 2007, our board of directors adopted and approved a reorganization plan to further align our resources with our strategic business objectives. As part of the plan, we closed our international offices located in Buenos Aires and London in order to streamline our business operations and reduce expenses. The reorganization, along with other organizational changes, reduced our total workforce by approximately 15%. Restructuring costs of approximately $581,000, primarily related to employee severance benefits of approximately $451,000 and facilities consolidation expenses of approximately $130,000, were recorded during the three months ended September 30, 2007. We completed this restructuring in the third quarter of 2007.
Depreciation and Amortization. Depreciation and amortization expense was $1.0 million for the three months ended September 30, 2008, decreasing 30% from depreciation and amortization expense of $1.5 million in the three months ended September 30, 2007. Depreciation and amortization expense was $3.2 million for the nine months ended September 30, 2008, decreasing 22% from depreciation and amortization expense of $4.1 million in the nine months ended September 30, 2007. These decreases were primarily due to a decrease in depreciable assets in service during the three and nine months ended September 30, 2008 compared to the prior year periods.
For the remainder of fiscal 2008, we expect depreciation and amortization expense will increase over fiscal 2007 as a result of the re-launch of our Gay.com website and as a result of additional capital investments to support our on-going product development.
Other Income and Expenses
Interest Expense. Interest expense was $29,000 and $750,000 for the three months ended September 30, 2008 and 2007, respectively. Interest expense was $109,000 and $1,564,000 for the nine months ended September 30, 2008 and 2007, respectively. Interest expense in the three and nine months ended September 30, 2007 included $700,000 and $1,406,000, respectively, of interest expense and amortization of the loan discount on notes payable that were repaid in full in July 2007.
Other Income, Net. Other income, net consists primarily of interest earned on cash, cash equivalents, short-term investments and restricted cash. Other income, net was $46,000 and $158,000 in the three months ended September 30, 2008 and 2007, respectively. Other income, net was $157,000 and $412,000 in the nine months ended September 30, 2008 and 2007, respectively. These decreases were primarily due to decreases in interest income resulting from lower cash balances.
Discontinued Operations
In an effort to simplify our business model, we discontinued our Travel and Events businesses during 2007. In March 2007, we sold our membership interest in DSW, a joint venture, to the minority interest partner. In December 2007, we sold substantially all of the assets of RSVP. In August 2008, we sold our Publishing business to Regent, which included the operations of LPI and SpecPub and recorded a net loss on sale of discontinued operations of $0.1 million related to the sale of our Publishing business. The net loss on sale of discontinued operations included $0.8 million of estimated direct costs incurred in connection with the sale. In estimating net loss on sale, management relied on a number of other estimates including estimates of the amounts attributable to the consummation of this sale transaction. Accordingly, we may revise our estimate of the net loss on sale of our Publishing business.
As a result of the sale of our interest in DSW, the sale of substantially all the assets of RSVP, the sale of substantially all of the assets of LPI and SpecPub and our decision to exit our Publishing and Travel and Events businesses, we have reported the results of operations and financial position of RSVP, DSW, LPI and SpecPub as discontinued operations within the condensed consolidated financial statements for the three and nine months ended September 30, 2007 and 2008 in accordance with FAS 144. We have reported the financial position of LPI and SpecPub as assets and liabilities of discontinued operations on the condensed consolidated balance sheet as of December 31, 2007. In addition, we have segregated the cash flow activity of RSVP, DSW, LPI and SpecPub from the condensed consolidated statements of cash flows for the nine months ended September 30, 2007 and 2008. The results of operations of RSVP and DSW were previously reported and included in the results of operations and financial position of our Travel and Events segment. The results of operations of LPI and SpecPub were previously reported and included in the results of operations and financial position of our Publishing segment.
As a result of the agreement to sell LPI, we reduced the net carrying value of the LPI reporting unit by $2.0 million in the three months ended March 31, 2008 to the estimated amount attributable to the sale of this reporting unit. As a result of the agreement to sell SpecPub, we reduced the net carrying value of the SpecPub reporting unit $4.3 million in the three months ended March 31, 2008 to the estimated amount attributable to the sale of this reporting unit. These reductions in carrying value are reflected in impairment of goodwill and intangible assets in the results of discontinued operations. We reviewed the carrying values of the LPI and SpecPub reporting units at August 13, 2008, the closing date for the sale, and deemed that no impairment had occurred subsequent to March 31, 2008. In estimating the reduction in carrying value of these reporting units, we relied on a number of estimates in calculating the amounts attributable to the consummation of this sale transaction.

Restructuring costs of approximately $19,000, consisting of termination benefits related to our Travel and Events business, were recorded in discontinued operations during the three and nine months ended September 30, 2007. Restructuring costs of approximately $892,000, consisting of termination benefits of approximately $351,000 and contract termination expenses of approximately $541,000 related to our Publishing business, were recorded in discontinued operations during the three and nine months ended September 30, 2008.
The results of discontinued operations for the three months ended September 30, 2007 were as follows (in thousands):

                                                            Three months ended September 30, 2007
                                                     LPI            SpecPub           RSVP           Total
Total revenue                                     $   5,682         $  1,584        $  7,855        $ 15,121
Operating costs and expenses:
Cost of revenue                                       3,512              990           7,643          12,145
Sales and marketing                                   1,641              381             260           2,282
General and administrative                              834               62             125           1,021
Restructuring                                             -                -              19              19
Depreciation and amortization                           249                2             118             369
Impairment of goodwill and intangible assets              -                -             900             900

Total operating costs and expenses                    6,236            1,435           9,065          16,736

Income (loss) from operations                          (554 )            149          (1,210 )        (1,615 )
Other income (expense), net                             (14 )             (4 )             5             (13 )

Income (loss) from discontinued operations        $    (568 )       $    145        $ (1,205 )      $ (1,628 )

The results of discontinued operations for the three months ended September 30, 2008 were as follows (in thousands):

                                                         Three months ended September 30, 2008
                                                  LPI              SpecPub           RSVP           Total
Total revenue                                 $      3,810         $    661         $     -        $ 4,471
Operating costs and expenses:
Cost of revenue                                      2,313              465               -          2,778
Sales and marketing                                    640               92              (2 )          730
General and administrative                             383               52               1            436
Restructuring                                          795               97               -            892
Depreciation and amortization                          256               28               -            284

Total operating costs and expenses                   4,387              734              (1 )        5,120

Income (loss) from operations                         (577 )            (73 )             1           (649 )
Other expense, net                                      (3 )              -               -             (3 )

Income (loss) from discontinued
operations                                            (580 )            (73 )             1           (652 )
Gain (loss) on sale of discontinued
operations                                            (786 )            651               -           (135 )

Income (loss) from and loss on sale of
discontinued operations                       $     (1,366 )       $    578         $     1        $  (787 )

The results of discontinued operations for the nine months ended September 30, 2007 were as follows (in thousands):

                                                       Nine months ended September 30, 2007
                                        LPI           SpecPub           RSVP           DSW            Total
Total revenue                        $  15,396        $  4,906        $ 17,023        $    2        $  37,327
Operating costs and expenses:
Cost of revenue                         10,143           3,042          18,678             -           31,863
Sales and marketing                      4,175           1,151           1,455            37            6,818
General and administrative               2,541             495             376             1            3,413
Restructuring                                -               -              19             -               19
Depreciation and amortization              753             251             287             -            1,291
Impairment of goodwill and
intangible assets                       15,700           5,400           4,700             -           25,800

Total operating costs and
expenses                                33,312          10,339          25,515            38           69,204

. . .