Amazon.com 2015 Annual Report Download - page 39

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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 2015, 2014, and 2013, compared to the comparable prior year
periods, is primarily due to variable costs corresponding with increased physical and digital product and service 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 a greater selection and in-stock inventory levels and to 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 regularly evaluate our facility requirements.
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, direct sales, 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 2015, 2014, and 2013, compared to the comparable prior year
periods, is primarily due to increased spending on online marketing channels, as well as payroll and related expenses.
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
Technology costs consist principally of research and development activities including payroll and related expenses for
employees involved in application, production, maintenance, operation, and platform development for new and existing
products and services, as well as AWS and other technology infrastructure expenses. Content costs consist principally of payroll
and related expenses for employees involved in category expansion, editorial content, buying, and merchandising selection.
Digital media content costs related to revenue recorded gross, including Prime Video, are included in cost of sales.
We seek to invest efficiently in several areas of technology and content so we may continue to enhance the customer
experience and improve our process efficiency through rapid technology developments while operating at an ever increasing
scale. Our technology and content investment and capital spending projects often support a variety of product and service
offerings due to geographic expansion and the cross-functionality of our systems and operations. 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 2015, 2014, and 2013, compared to comparable prior year periods, is
primarily due to increased spending on technology infrastructure principally allocated to our AWS segment, and an increase in
payroll and related costs associated with expanding our products and services.
Technology infrastructure costs consist of servers, networking equipment, and data center related depreciation, rent,
utilities, and payroll expenses. These costs are allocated to segments based on usage. In 2015, 2014, and 2013, we expanded our
technology infrastructure principally by increasing our capacity for AWS service offerings globally, compared to the
comparable prior year periods. Additionally, the costs associated with operating and maintaining our expanded infrastructure
have increased over time, corresponding with increased usage. We expect these trends to continue over time as we invest in
technology infrastructure to support increased usage.
The increase in payroll and related costs is primarily due to the expansion of new and existing product categories and
service offerings, including AWS, and initiatives to expand our ecosystem of products and services.
For 2015, 2014, and 2013, we capitalized $642 million (including $114 million of stock-based compensation), $641
million (including $104 million of stock-based compensation), and $581 million (including $87 million of stock-based
compensation) of costs associated with internal-use software and website development. Amortization of previously capitalized
amounts was $635 million, $559 million, and $451 million for 2015, 2014, and 2013.
General and Administrative
The increase in general and administrative costs in absolute dollars in 2015, compared to the comparable prior year
period, is primarily due to increases in payroll and related expenses. The increase in general and administrative costs in
absolute dollars in 2014, compared to the comparable prior year period, is primarily due to increases in payroll and related
expenses and professional service fees.