Amazon. com, Inc. (NASDAQ:AMZN) Fourth Quarter 2021 Earnings Conference Call February 3, 2022 5:30 p. m. Eastern Time
Participating companies
Dave Fildes – Director, IR
Brian Olsavsky – Chief Financial Officer
Conference Call Participants
Eric Sheridan – Goldman Sachs
Brian Nowak – Morgan Stanley
Doug Anmuth – JP Morgan
Mark Mahaney – Evercore ISI
Colin Sébastien – Baird
Jason Helfstein – Oppenheimer
Justin Post – Bank of America
John Blackledge – Cowen
Dan Salmon – BMO Capital Markets
Operator
Thank you for staying there. Hello everyone and welcome to the call of the Amazon. com convention on the monetary results of the fourth quarter of 2021. Right now, all participants are in listen-only mode. After the presentation, we will hold a question and answer session. Today’s call is recorded.
For opening remarks, I will have the Director of Investor Relations, Dave Fildes. Continue.
david fildes
Hello and welcome to our fourth quarter 2021 monetary effects convention call. Brian Olsavsky, our Chief Financial Officer, joins us to answer your questions. As you heed the convention call, we invite you to have our press release in front of you. , which includes our monetary effects, as well as metrics and commentary on the quarter.
Please note that unless otherwise stated, all comparisons in this call will conflict with our effects for the comparable era of 2020. Our comments and responses to your questions reflect management’s reviews as of today, February 3, 2022 only, and will come with forward-looking data statements. The actual effects may differ materially. Today’s press release and our FILINGs with the SEC include additional information on points that may also affect our monetary effects, in addition to our most recent annual report on Form 10-K and upcoming filings.
During this call, we may discuss certain non-GAAP monetary measures in our press release, the slides accompanying this webcast, and our SEC filings, all posted on our IR website. -GAAP measures, adding reconciliations of those measures with comparable GAAP measures. Our forecasts incorporate the order trends we have noticed to date and what we now consider adequate assumptions. Our effects are inherently unpredictable and can be materially affected across many points, adding uncertainty. related to the effects of the COVID-19 pandemic, exchange rate fluctuations, adjustments in global economic situations and visitor demand and spending, inflation, the hard labor market and global supply chain constraints, global events, the rate of Internet expansion, e-commerce and cloud facilities and the various points detailed in our SEC filings.
These third-class pricing also reflect our estimates to date regarding the effects of the COVID-19 pandemic on our operations, adding to those discussed in our SEC filings. Our forecasts also assume, among other things, that we do not conclude any further acquisitions, restructurings or legal settlements. It is not conceivable to expect demand for our goods and services, as it should be, and as a result, our actual effects may differ materially from our expectations.
And now I’m going to pass it on to Brian.
Brian Olsavski
Thank you for coming today.
Let me begin by greeting and thanking once again our workers around the world for their efforts. This was the time of the holiday season of this pandemic, and it required exceptional collaboration and coordination between our workers and business partners to prioritize visitor protection and experience. The team did a wonderful job in delivering this holiday to consumers.
Now let’s report our fourth-quarter monetary results. For the fourth quarter, net sales were $137. 4 billion, up 10% year-over-year, excluding currency effects. We continue to focus on delivering the most productive experience for our customers across our businesses. On the client side, we welcomed millions of new Prime members in the U. S. In the U. S. and around the world during the quarter, while we continue to see consistently higher member renewal rates across geographies.
Our third-party distributors, in particular, have benefited from strong visitor demand for this holiday season. 3P distributors provided 56% of all unit sales in the quarter, the highest combination ever recorded in the fourth quarter. We have noticed an expansion of usage and profits in 2021. AWS generated more profit year-over-year than any quarter in its history, and is now a business with an annualized run rate of $71 billion, up from the $51 billion implementation rate a year ago.
Even on a broad basis, profits increase by up to 40% year over year. put this profit expansion into perspective. Despite the 2020 ordinary sales expansion, we continue to see an increase in visitor demand and sales for the rest of 2021, even as the economy has reopened.
