ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS

Acquisition Activity

On September 25, 2014, we acquired Twitch Interactive, Inc. (“Twitch”) for approximately $842 million in cash, as adjusted for the assumption of options and other items. We acquired Twitch because of its user community and the live streaming experience it provides. During 2014, we acquired certain other companies for an aggregate purchase price of $20 million. The primary reason for our other 2014 acquisitions was to acquire technologies and know-how to enable Amazon to serve customers more effectively.

During 2015 and 2016, we acquired certain companies for an aggregate purchase price of $690 million and $103 million. The primary reason for these acquisitions, none of which were individually material to our consolidated financial statements, was to acquire technologies and know-how to enable Amazon to serve customers more effectively.

Acquisition-related costs were expensed as incurred and were not significant.

Purchase Price Allocation

The aggregate purchase price of these acquisitions was allocated as follows (in millions):



	December 31,
	2014			2015			2016
Purchase Price
Cash paid, net of cash acquired	$	813		$	599		$	81
Stock options assumed	44			5			—
Indemnification holdback	5			86			22
	$	862		$	690		$	103
Allocation
Goodwill	$	707		$	482		$	60
Intangible assets (1):
Marketing-related	23			3			2
Contract-based	1			1			1
Technology-based	33			208			53
Customer-related	173			18			1
	230			230			57
Property and equipment	16			4			3
Deferred tax assets	64			55			17
Other assets acquired	34			53			10
Deferred tax liabilities	(88		)	(85		)	(18		)
Other liabilities assumed	(101		)	(49		)	(26		)
	$	862		$	690		$	103

___________________


(1)	Intangible assets acquired in 2014, 2015, and 2016 have estimated useful lives of between one and five years, one and six years, and one and seven years, with weighted-average amortization periods of five years, five years, and five years.

The fair value of assumed stock options, estimated using the Black-Scholes model, and restricted stock units of $39 million, $9 million, and $0 million for 2014, 2015, and 2016 will be expensed over the remaining service period. We determined the estimated fair value of identifiable intangible assets acquired primarily by using the income approach. These assets are included within “Other assets” on our consolidated balance sheets and are being amortized to operating expenses on a straight-line basis over their estimated useful lives.

Pro forma results of operations for 2016 have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to our consolidated results of operations.

Goodwill

The goodwill of the acquired companies is generally not deductible for tax purposes and is primarily related to expected improvements in technology performance and functionality, as well as sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. The following summarizes our goodwill activity in 2015 and 2016 by segment (in millions):



	North America			International			AWS			Consolidated
Goodwill - January 1, 2015	$	2,584		$	735		$	—		$	3,319
Segment reallocation—January 1, 2015 (1)	(606		)	—			606			—
New acquisitions	41			18			423			482
Other adjustments (2)	(7		)	(34		)	(1		)	(42		)
Goodwill - December 31, 2015	2,012			719			1,028			3,759
New acquisitions	30			13			17			60
Other adjustments (2)	2			(38		)	1			(35		)
Goodwill - December 31, 2016	$	2,044		$	694		$	1,046		$	3,784

___________________


(1)	In conjunction with the change in reportable segments in the first quarter of 2015 to include the AWS segment, we reallocated goodwill on a relative fair value basis.


(2)	Primarily includes changes in foreign exchange rates.

Intangible Assets

Acquired intangible assets, included within “Other assets” on our consolidated balance sheets, consist of the following (in millions):



	December 31,
	2015							2016
	Acquired Intangibles, Gross (1)		Accumulated Amortization (1)			Acquired Intangibles, Net		Acquired Intangibles, Gross (1)		Accumulated Amortization (1)			Acquired Intangibles, Net		Weighted Average Life Remaining
Marketing-related	$	502	$	(252	)	$	250	$	499	$	(299	)	$	200	4.6
Contract-based	331		(174		)	157		397		(212		)	185		4.3
Technology- and content-based	683		(268		)	415		705		(353		)	352		4.6
Customer-related	331		(161		)	170		299		(182		)	117		2.7
Acquired intangibles (2)	$	1,847	$	(855	)	$	992	$	1,900	$	(1,046	)	$	854	4.3

___________________


(1)	Excludes the original cost and accumulated amortization of fully-amortized intangibles.


(2)	Intangible assets have estimated useful lives of between one and twenty years.

Amortization expense for acquired intangibles was $215 million, $270 million, and $287 million in 2014, 2015, and 2016. Expected future amortization expense of acquired intangible assets as of December 31, 2016 is as follows (in millions):



Year Ended December 31,
2017	$	264
2018	203
2019	170
2020	103
2021	38
Thereafter	76
	$	854