Report: Adobe Digital Economy Project June 2016

© 2016 Adobe Systems Incorporated. All Rights Reserved.
ADOBE DIGITAL ECONOMY PROJECT
JUNE 2016 UPDATE

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved.
Adobe Digital Insights background
Based on analysis ofaggregated 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 Adobe
Marketing Cloud:
• $7.50ofevery $10spent online with top 500 U.S.retailers go through Adobe Marketing Cloud **
• Adobe Marketing Cloud powers:
• 20 ofthe top 30 U.S.employers
• 9 of10largest hotel groups
• 7of10largest airlines
**LatestIR Top 500 Report 2015
2
Adobe
Analytics
Adobe
Mobile Services

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 3
Digital Price Index
(DPI)
Job Seeking Index
(JSI)
Digital Housing Index
(DHI)

Main takeaways: June
 Our Digital Price Index (DPI) continues to see general deflation in the goods and services we currently cover. Only two categories have shown YoY inflation,
hotels (domestic) and nonprescription drugs. And even for these categories, the inflation rates are small (0.8% and 0.3%, respectively)
 Essential goods (such as groceries, nonprescription drugs and medical supplies) have seen significantly less deflation than non-essential goods (such as
electronics, sporting goods etc.)
 Prices for nonprescription drugs increased 0.5% in June relative to May, while prices for medical equipment and supplies decreased -0.2% during the same
period.
 Relative to June 2015, prices for the medical equipment and supplies category have decreased 0.6%, while prices for diabetics equipment specifically (testing
strips, measurement equipment etc.) have increased by 2.4%.
 After decreasing for four consecutive months, prices for groceries are down year-over-year.
 In the travel space, prices for Hotels (domestic) decreased significantly by 1% in June, bringing the year-over-year inflation rate down to 0.8% in June from 1.7% in
May
 Our Job Seeking Index shows that online job seeking is down in June, indicating that the labor market situation in May might have been temporary.
 Our Digital Housing Index shows that online housing seeking is down for the second consecutive month.
 For both the JSI and the DHI, Washington, D.C. has one of the highest rates of increase in online job and house seeking activity, likely due to the election year.
4

Economist Advisors
5
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

Methodology
6
Based 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 products sold online
BLS: Consumer Price Index Adobe: Digital Price Index
Quantities Sold No Yes
Products/quantities updated Every 4 years Daily
Number of Products 83 thousand (all categories)
2.2 million
(currently covered categories)
Data Collection Frequency Bi-Monthly Daily
Data Availability Monthly Daily
Offline Prices Yes No
Long history Yes No
All categories of spending Yes No
** Latest IR Top 500 Report 2015

Big data in DPI decreases uncertainty
7
DPI CPI
Appliances 0.15% 0.46%
Airfare 0.08% 0.51%
Computers 0.28% 0.49%
Furniture and bedding 0.07% 0.31%
Grocery 0.10% 0.12%
Hotels: domestic 0.04% 2.30%
Medical equipment and supplies 0.20% 0.39%
Nonprescription Drugs 0.18% 0.47%
Sporting Goods 0.12% 0.31%
Televisions 0.24% 0.60%
Toys 0.25% 0.59%

Inflation rates by price ranges
8
• Televisions have seen higher-ticket items
deflate faster than lower-ticket items
• In computers, models priced above $1,200
showing the least deflation in the category
• Price bins are determined based on the price the product had when originally
launched (first price).

The Importance of detail: Black Friday
9
• DPI captures the effect of major discount holidays
like Black Friday and Cyber Monday because it
measures quantities and does so in real-time
• Lowest prices for TVs in 2015 were Thanksgiving and
Black Friday
• Data demonstrates retailers trying to start sales
earlier – the Sunday and Monday before
Thanksgiving saw low prices

Measuring rapidly shifting consumer preferences
10
• Electronics see an average of 80% of
online spend on new* products**
• 16% of monthly online spend for groceries
on 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)

Special topics: Brexit and the Rio Olympics
11
• Prices for hotels in London decreased 3% MoM and
13.6% YoY
• Prices for flights to London (LHR) are down 8.5%
MoM and 12.1% YoY
• Prices for hotels in Rio de Janeiro increased 4.1%
MoM but are still down 3.3% YoY
• After being down significant down YoY in the early
months of 2016, prices for flights to Rio de Janeiro
(GIG) increased 17% MoM and are up 34% YoY