For the fourth quarter, Amazon’s two-year compound annual expansion rate was 25%, excluding the effect of exchange rates, in line with our third quarter rate. capacity for more than two years, expanding the footprint of our distribution center and adding significant transportation to ensure fast and on-time delivery. There are now 1. 6 million Amazon workers worldwide, which has also doubled in two years. Our source of operating income in the fourth quarter was $3. 5 billion.
As we discussed in the last earnings call, we have incurred costs of more than $4 billion due to inflationary pressures, lost productivity and disruption to our operations. -part of the carriers that our fulfillment network.
Productivity loss and network outages were primarily due to work capacity limitations due to staffing difficulties at peak periods of our services. This is due to the very tight hard-working market in the current part of 2021 and more recently due to the appearance of the Omicron variant. We expect those charging issues to persist in the first quarter, albeit adjusted for lower seasonal volumes compared to the fourth quarter.
Our effects also come with a year-over-year negative effect of approximately $1 billion due to the decrease in constant load leverage on our execution network. Remember that we saw very high drive volumes during the peak of 2020 and the first part of 2021 and that the execution network was operating at almost one hundred percent of its capacity during this period. Now, with a more general execution capability, our operating leverage decreases compared to comparable periods last year.
We expect this to continue to have a negative effect year-over-year in the first quarter of 2022. As we navigate those short-term headwinds, the fundamentals of our retail business are solid and we’re sure of an amount. of developing corporations and a solid line of innovation. AWS saw another quarter of strong expansion as enterprises and developers continue to turn to AWS for critical, cutting-edge cloud solutions.
Now, with $71 billion in annualized earnings, AWS earnings grew 40% year-over-year in the fourth quarter, our fourth consecutive quarter of accelerating earnings growth. thousands of virtual assistants. re:Invent remains the focus of the year for us, as it is an excellent opportunity to present new facilities while interacting with consumers and partners to better tell the next topics we focus on. We announced more than 115 new facilities and features at the event, as companies across all primary industries continue to choose AWS as their generation provider to drive innovation in their organizations.
In the last quarter alone, NASDAQ announced a multi-year partnership to migrate North American markets to AWS, adding its tuning engine. Best Buy decided on AWS as its favorite provider of cloud infrastructure services. Meta, the parent company of Facebook, Instagram and WhatsApp selected AWS as their long-term strategic cloud provider to drive AI studies and development. And Stellantis, the parent company of Chrysler Dodge, Fiat, Jeep and Ram, chose AWS as its preferred global cloud provider. for vehicle platforms to power new virtual products and improve the global workforce. You can find more examples in our earnings release of how the world’s largest corporations like Adidas, Goldman Sachs, Pfizer, Rivian, and many others are employing AWS for their businesses.
Overall net revenue was $14. 4 billion in the fourth quarter. While we focus our comments on the operating source of revenue, I would note that this net source of revenue includes a pre-tax valuation gain of $11. 8 billion similar to our non-unusual equity investment in Rivian Automotive, which finalized its IPO in November.
Before moving on to the questions and answers, I will mention 3 other elements similar to our disclosures. First, we now separate advertising revenue from other revenue as a component of our tax returns across groups of similar products and services. This updated presentation is provided in the supplemental monetary data included in our earnings release. We are excited to continue innovating in spaces such as sponsored ads, video streaming, and measurement. Of course, advertising only works if we make it useful to Amazon consumers when we create wonderful experiences for visitors. we get more wonderful effects for brands.
Second, we are prospectively updating the lifespan of our servers and network appliances starting in January. In general, we monitor and review the useful life of our depreciable assets to ensure that our financial statements reflect our most productive estimate of how long assets are used. in operations. We are extending the lifespan of servers from 4 to 5 years and the lifespan of network devices from 5 to 6 years. As a result, our guidance for the first quarter includes a lower amortization expense of approximately $1 billion.
We expect the quarterly impact of this update to be minimized throughout the year. While we’re requesting an accounting update here, it actually reflects a huge effort by the AWS team to make our server and network device last longer. We have been operating at scale for over 15 years and continue to refine our software to run more successfully on hardware. This reduces strain on hardware and extends lifespan, whether for the assets we use to help external aws consumers, as well as those used to help our own internal Amazon business.
