Adobe Digital Economy Project - September 2016

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

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved.
Main takeaways: September
2
§ In the wake of this summer’s Brexit vote, the U.K. appears to be an attractive destination for travelers. International flights to London Heathrow and London
Gatwick are down 8.6% and 8.5% month over month, in contrast to 2.3%decrease in overall prices for all international flights. Hotels in the UK saw a MoM
increase of 3.1% though they are down 18.3%YoY compared to September of 2015
§ Deflation is slowing across the U.K. in select DPI categories, revealing the first signs of inflationary pressures post-Brexit
§ Lower prices for flights to the U.K.as well as MoM declines in prices of flights to Madrid (-5.1%) and Paris (-4.3%) are making flights to Europe cheaper MoM (-
5.5%) than international flights,which saw MoM deflation of only 2.3%
§ Labor Day sales in the U.S. contributed to continued deflation for appliances, TVs, and tablets. Appliance prices are down 1.5% between August and September,
while TV prices are down 1.0% and tablets 1.3%. TVs, computers, tablets, and electronics have seen double-digit YoY deflation
§ Significant MoM inflation occurred in domestic flights (up 2.4%) where airlines are facing higher fuel prices and employment costs and for computers (1.4%),
though both categories are stilldown YoY (7.0% and 10.3%). Other categories including international hotels, grocery, medical equipment, and non prescription
drugs saw prices rise MoM
§ U.S. results signal continued economic stability and low inflation:
§ In the U.S. DPI domestic airfare prices are up from August 2.4% but still down 7.9% from last September, YoY
§ Our U.S. Job Seeking Index shows that online job searches have decreased, reflecting fewer job seekers in the labor market
§ Our U.S. Digital Housing Index shows the largest YoY increase since April in online searches for home purchases and rentals, revealing a strengthening
housing market moving into the fall

Adobe Digital Insights Background
Based on analysisofaggregated and anonymous datafrom Adobe Marketing Cloud:
• AdobeAnalytics and Adobe Mobile Services
Thousands ofbrands worldwide including two thirds of Fortune 50 companiesrely 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
3
Adobe
Analytics
Adobe
Mobile Services

Economist Advisors
4
Austan Goolsbee,UniversityofChicago
§ 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

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 5
Digital Price Index
(DPI)
Job Seeking Index
(JSI)
Digital Housing Index
(DHI)

Digital Price Index
(DPI)

Methodology – U.K.
7
Based on analysis of aggregated and anonymous data
• Fisher Ideal Price Index
• $6 of every $10 spent online with top 100 European retailers go through Adobe Marketing Cloud **
• Based on analysis 1 billion website visits and 100k products sold online
ONS: Consumer Price Index Adobe: DigitalPrice Index
Quantities Sold No Yes
Products/quantities updated Annually Daily
Number of Products 180,000
100k
(currently covered categories)
Data Collection Frequency Monthly Daily
Data Availability Monthly Daily
Offline Prices Yes No
Long history Yes No
All categories of spending Yes No
** Latest IR U.K. Top 500 Report 2015

Adobe DPI in the United Kingdom
8
• Our Digital Price Index in the U.K. for groceries shows that grocery
prices have deflated by 2.9% YoY in September. Prices dropped 0.52%
between August and September, continuing the trend of lowering food
prices while the UK still enjoys pre-Brexit terms of trade with the EU
• For computers, we see YoY deflation of 13.7%. Deflation in this category
appears to be slowing, as deflation slowed MoM from -1.0% in July to -
0.7% in August to 0.3% in September.
• Similarly TV prices in the UK continue to fall; the DPI shows YoY
deflation of 24.6% between September 2015 to September 2016.
Deflation appears to be slowing in this category as well as deflation
MoM was 1.3% between August and September, down from 2.9%
between July and August.

Methodology – U.S.
9
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
BEA: Personal Consumption
Expenditures
Adobe: DigitalPrice Index
Quantities Sold No No Yes
Products/quantities updated Every 2 years Monthly Daily
Number of Products 83 thousand (all categories) 83 thousand (all categories)
2.2 million
(currently covered categories)
Data Collection Frequency Bi-Monthly Monthly Daily
Data Availability Monthly Monthly Daily
Offline Prices Yes Yes No
Long history Yes Yes No
All categories of spending Yes Yes No
Index Type Laspeyeres Fisher Ideal Fisher Ideal
** Latest IR Top 500 Report 2015

Big data in DPI decreases uncertainty
10
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
11
• 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
12
• 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
13
• Electronics see an average of 80% of online
spend on new* products**
• 16% of monthlyonline spendfor 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)

