report: adobe digital economy project may 2016

ADOBE DIGITAL INDEX |Adobe Digital Economy Project 1

ADOBE DIGITAL ECONOMY PROJECTMAY 2016

OVERVIEW

Adobe Digital Index background

Based on analysis of aggregated and anonymous data from Adobe Marketing Cloud:• Adobe Analytics and Adobe Mobile Services

Thousands of brands worldwide including two thirds of Fortune 50 companies rely on AdobeMarketing Cloud:• $7.50 of every $10spent online with top 500 U.S. retailers go through Adobe Marketing Cloud **• Adobe Marketing Cloud powers:

• 20 of the top 30 U.S.employers• 9 of 10largest hotel groups• 7of 10largest airlines

**Latest IR Top 500 Report 2015

AdobeAnalytics

AdobeMobile Services


Digital Price Index(DPI)

Job Seeking Index(JSI)

Digital Housing Index(DHI)

Presenter

Presentation Notes

the Digital Price Index (DPI), which measures changes of online consumer goods prices in real-time, the Digital Housing Index (DHI), reporting adjustments in online house searching, and the Job Seeking Index (JSI), measuring shifts in online job seeking activity.


Main takeaways: May

• Our Digital Price Index (DPI) shows strong signs of deflation in the goods and services we currently cover that are bought online

• Categories showing the most month-over-month deflation in May were tablets, televisions and appliances, with hotels and flightsshowing month-over-month inflation mainly due to seasonality.

• The only covered category showing inflation in May is toys, with toys priced below $70 showing the most price increases

• In groceries, prices have decreased for three consecutive months

• For computers, we see that in May prices seem to have stabilized after two months of steep declines, with high-end computersshowing the least deflation

• Our Job Seeking Index showed signs that job seeking activity is increasing relative to recent months

• Our Digital Housing Index had the lowest YoY growth in the last 9 months


Digital Price Index(DPI)


DIGITAL PRICE INDEX

Economist Advisors

Austan Goolsbee, University of Chicago Robert P. Gwinn Professor of Economics at The University of Chicago's Booth School of Business

Formerly served as President Obama’s Chairman of the Council of Economic Advisers

The youngest member of the cabinet of President Obama

Pete Klenow, Stanford University Professor, Department of Economics, Stanford University

Currently Visiting Scholar, Federal Reserve Bank of San Francisco

Member of editorial boards for Econometrica, American Economic Review, Quarterly Journal of Economics and others


DIGITAL PRICE INDEX

MethodologyBased on analysis of aggregated and anonymous data

• Fisher Ideal Price Index• Adobe measures 80% of all online transactions from top 100 U.S. retailers **• $7.50 of every $10 spent online with top 500 U.S. retailers go through Adobe Marketing Cloud **• Based on analysis of 15 billion website visits and 2.2 million online products sold between May 2014 and May 2016

BLS: Consumer Price Index Adobe: Digital Price IndexQuantities Sold No YesProducts/quantities updated Every 4 years Daily

Number of Products 83 thousand (all categories) 2.2 million (currently covered categories)

Data Collection Frequency Bi-Monthly DailyData Availability Monthly DailyOffline Prices Yes NoLong history Yes NoAll categories of spending Yes No

** Latest IR Top 500 Report 2015

Presenter

Presentation Notes

Fundamental economic theory states that as prices rise, consumers will shift their purchases to lower-priced items. Since our index uses quantities associated with each purchase to determine the importance of a product in consumers’ expenses, it picks up the effects of this substitution.