And finally, we will increase the value of Prime in the US. U. S. in the first quarter. We continue with Prime. In recent years, we have added more variety of products available with loose and unlimited shipping, more exclusive offers and discounts. and more high-quality entertainment, adding TV, movies, music and books.
Since 2018, Prime Video has tripled the number of Amazon Originals. Next September, Prime Video will also launch the highly anticipated Lord of the Rings: The Rings of Power and will be the exclusive home of Thursday Night Football as a component of a historic 11th-year agreement with the National Football League. Since 2018 in the United States, same-day delivery availability has increased from 48 metropolitan areas to more than 90. he stockpiled billions of dollars through grocery shopping on Prime Days. All of this adds to the program’s new benefits, such as savings on prescriptions and fast loose shipping from Amazon Pharmacy and Amazon Music’s ever-growing catalog for Prime members, as well as Prime Reading. and Prime Gaming.
With the continued expansion of Prime member benefits and the increase in member usage we’ve noticed, as well as rising salaries and transportation costs, Amazon will increase the value of a Prime club in the United States with a monthly value expanding from $12. 99 to $14. 99 and the annual subscription increases from $119 to $139. This is our first value increase since 2018. For new Prime members, the value update will take effect on February 18. For existing Prime members, the new value will apply after March 25 on the date of their next renewal.
That said, let’s move on to the questions and answers.
Operator
Thank you. At this time we will open for s. [Trader Instructions] Our first comes from Eric Sheridan of Goldman Sachs. Continue with your matrix
eric sheridan
Thank you very much for answering the question. I need to go back to Andy’s feedback on same-day delivery. Can you tell us a little bit about how many of those investments might be behind or in front of you in terms of same-day delivery and how that defines society in terms of customer habit versus the competitive dynamics you see versus competing elements like omnichannel and last-mile delivery?Thanks a lot.
Brian Olsavski
Hi Eric, of course. So on the same day, again, there are several degrees of fast shipping here from ultra-fast, which is essentially our grocery business in one or two hours on the same day and less, then one day and two days Prime. We feel smart where they are. We continue to develop the capacity to meet those thresholds. I think his comments were more about us going back to our pre-pandemic levels for delivery in a day and that, and then going to more and more metropolitan spaces on the same day.
We also do it globally, but we believe that this combination of speed for other product levels, or the product line, excuse me, resonates with customers. but we know how complicated it is. And our purpose is to do it and do it at a price where we can also make cash and our payment design accordingly.
That’s where the tough stuff comes in, but we appreciate the progress we’ve made in increasing our FBA capability over the past few years. And what we’ve added, as we mentioned, we’ve doubled the capacity of netpaintings in the last two years. That’s not all for managing the current volume. It’s also about being closer to the visitor and being able to send faster.
So we love where we are. We know there is work to be done to improve our visitor service. We like the progress we have made in recent times, but we believe that the long term is brilliant in this regard.
Operator
The following is by Brian Nowak of Morgan Stanley. Continue with yourArray
Brian Nowak
Thank you for answering my questions. I have two. Brian, the first, there are a lot of things that have replaced in retail, a pre-pandemic, post-pandemic plus same-day type, more groceries, more last-mile investments in an advertising company. It’s funny to hear, like Do you think about the long-term profitability of the retail segment, do you have your attitude about how you think about long-term profitability or the retail money that fell after the pandemic due to the increased need for investment is the first?
Then the second, like the new disclosure, I would be interested in any other disclosure about the number of engineers or the duration of the groups in which much of the innovation you talked about is being executed and that is something earlier. — the allocation stage that does not generate income, we can better perceive that investment in Amazon. Thank you.
Brian Olsavski
In the second, we are used to making long-term bets for customers, and some of them fall into very small corporations with short-term income. They will regularly be incorporated with other profits, which will be reduced once we have separated advertising. . So I think they see it in our earnings disclosure in general. But much of our profitability is indicated at the segment level, and we will continue to do so with earnings disclosure.
