Amazon.com 2013 Annual Report Download - page 38

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and enhancements to our customer self-service features. Additionally, because payment processing and fulfillment costs
associated with seller transactions are based on the gross purchase price of underlying transactions, and payment processing
and related transaction and fulfillment costs are higher as a percentage of sales versus our retail sales, sales by our sellers have
higher fulfillment costs as a percent of net sales.
The increase in fulfillment costs in absolute dollars in 2013, 2012, and 2011, compared to the comparable prior year
periods, is primarily due to variable costs corresponding with increased physical and digital product and services sales volume,
inventory levels, and sales mix; costs from expanding fulfillment capacity; and payment processing and related transaction
costs.
We seek to expand our fulfillment capacity to accommodate greater selection and in-stock inventory levels and meet
anticipated shipment volumes from sales of our own products as well as sales by third parties for which we provide the
fulfillment services. We evaluate our facility requirements as necessary.
Marketing
We direct customers to our websites primarily through a number of targeted online marketing channels, such as our
Associates program, sponsored search, portal advertising, email marketing campaigns, and other initiatives. Our marketing
expenses are largely variable, based on growth in sales and changes in rates. To the extent there is increased or decreased
competition for these traffic sources, or to the extent our mix of these channels shifts, we would expect to see a corresponding
change in our marketing expense.
The increase in marketing costs in absolute dollars in 2013, 2012, and 2011, compared to the comparable prior year
periods, is primarily due to increased spending on online marketing channels, such as our sponsored search programs and our
Associates program, payroll and related expenses, and television advertising.
While costs associated with Amazon Prime memberships and other shipping offers are not included in marketing
expense, we view these offers as effective worldwide marketing tools, and intend to continue offering them indefinitely.
Technology and Content
We seek to efficiently invest in several areas of technology and content such as technology infrastructure, including AWS,
expansion of new and existing product categories and offerings, and initiatives to expand our ecosystem of digital products and
services, as well as in technology infrastructure so we may continue to enhance the customer experience and improve our
process efficiency. We expect spending in technology and content to increase over time as we continue to add employees and
technology infrastructure.
The increase in technology and content costs in absolute dollars in 2013, 2012, and 2011, compared to the comparable
prior year periods, is primarily due to increases in payroll and related expenses, including those associated with our initiatives
to expand our ecosystem of digital products and services, and increased spending on technology infrastructure, including AWS.
We expect these trends to continue over time as we invest in these areas by increasing payroll and related expenses and adding
technology infrastructure.
For 2013, 2012, and 2011, we capitalized $581 million (including $87 million of stock-based compensation), $454
million (including $74 million of stock-based compensation), and $307 million (including $51 million of stock-based
compensation) of costs associated with internal-use software and website development. Amortization of previously capitalized
amounts was $451 million, $327 million, and $236 million for 2013, 2012, and 2011. A majority of our technology costs are
incurred in the U.S., most of which are allocated to our North America segment. Infrastructure, other technology, and operating
costs incurred to support AWS are included in technology and content.
General and Administrative
The increase in general and administrative costs in absolute dollars in 2013, 2012, and 2011, compared to the comparable
prior year periods, is primarily due to increases in payroll and related expenses.
Stock-Based Compensation
Stock-based compensation was $1.1 billion, $833 million, and $557 million during 2013, 2012, and 2011. The increase in
2013, 2012, and 2011, compared to the comparable prior year periods, is primarily due to an increase in the number of stock-
based compensation awards granted to existing and new employees.