May 2016 Recap
12
MoM: May vs April MoM: May vs April Difference (percentage) Same Sign? YoY: Cumulative May 2015-2016 YoY: Cumulative May 2015-2016 Difference (percentage) Same Sign?
DPI CPI DPI vs. CPI
DPI vs.
CPI DPI CPI DPI vs. CPI
DPI vs.
CPI
Appliances -1.0% 0.0% -1.0% No -4.5% -2.9% -1.6% Yes
Computers -0.4% -0.9% 0.5% Yes -12.7% -7.8% -4.9% Yes
Flights 4.1% 4.6% -0.5% Yes -5.0% -3.2% -1.8% Yes
Furniture and bedding -0.8% -0.5% -0.3% Yes -3.4% -2.4% -1.0% Yes
Grocery -0.2% -0.5% 0.3% Yes 0.4% -0.7% 1.1% No
Domestic Hotels 0.7% 3.5% -2.8% Yes 2.6% 2.8% -0.1% Yes
Medical equipment and supplies -1.3% 0.7% -2.0% No -1.5% -1.4% -0.1% Yes
Nonprescription Drugs -0.8% 0.3% -1.1% No -0.2% -1.2% 1.0% Yes
Sporting Goods -0.4% -0.2% -0.2% Yes -5.2% 0.3% -5.5% No
Televisions -2.0% -1.6% -0.4% Yes -18.5% -17.4% -1.1% Yes
Toys 0.4% -0.6% 1.0% No -6.5% -8.0% 1.6% Yes

June 2016 Summary
13
• Main deflation in June:
• Tablets, Int’l Hotels, Televisions, Appliances
• Main inflation in June:
• Int’l airfare, Nonprescription drugs, Airfare, Toys
YoY MoM
Appliances -6.5% -1.8%
Computers -12.3% -1.6%
Electronics -10.5% -1.8%
Flights -4.2% 0.4%
Flights: domestic -6.6% -0.2%
Flights: international -0.6% 2.5%
Furniture and bedding -4.0% -1.3%
Grocery -0.1% -0.6%
Hotels: domestic 0.8% -1.0%
Hotels: international -4.0% -3.2%
Medical equipment and supplies -0.6% -0.2%
Nonprescription Drugs 0.3% 0.5%
Sporting Goods -5.1% -0.6%
Tablet -19.9% -3.5%
Televisions -17.5% -2.2%
Toys -4.9% 0.3%

Appliances
14
• Adobe DPI shows cumulative deflation of -6.5% YoY (June
2015 to June 2016)
• Main YoY price decreases for Appliances priced between
$600 and $1000
• For June 2016, prices decreased -1.8% vs May 2016 MoM
METHODOLOGY:
• The data used contains transactions for ~110 K products
• Products include large appliances such as fridges, ovens, washers, dryers as well as smaller appliances such as vacuums, mixers, blenders etc.

Airfare
15
2015 to June 2016)
• For June 2016, prices increased 0.4% vs May 2016 MoM
METHODOLOGY:
• The data used contains transactions for ~370 K flight routes
• Includes associated fees, where applicable

Airfare: domestic
16
2015 to June 2016)
• Main YoY price decreases in Washington, Tennessee,
Oregon
• Main YoY price increase in Florida
METHODOLOGY:

Airfare: international
17
2015 to June 2016)
• Main YoY price decreases are for flights destined to
Africa and Europe
• Main YoY price increases are for Latin America
METHODOLOGY:

Electronics
18
2015 to June 2016)
• Main YoY price decreases for Electronics priced between
$200 and $500
METHODOLOGY:
• The data used contains transactions for ~1 M products
• Products span across dozens of diﬀerent categories such as televisions, laptops, Blu-ray players, desktops, tablets, wearables, headphones, video games,printersetc..