You made a query about the business model. I think it’s a smart consultation. And we are, reflecting on the last two years, we are encouraged by many things. It marked them there, the adoption of virtual benefits, the use of groceries, and the price that becomes for customers, not to mention the acceleration of the move of companies to the cloud. The ability to double our execution capacity this period, in addition to making significant advances in our FBA, prepares us well for the future. And yet, we also had to deal with a lot of interruptions at the time.
Therefore, the first wave of disruption controlled the volume without the ability to manage it, and then caught up temporarily. And as it began to improve, the workforce took a turn in the U. S. We had to fight to get the workers up. We have succeeded. We raised more than 273,000 workers in the latter part of last year. But I think if you take a look at the previous year, it was more than 400,000.
So there’s a lot of expansion in the network. And we are happy with the main participants in the earnings skill. There is – if you take a step back, there is a margin of source and collaboration with suppliers and distributors as well. There are fees in some cases, for 3P and Prime services, as we just mentioned, are increasing. added a contribution layer in recent years. But again, this only works and succeeds if we make it a smart experience for the visitor. So, we’re trying very hard to get there. And that’s part of our ability to offer lower prices, greater variety and greater convenience.
So if you take them, they are all solid and empowering areas. In reality, it is the duty: our duty is to regain our operational power in all our areas of office. We’ve, again, built a lot of capacity. We hired a lot of other people. Some of the other people are still there: all of our groups are fighting Omicron right now. But we’re seeing the sun rise and here for the next few quarters, and that’s where we’re going to put in a lot of effort.
Operator
The next one is from Doug Anmuth with JP Morgan.
doug anmuth
Thank you for answering the question. Brian, has doubled its distribution network and workforce in the last two years. It has approximately 2. 5 years in this investment cycle. Where is Amazon in terms of getting out of this investment cycle?Do you see a slowdown in that big capital spending this year?
Brian Olsavski
Let’s talk a little bit about capital expenditures. And I will do so by adding equity leases, which are the waste we rent into our infrastructure design assets. We’re doing less now, but we’re still doing it and we’ve done it historically. Numbers and how they’ve grown over the last few years, I’m going to give you the proportions, which I’m not sure we showed in the first place were around 40%, just under 40% of that CapEx goes infralayout, most of them power AWS, but also certainly, Amazon is a big visitor to it and we build and design ourselves directly or through AWS.
Almost a little less than 30% are warehouses with a fulfillment capacity structure: warehouse only, no shipping. And then a little less than 25% is the capacity and shipping structure of our AMZL network, basically on a global scale. The remaining 5% are small things like offices and department stores and other spaces in the capital. But those are the 3 big spaces.
If I look to the future, we’re still executing some of our plans for 2022, but it’s getting a little clearer. We see an increase in CapEx for infrastructure. We still have a very fast-developing business that’s developing globally, and we’re adding regions and features to manage usage that outpaces the profit expansion of that business. So, we feel smart about making those investments.
On the middle distribution side, this represents around 30% of expenditure over the last two years. We see this moderating and most likely now in line with the expansion of our underlying business. I think there are things that can add up to that rate of expansion, things like expanding our FBA business, expanding dice that possibly wouldn’t be others from square footage. So, we need to have the ability to have a healthy retail and FBA business, as this drives 1-day delivery. and delivery in 2 days and delivery in the same day. That’s very important. But we see that the FC currency is likely to moderate this year. And then, the third detail is transportation. We still see more investment grades in this domain in 2022.
So, if you sum it up, we expect capital expenditures, adding capital rentals of equipment, to build year after year. I can’t give you the exact percentage, but I hope it will give you a little more dynamism about what, how we technify it.
Operator
The following is by Mark Mahaney with Evercore ISI.
Marc Mahaney
It discloses all the prices it expected to see in the December quarter. Just reach out to find out if there are any real wonders for you. So, it turns out that he has a little more influence than he thought. And then use it to help. let’s think about what. . . I think you said the sun was rising. Financially, does that mean we’re going to have some kind of improvement in operating margins over the course of the year, because some of those transient prices are scheduled and you do you have to absorb some of the more consistent prices?So, just communicate the wonder in terms of pricing you announced for the December quarter, the $6 billion. And how does it deserve us to think about those that are developing as we go along??
