Amazon.com 2001 Annual Report Download - page 35

shipping option for our internationally-focused Web sites. Although marketing expenses do not include our free
and reduced shipping offers, we view such promotions as an effective marketing tool.
Technology and Content
Technology and content expenses consist principally of payroll and related expenses for development,
editorial, systems and telecommunications operations personnel and consultants; systems and
telecommunications infrastructure; and costs of acquired content, including freelance reviews. Technology and
content expense was $241 million, $269 million and $160 million for 2001, 2000 and 1999, respectively,
representing 8%, 10% and 10% of net sales for the corresponding periods, respectively. The decline in absolute
dollars spent during 2001 in comparison to the prior year primarily reflect our migration to a technology platform
that utilizes a less-costly technology infrastructure, as well as improved expense management and general price
reductions in most expense categories, including data and telecommunication services, due to market
overcapacity. The increase in absolute dollars spent during 2000 in comparison to 1999 primarily reflects past
investments in our systems and telecommunications infrastructure to support the continual enhancements to our
Web site, as well as costs associated with launching our www.amazon.fr and www.amazon.co.jp sites during
2000. We expect to continue to invest in technology and improvements in our Web sites during 2002, which may
include, but is not limited to, offering additional Web site features and product categories to our customers and
implementing additional strategic alliances, as well as potentially continuing our international expansion.
General and Administrative
General and administrative expenses consist of payroll and related expenses for executive, finance and
administrative personnel, recruiting, professional fees and other general corporate expenses. General and
administrative expenses were $90 million, $109 million and $70 million for 2001, 2000 and 1999, respectively,
representing 3%, 4% and 4% of net sales for the corresponding periods, respectively. The decline in absolute
dollars of general and administrative costs during 2001 in comparison with 2000 was primarily due to our
operational restructuring plan announced in January 2001, which reduced the number of positions in corporate
and administrative roles and consolidated our corporate office locations. The increase in general and
administrative costs during 2000 in comparison to 1999 relates primarily to increases in personnel, facility-
related costs associated with our corporate expansion, and professional fees associated with general corporate
matters.
Stock-Based Compensation
Stock-based compensation includes stock-based charges resulting from variable accounting treatment of
certain stock options, option-related deferred compensation recorded at our initial public offering, as well as
certain other compensation and severance arrangements. Stock-based compensation also includes the portion of
acquisition-related consideration conditioned on the continued tenure of key employees of certain acquired
businesses, which must be classified as compensation expense rather than as a component of purchase price
under accounting principles generally accepted in the U.S. Stock-based compensation was $5 million,
$25 million and $31 million for 2001, 2000 and 1999, respectively. The declines in stock-based compensation
during 2001 and 2000 in comparison to the prior respective years resulted from the full vesting and
corresponding full recognition of deferred stock-based compensation relating to employees of certain acquired
businesses.
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