Electronics: computers
19
2015 to June 2016)
• Main YoY price decreases for Computers priced between
$700 and $1200
METHODOLOGY:

Electronics: televisions
20
2015 to June 2016)
• Main YoY price decreases for Televisions priced greater
than $2000
METHODOLOGY:

Electronics: tablets
21
2015 to June 2016)
• Main YoY price decreases for Tablets priced between
$350 and $550
METHODOLOGY:

Furniture and Bedding
22
2015 to June 2016)
• Main YoY price decreases for Furniture and bedding
priced between $100 and $150
METHODOLOGY:
• Products include interior and exterior furniture, mattresses and other bedding products

Groceries
23
2015 to June 2016)
METHODOLOGY:
• Our dataset covers an estimated 30-40% of all online grocery purchases. It contains transactions for ~195k products
• 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

Hotels: domestic
24
METHODOLOGY:
• The data used contains transactions for ~250 K hotel properties
• Adobe DPI shows cumulative inflation of 0.8% YoY (June
2015 to June 2016)
• Main YoY price increases are in Nevada (parking
charges), Tennessee, Colorado and California
• Main YoY price decreases are in Illinois, New York,
Hawaii and Washington, D.C.

Hotels: international
25
2015 to June 2016)
• Main price decreases for hotels in Africa and South
America
• Main price increases for hotels in North America and
Oceania
METHODOLOGY:
• The data used contains transactions for ~250 K hotel properties

Medical Equipment and Supplies
26
2015 to June 2016)
• Main YoY price decreases for Medical equipment and
supplies for products priced more than $135
• Main YoY price increases for Medical equipment and
supplies for products priced between $0 and $10
• For diabetes-specific supplies and equipment, we found
YoY inflation rate of 2.4%
METHODOLOGY:
• The data used contains transactions for 6,000 products
• ” includes supportive and convalescent equipment, dressings and first aid kits, and medical equipment for general use

Nonprescription drugs
27
• Adobe DPI shows cumulative inflation of 0.3% YoY (June
2015 to June 2016)
• Main YoY price decreases for Nonprescription Drugs
priced greater than $40
• Main YoY price increases for Nonprescription Drugs
priced between $10 and $15
METHODOLOGY:
• The data used contains transactions for 16 K products
• Includes all non-prescription medicines taken by swallowing, applying on your skin (such as topicals), inhaling, as suppositories, or enemas.

Sporting Goods
28
2015 to June 2016)
• Main YoY price decreases for Sporting Goods priced
between $40 and $100
METHODOLOGY:
• Products include small equipment and accessories (balls, gloves, uniforms) as well as large equipment such as treadmills, weightlifting tools etc.

Toys
29
2015 to June 2016)
• Main YoY price decreases for Toys priced between $70
and $200
• Main YoY price increases for Toys priced greater than
$300
METHODOLOGY:
• Products include toys, games as well as playground equipment

Online Job Seeking declines
30
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**
• US online job seeking is down 14.1% YoY in June

Online housing search growth slows
31
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.
• Online search for purchases and rentals up 10.4% YoY
in June

Appendix
33

Digital Price Index: Fisher Ideal Price Index
∑𝑖𝑖=1
𝑛𝑛
𝑃𝑃𝑖𝑖𝑖𝑖 𝑈𝑈𝑖𝑖𝑖𝑖−1
∑𝑖𝑖=1
𝑛𝑛
𝑃𝑃𝑖𝑖𝑖𝑖−1 𝑈𝑈𝑖𝑖𝑖𝑖−1
∗
∑𝑖𝑖=1
𝑛𝑛
𝑃𝑃𝑖𝑖𝑖𝑖 𝑈𝑈𝑖𝑖𝑖𝑖
∑𝑖𝑖=1
𝑛𝑛
𝑃𝑃𝑖𝑖𝑖𝑖−1 𝑈𝑈𝑖𝑖𝑖𝑖
• 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 consumers
preferences for what goods to buy are constant over a certain number of years, it is able to account for the fact
that they are constantly changing what they buy.
𝐹𝐹𝐹𝐹𝐹𝐹 𝐹𝐹𝐹𝐹𝐹 𝜋𝜋𝑡𝑡 =

Methodology Comparison: Fisher, Laspeyres and Paasche

Annual Cumulative Inflation Rates

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

Inflation Rates by Price Bins, May (MoM)

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

Job Seeking Online: Traffic Sources
• Direct traffic to employment-listing websites is
higher than search traffic
• Search ranks second

Report: Adobe Digital Economy Project June 2016

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Report: Adobe Digital Economy Project June 2016