DIGITAL PRICE INDEX

• Electronics see an average of 80% ofonline spend on new* products**

• 16% of monthly online spend for grocerieson new products

* Products that have been available for 1 year or less** A product is defined as an item for purchase which has an unique identifier (such as a SKU)

Measuring rapidly shifting consumer preferences


DIGITAL PRICE INDEX

• DPI captures the effect of major discount holidayslike Black Friday and Cyber Monday because itmeasures quantities and does so in real-time

• Lowest prices for TVs in 2015 were Thanksgivingand Black Friday

• Data demonstrates retailers trying to start salesearlier – the Sunday and Monday beforeThanksgiving saw low prices

The Importance of detail: Black Friday

Presenter

Presentation Notes

Note: Cannot directly compare Electronics with BLS, since they do not have an umbrella category composed of all consumers electronics.


DIGITAL PRICE INDEX

Inflation rates by price bins

• Televisions have seem higher-ticket itemsdeflate faster than lower-ticket items

• In computers, models priced above $1,200showing the least deflation in the category

• Price bins are determined based on the price the product had when originallylaunched (first price).


DIGITAL PRICE INDEX

April 2016 Recap

MoM: April vs March MoM: April vs March Difference (percentage) Same Sign? YoY: Cumulative April 2015-2016 YoY: Cumulative April 2015-2016 Difference (percentage) Same Sign?

DPI CPI DPI vs. CPI DPI vs. CPI DPI CPI DPI vs. CPI DPI vs. CPIAppliances -1.1% -0.3% -0.8% Yes -4.9% -3.7% -1.2% YesComputers -2.1% 0.0% -2.1% No -13.9% -7.7% -6.1% YesDomestic Hotels 1.6% -0.8% 2.4% No 2.8% -0.01% 2.8% NoFlights -0.9% 4.3% -5.2% No -4.6% 0.4% -4.9% NoFurniture -0.5% -0.2% -0.3% Yes -2.8% -2.6% -0.3% YesGrocery -0.2% 0.1% -0.3% No 0.5% -0.3% 0.8% NoSporting Goods -0.7% 1.6% -2.3% No -5.5% -0.5% -5.0% YesTelevisions -1.6% -1.8% 0.2% Yes -19.7% -16.1% -3.6% YesToys -1.6% -0.4% -1.2% Yes -7.6% -8.1% 0.5% Yes


DIGITAL PRICE INDEX

• Main deflation in May:• Tablets, Televisions & Appliances

• Main inflation in May:• Flights, Hotels & Toys

May 2016 Summary

YoY MoMAppliances -4.5% -1.0%Computers -12.7% -0.4%Electronics -10.3% -1.4%Flights -5.0% 4.1%Flights: domestic -7.1% 4.1%Flights: international -1.7% 3.1%Furniture -3.4% -0.8%Grocery 0.4% -0.2%Hotels: domestic 2.6% 0.7%Hotels: international -0.5% 0.7%Sporting Goods -5.2% -0.4%Tablets -21.5% -3.7%Televisions -18.5% -2.0%Toys -6.5% 0.4%


• The data used contains transactions for ~110K products between May 2014 and May 2016

• Products include large appliances such as fridges, ovens, washers, dryers as well as smaller appliances such asvacuums, mixers, blenders etc.

Appliancesmethodology


DIGITAL PRICE INDEX

Appliances prices decreased 4.5% YoY, driven by big appliances

* CPI category “Appliances” used for comparison

• Between May 2015 and May 2016, DPI showscumulative deflation of 4.5% YoY

• For May, prices decreased 1% vs April MoM

• Main deflation items in May are for high-ticketappliances (above $600)

Presenter

Presentation Notes

Online price deflation timeframe: last year


• The data used contains transactions for ~1M products between May 2014and May 2016

• Products span across dozens of different categories such as televisions, laptops, Blu-ray players, desktops, tablets,wearables, headphones, video games, printers etc.

Electronicsmethodology


DIGITAL PRICE INDEX

Cameras and smart watch prices decline in May

• Prices for electronics decreased 10.3% between May2015 and May 2016 YoY

• For May, prices decreased 1.4% vs April MoM

• Main deflation in May happening in televisions,tablets, cameras and smart watches

* No CPI category exists for comparison

Presenter

Presentation Notes

Note: Cannot directly compare Electronics with BLS, since they do not have an umbrella category composed of all consumers electronics.


