OSD revenue increased primarily as a result of growth in online advertising revenue. Online advertising revenue grew $117 million or 23% to $632 million, reflecting continued growth in Bing, offset in part by decreased third party advertising revenue.
OSD operating loss increased due to higher cost of revenue and research and development expenses, offset in part by increased revenue. Cost of revenue grew $110 million driven by costs associated with the Yahoo! search agreement. Research and development expenses grew $68 million or 28%, primarily due to headcount-related expenses associated with the search portion of the business.