Brian Olsavski
Okay, Marc. No, I’m sitting in Seattle. So my view of the sunrise is possibly a little different from where you are. But we’re seeing that things are getting better. Yes, let’s go back to the fourth quarter. We said we would have about $4 billion in additional prices due to labor shortages and inefficiency of this cause, as well as higher labor rates and other changes in premiums and prices for external transportation. We’ve been slightly above that . $4 billion. I think things went according to plan. I would say the hiring has been solid, but we can also have done better. We may also have had more people, so we had to protect a lot. overtime. There are higher prices on transportation through third parties.
But overall, the challenge in the fourth quarter was staffing, development, or excuse me, staff development, and we said we were looking to raise 150,000 more people or more. We raised net-net through approximately 140,000 in the quarter, 273,000 in the current part of the year. So as we turn the page in 2022, we felt smart: better about paintings, that Omicron has started, and now has another kind of painting challenge where there are a lot of other people who are on leave and short-term while applying to test positive for COVID and can re-enter the workforce and protect their colleagues. So, there are cases where you pay two or three times for the same hour of paintings if someone is on leave, you pay them and also potentially pay someone who covers the shift over time.
Therefore, there is pressure on prices in the first quarter. I think the good news is that the challenge of Paintingsforce is not as big in the first quarter as it is in the fourth quarter, in the third and fourth quarters. that. We will have to work now to make our operations more effective as we increase staffing levels. And we will deploy much of our efforts to increase our shipping speeds and surpass our pre-pandemic levels. Therefore, there are many other demanding situations that are happening right now. The team has been rushing for more than two years. that answers your question.
Operator
The next one is by Colin Sebastian with Baird.
colin sebastien
I wanted to ask you about AWS and the huge earnings acceleration there. I wondered if maybe I could talk more in particular about the engine of this acceleration. Is the application layer perhaps now large enough to see that it gradually contributes to growth?And I think in the press release, he also highlighted the expansion of infrastructure globally. I think it would be attractive to load some context on the scale or distribution of AWS’s business around the world outside of North America, if you can. Just put a little bit of context around that. Thank you.
Brian Olsavski
Of course Colin. Thanks for your questions. As for the rate of expansion, I think it’s a mixed bag. We’ve added resources in sales and marketing in recent years, and it’s beginning to pay off. There was some relief in spending in early 2020 that we, like other people, are catching up with: other companies have another experience of COVID, some their volumes have skyrocketed, some their volumes have crashed. So as things stabilized, I think the most lasting thing is that a lot of other people committed to moving to the cloud, better understood the benefits of it, and probably accelerated their internal timelines for it. And we are here to help you and we work very hard to make this a good fortune and we have a strong team of sales and marketing professionals to help you along with technical advisors. That is what we are seeing, and we are pleased with the acceleration in activity in the last 4 quarters. We’ll see, we’re also pleased with the power of infrastructure investment, as I mentioned, extending life is not done on an accounting basis unless you have evidence that it really is, we see it in real life. Very positive metrics on AWS.
david fildes
Just to stick to the foreign point, what we’re seeing outside the U. S. In the U. S. , I mean we are: as a component of this strong overall growth, we continue to see abundant momentum around the world. Customers move their workloads to AWS in other phases. And so, looking at launch, some of the other announcements, there’s a varied smart list of companies, Adidas in Germany migrated its SAP environments to AWS, in the Netherlands, Stellantis chose AWS as its preferred cloud provider. There are several examples of wonderful corporations doing other wonderful things at other stages of this migration.
What has been vital for us, among many other things, is continuing to expand our global infrastructure footprint to maintain the momentum we are seeing. So, just this last quarter of the fourth quarter, we opened the Asia-Pacific region in Jakarta. And we have announcements of launch plans and Canada in the Calgary domain next year or maybe in 2023 or 2024. So, a lot of paintings and a lot of momentum. These are just a few examples. But where we are now is: AWS lately has 84 Availability Zones in 26 regions around the world. And just in terms of a forward-looking roadmap, we have announced the launch of 24 additional zones in 8 other regions, and they will be there in the next two years.