DIGITAL PRICE INDEX

Deflation for computers slows in May, driven by high-end market



• Main price decreases for computers pricedbetween $700 and $1,200

• Main price increases for high-end computers(priced above $1,200)

* CPI category “Personal computers and peripheral equipment” used for comparison

Presenter

Presentation Notes

- Period is last year for online deflation


DIGITAL PRICE INDEX

High-end televisions drive price decreases in May

* CPI category “Television” used for comparison


• For May, prices decreased 2% vs April MoM

• Main price decreases in high-end televisions(above $2,000)

Presenter

Presentation Notes



DIGITAL PRICE INDEX

Tablets see large price decline in May



• Main decrease in May for tablets priced between$350 and $550

• This is an important category not specifically brokenout in the CPI

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Presentation Notes



• The data used contains transactions for ~370 K flight routes between April 2015 and May 2016• Includes associated fees, where applicable

Flightsmethodology


DIGITAL PRICE INDEX

Flight prices down 5% YoY

• Between May 2015 and May 2016, DPI showscumulative deflation of 5% YoY

• For May, prices increased 4.1% vs April MoM

* CPI category “Airline fare” used for comparison


DIGITAL PRICE INDEX

Domestic flight prices down 7.1% YoY



• Main inflation states were Texas, California andFlorida

• Main deflation states were Washington, Georgiaand Hawaii


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Presentation Notes

Seattle, JFK and San Jose & Boston shows the biggest price increases in May


DIGITAL PRICE INDEX

International flight prices down 1.7% YoY



• Main price increases in May were for NorthAmerican and European destinations

• Main price decreases in May were for Asia


Presenter

Presentation Notes



• The data used contains transactions for ~173K products between May 2014 and May 2016• Products include interior and exterior furniture, mattresses and other bedding products

Furniture and beddingmethodology


DIGITAL PRICE INDEX

Furniture and bedding prices decrease, especially for patio

* CPI category “Furniture and bedding” used for comparison



• Main deflation items in May are for PatioFurniture

Presenter

Presentation Notes



• Our dataset covers an estimated 30-40% of all online grocery purchases. It contains transactions for ~195k products (2015-2016) and is heavily comprised of groceries bought online and picked-up in store

• The percent of shoppers buying groceries online is small, but growing by 35% YoY as of February• The mix of grocery products bought online is not the same as offline – the top category for online shopping is drinks

(nonalcoholic), while for offline shopping it is meat

• Still, a significant portion of online grocery shopping is dedicated to meats, dairy, fruits and vegetables – more than 50%

• When it comes to products where there’s little substitution possible and consumer choice is minimal (like milk and eggs), theDPI tracks almost perfectly with the CPI. This is a good indication that prices online match offline prices well

Groceriesmethodology


DIGITAL PRICE INDEX

Online Groceries prices down in May, driven by juices & drinks

• Between May 2015 and May 2016, DPI showscumulative inflation of 0.4% YoY


• Main deflation in May for juices & nonalcoholicdrinks

* CPI category “Food at Home” used for comparison

Presenter

Presentation Notes

Since food is a very important item in consumer’s budgets, this number must be watched closely.


• The data used contains transactions for ~250 K hotel properties between April 2015 and May 2016• Includes associated fees, where applicable

Hotelsmethodology


DIGITAL PRICE INDEX

Domestic hotel prices increase by 2.6% YoY

* CPI category “Other lodging away from home including hotels and motels” used for comparison

• Between May 2015 and May 2016, DPI showscumulative inflation of 2.6% YoY


• Main price increases in California, Illinois andWashington

• Main price decreases in Florida, Arizona &Louisiana

Presenter

Presentation Notes

Main deflation in May for Orlando, Miami, Fort Lauderdale & Tampa


DIGITAL PRICE INDEX

International hotel prices increase 0.7% in May



• Main price increases for hotels in North Americaand ANZ

• Main price decreases in Asia and South America


Presenter

Presentation Notes

Main deflation in May for Cancun, San Juan, Dubai & Tokyo


• The data used contains transactions for ~300 K products between May 2014and May 2016• Products include small equipment and accessories (balls, gloves, uniforms) as well as large

equipment such as treadmills, weightlifting tools etc.

Sporting Goodsmethodology


DIGITAL PRICE INDEX

Sporting goods



• Main deflation in high-ticket sporting goods(above $350)

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Presentation Notes



• The data used contains transactions for ~249 K products between May 2014and May 2016• Products include toys, games as well as playground equipment

Toysmethodology


DIGITAL PRICE INDEX

Toys have inflation in May, driven by products below $70

* CPI category “Toys” used for comparison



• Main price increases for May were for toys pricedbelow $70

Presenter

Presentation Notes



Job Seeking Index(JSI)


JOB SEEKING INDEX

Methodology

Based on analysis of aggregated and anonymous data from more than 1 billion visits to U.S. employment-search websites and top employer career pages from May 2015 through May 2016. Adobe Marketing Cloud powers 20 of the top 30 U.S. employers**


JOB SEEKING INDEX

Online Job Seeking declines

• US online job seeking is down 8.1% YoY in May

• Government reported May Unemployment Rate at4.5% (down 15.1% YoY), due in large part to acontraction in the labor force


Digital Housing Index(DHI)


DIGITAL HOUSING INDEX

Methodology

Based on analysis of aggregated and anonymous data from more than 2 billion visits to U.S. housing search websites between May 2015 and May 2016.


DIGITAL HOUSING INDEX

Online housing search growth slows

• Online search for purchases and rentals up 14.8%YoY in May

• NAR reports existing home sales increased 1.7%YoY in April


DIGITAL PRICE INDEX

Presenter

Presentation Notes

Thank you.


Appendix

42

Presenter

Presentation Notes

Online price deflation timeframe: last 2 years


DIGITAL PRICE INDEX

Digital Price Index: Fisher Ideal Price Index

∑𝑖𝑖=1𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖𝑈𝑈𝑖𝑖𝑖𝑖−1∑𝑖𝑖=1𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖−1𝑈𝑈𝑖𝑖𝑖𝑖−1

∗∑𝑖𝑖=1𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖𝑈𝑈𝑖𝑖𝑖𝑖∑𝑖𝑖=1𝑛𝑛 𝑃𝑃𝑖𝑖𝑖𝑖−1𝑈𝑈𝑖𝑖𝑖𝑖

• The Fisher Ideal Price Index uses quantities purchased on the current period (month) and a previous period(previous month) to determine actual consumer’s preferences. Instead of assuming that consumerspreferences for what goods to buy are constant over a certain number of years, it is able to account for the factthat they are constantly changing what they buy.

𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹𝐹 𝜋𝜋𝑖𝑖 =


DIGITAL PRICE INDEX

Methodology Comparison: Fisher, Laspeyres and Paasche


DIGITAL PRICE INDEX

Annual Cumulative Inflation Rates


DIGITAL PRICE INDEX

Electronics Deflation in Detail

• The average price paid for an iPad mini (all models) has decreased by about 40% since the iPad mini 1 was introduced in November 2012.

• Although the initial price tag of new models remains constant at around $400, the automatic discount of previous models causes the average price to consistently fall: when the iPad mini 3 was introduced at an average price of $450, the price for the iPad Mini 2 was reduced by 25% to $300.

• This data only includes iPad minis sold in retail websites


DIGITAL PRICE INDEX

Inflation Rates by Price Bins, May (MoM)


DIGITAL PRICE INDEX

Inflation Rates by Price Bins, May (MoM) – Cont ’d


DIGITAL PRICE INDEX

Job Seeking Online: Traffic Sources

• Direct traffic to employment-listing websites ishigher than search traffic

• Search ranks second