Operator
The next one is by Jason Helfstein with Oppenheimer.
Jason Helstein
So, I just need to dig a little deeper into third-party sellers. Growth there has slowed even for a two-year pile. So perhaps you could tell us about some of the points that you think might influence this?then, directly on AWS, you put color there. Are there bottlenecks to expansion that you still see?I mean, you explained why it’s a very smart quarter and it has to do with some of the compositions, but are there any bottlenecks to develop, whether it’s the supply chain or employees?Thank you.
Brian Olsavski
Excuse me. Jason, is it your time on AWS?
Jason Helstein
Yes, on AWS.
Brian Olsavski
Yes, I’m sorry. Let me start with that. No, we don’t see any bottlenecks in the capability aspect or probably the limitation of this activity is our ability to work with consumers to speed up their response times. Therefore, we are making an investment and working hard to achieve it. So, still operationally, we continue to increase capacity, as I mentioned in the capital assets segment, discussion about capital assets, and we expect it to increase from year to year in 2022.
At 3P, I think what you’re seeing is a reduced expansion rate, just like the rest of the company, as I mentioned earlier, we’re dealing with the era of higher expansion from the third quarter of 2020 to the first quarter of 2021. But in two Based on one year, you still see a 31% compound annual expansion in 3P dealer revenue. It is true that it was in the – it was 34% in the last quarter, but it still continues. I think the vital point at its peak is that dealerships are definitely the big winners of the fourth quarter. The percentage of configurations up to 56% was a record for 3P. We continue to invest heavily to make distributors successful on our site. They are also big consumers of advertising, as they use it to grow their brands and load, it allows consumers to see their variety and make purchases. Therefore, we are very satisfied with third-party vendor service companies and, again, we are looking for tactics to help distributors succeed.
Operator
The following is from Justin Post with Bank of America.
Justin Post
perhaps Super. Je will communicate about advertising services. Maybe tell us why abandon it, if it hasn’t already?And then, to what extent may Prime Day have been a slowdown factor?But in general, what is the room for maneuver that this line has to overcome the expansion of GMV?How do we think you are in terms of penetration?Thank you.
Brian Olsavski
Let me start with why we broke up. We tested the proportion of other revenue from advertising services. And we got to a point where, and I had argued quite a bit in each and every quarter, that most of that position was advertising revenue. And we feel it with certainty that we deserve to break it down and split the other part of it. So that was the impetus for change. And we took a look at those things each and every year, and the end of the year was a smart time to do that as we begin 2022. So I hope this helps you perceive the expansion rate without having to impute it from other income.
The rate of expansion during the 33% quarter was down from 66% in the fourth quarter of last year. The fourth quarter of last year introduced Prime Day for the first time. And Prime Day has a lot. I can’t scale it for you, but there’s a lot of advertising similar to Prime Day, evidently. So when adjusted quarterly, it often has an impact on execution rates. We saw it a little bit in the last quarter of this year when we had Prime Day and it was working: the time when the 2021 quarter was running, the 2020 era that didn’t have Prime Day. Then, it will move a little. But I think the most important story here is the good fortune we have with distributors and distributors, which makes it a useful product for customers.
david fildes
And Justin, just to get on top of that, I need to say that the priorities with advertising are: On a higher level, it has improved the usability of the tool. We think there are wonderful feedback loops with consumers, as Brian mentioned, to continue to build and improve on that. This results in more wonderful relevance and more engaging experiences. And again, the more we can engage with advertisers, consumers and be informed and have more opportunities to listen to them and perceive that we can create more wonderful analytics tools, provide more wonderful metrics, give you more wonderful overview of functionality. So, in reality, he focused on serving brands. And that’s in sponsored ad space, however we talked about video advertising is definitely a great opportunity. And because we have homes like Fire TV, IMDb TV, Twitch, live sports, there’s been a lot of exciting things happening in live sports and actually coming this year as well, whether it’s in the NFL here in the United States. United still abroad in a number of households, really excited to work with people. And again, it’s about giving smart recommendations to consumers and helping them with their buying decisions and giving them data about it. And this, in turn, of course, also helps advertisers and provides a wonderful result. So I think it is a domain that we are passionate about. Longer-term demand-side platform opportunities with Amazon DSP are something we continue to paint and refine and, again, target visitors as we do.
Operator
The next one is by John Blackledge with Cowen.
John Blackledge
Two queries. First of all, could you tell us about how purchasing and the supply chain affected the company in the fourth quarter, and how we might think about the effects of supply chain issues in the second quarter and during the year?And then the query for now would be, are you planning are accumulating preferential costs in markets outside the U. S. ?USA? Thank you.
Brian Olsavski
Hi John. Thank you for your question. First on the main topic. We compare both countries differently. We look at the relative value to the visitor rather than our fee to offer that and the use and cost we create for visitors. We are sorry, especially after not increasing the price in the US. In the U. S. since 2018, the time had come to do so. And we think it’s a much more valuable program today than it was in 2020, let alone 2018. So, from other countries, we will continue to compare one and both years and nothing more to announce for the moment.
In the origin chain, there are express things that I think we all see in the origin chain where we expect products. But when it comes to Amazon, we’ve done a lot to fight the demanding supply chain situations we saw in the fourth quarter or expected in the fourth quarter. We bottle the product in advance. We work with suppliers to secure stocks early, in some cases paid earlier, which has had an effect on current capital. We have also worked very hard to open the channels of: the existing verification channels in the country either the port capacity or the shipping capacity. So we did everything. We knew until now how to try to get more capacity in a restricted market. And we think it worked for our consumers in the fourth quarter, because the demanding situations continue in 20, I wouldn’t say we completely outperformed that, but we don’t. be expecting it to be a big challenge in the first trimester.
Operator
The latest is from Dan Salmon of BMO Capital Markets.
Dan salmon
First of all, I just looked to stick a little bit and see in the ad numbers, if there is a qualitative color that can load, say, a rough balance between functional advertising and logo advertising, perhaps the United States as opposed to the rest of the world. Everything you load can be great. And then, secondly, Brian, discussed the Thursday Night Football exclusive broadcast and that’s one of the reasons behind creating greater value for Prime. Dave, discussed it as a new and dynamic detail for the advertising industry. Maybe we’ll come back to that, because the kind of importance of live sports in the video area is incredibly important, do you see that it takes the company to a new point at this point?
Brian Olsavski
Let me start with this question of the moment. So, I didn’t need to give you the impression that we have higher costs because football exists. Prime members to make the Prime club more valuable, as well as foreign sports, we had one of the highest rated games of the fourth quarter with, I think, Manchester United and, sorry, I will combine the team.
david fildes
Arsenal, I don’t know.
Brian Olsavski
Yes, I’m not going to bother. But then again, we’ve been trying to get sports houses that are valuable to the main offering. We’re probably still at the beginning. Notoriously we have had good luck with Premier League Soccer, other football leagues around the world, tennis houses and probably also the marquee like running with the NFL on Thursday Night Football.
david fildes
Dan, in terms of breakup, I think, as we said before, on the advertising side, sponsored products and logos account for most of the advertising profits today. We did not give a geographical distribution. But suffice it to say that many of those efforts, which Brian talked about, whether it’s on video, advertising opportunities for, in those sponsored products, and sponsored logo efforts, we’ve replicated a lot of tools, features, and around the world. and we’re constantly learning and creating the logo and presence with that so we can make greater strides with customers in the long run.
Brian Olsavski
And since I don’t need to hang you up, Dan, the football match between Manchester United and Arsenal in December was the most watched Premier League match on our service with an estimated audience of four million. So I think it’s quite attractive because we’ve had a lot of smarter and smarter relationships with the Premier League. We’ve had Boxing Day games and we’re still a valuable spouse to each other.
david fildes
With that, thank you for joining us today and for your questions. There will be a repeat on our IR site for at least 3 months. We appreciate your interest in Amazon and look forward to speaking with you next quarter.