August 2016 Recap
14
MoM: August
to Septemer
MoM: August
to September
Difference
(percentage)
Same
Sign?
YoY: Cumulative August
2015-2016
YoY: Cumulative August
2015-2016
Difference
(percentage)
Same
Sign?
DPI CPI DPI vs. CPI DPI vs. CPI DPI CPI DPI vs. CPI DPI vs. CPI
Appliances 1.8% -0.9% 2.7% No -5.7% -2.9% -2.8% Yes
Computers -0.4% -0.7% 0.3% Yes -12.2% -6.9% -5.3% Yes
Domestic Hotels -2.1% -1.5% -0.6% Yes 2.3% 2.5% -0.2% Yes
Flights -3.6% -5.5% 1.9% Yes -3.2% -3.7% 0.4% Yes
Furniture and bedding 0.2% -1.2% 1.4% No -3.3% -2.9% -0.5% Yes
Grocery 0.0% 0.0% 0.0% No -0.9% -1.9% 1.0% Yes
Medical equipmentand supplies -1.0% -0.2% -0.8% Yes -1.3% -0.1% -1.2% Yes
Nonprescription Drugs -0.8% 0.2% -1.0% No -0.3% -1.2% 0.9% Yes
Sporting Goods -0.5% -0.3% -0.2% Yes -5.7% -1.8% -3.9% Yes
Televisions -2.9% -1.9% -1.0% Yes -20.9% -20.5% -0.4% Yes
Toys 0.3% -0.1% 0.4% No -5.6% -8.1% 2.5% Yes

September 2016 Summary
15
• Main deflation in September:
• International flights, appliances, tablets,
televisions
• Main inflation in September:
• Domestic flights, computers
YoY MoM
Appliances -6.1% -1.5%
Computers -10.2% 1.4%
Electronics -10.7% -0.5%
Flights -3.1% 1.3%
Domestic Flights -5.7% 2.4%
Intl Flights 0.0% -2.3%
Furniture and bedding -3.4% -0.1%
Grocery -1.0% 0.2%
Domestic Hotels 1.0% -0.3%
Intl Hotels -3.7% 0.1%
Medical equipment and supplies -0.9% 0.3%
Nonprescription Drugs 0.2% 0.1%
Sporting Goods -5.5% -0.4%
Tablet -20.4% -1.3%
Televisions -20.8% -1.0%
Toys -6.0% -0.8%

Appliances
16
• Adobe DPI shows cumulative deflation of -6.1% YoY
(September 2015 to September 2016)
• Main YoY price decreases for Appliances pricedbetween
$600 and $1000
• For September 2016, prices decreased -1.5% vs August 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 smallerappliances such as vacuums, mixers, blenders etc.

Airfare
17
• For September 2016, prices increased 1.3% vs August 2016
MoM
METHODOLOGY:
• The data used contains transactions for~370 K flight routes
• Includes associated fees, where applicable

Airfare: domestic
18
• Main YoY deflation for flights Oregon, Illinois and
Colorado
• Main YoY inflation for Hawaii, Florida
MoM
METHODOLOGY:

Airfare: international
19
• Adobe DPI shows cumulative inflation of 0.0% YoY (September
2015 to September 2016)
• Main YoY deflation for flights to Europe and Africa
• Main YoY inflation for flights to South America
MoM
METHODOLOGY:

Electronics
20
• Main YoY price decreases for Electronics priced between
$200 and $500
MoM
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,printers etc..

Electronics: computers
21
• Main YoY price decreases for Computers pricedbetween
$700 and $1200
MoM
METHODOLOGY:

Electronics: televisions
22
• Main YoY price decreases for Televisions priced greater
than $2000
MoM
METHODOLOGY:

Electronics: tablets
23
• Main YoY price decreases for Tablets priced between
$350 and $550
MoM
METHODOLOGY:

Furniture and Bedding
24
• Main YoY price decreases for Furniture and bedding
priced between $100 and $150
MoM
METHODOLOGY:
• Products include interior and exterior furniture, mattresses and other bedding products

Groceries
25
MoM
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 foronline shopping is drinks (nonalcoholic), while foroﬄine shopping it is meat

Hotels: domestic
26
METHODOLOGY:
• The data used contains transactions for~250 K hotel properties
• Adobe DPI shows cumulative inflation of 1.0% YoY
• Main YoY inflation for Nevada, Hawaii, Colorado and
Tennessee
• Only state showing YoY deflation is New York
MoM

Hotels: international
27
METHODOLOGY:
• The data used contains transactions for~250 K hotel properties
• Main YoY inflation for Oceania and North America
destinations
• Main YoY deflation for African and European destinations
MoM

Medical Equipment and Supplies
28
• Main YoY price decreases for Medical equipment and
supplies priced greater than $135
• Main YoY price increases for Medical equipmentand
supplies priced between $0 and $10
MoM
METHODOLOGY:
• The data used contains transactions for6,000 products
• ” includes supportive and convalescent equipment, dressings and first aid kits, and medical equipment forgeneral use

Nonprescription drugs
29
• Adobe DPI shows cumulative inflation of 0.2% YoY
• Main YoY price decreases for Nonprescription Drugs
priced greater than $40
• Main YoY price increases for Nonprescription Drugs
priced between $15 and $25
MoM
METHODOLOGY:
• The data used contains transactions for16 K products
• Includes all non-prescription medicines taken by swallowing, applying on yourskin (such as topicals), inhaling, as suppositories, or enemas.

Sporting Goods
30
• Main YoY price decreases for SportingGoods priced
between $40 and $100
MoM
METHODOLOGY:
• Products include small equipment and accessories (balls, gloves, uniforms) as well as large equipment such as treadmills, weightlifting tools etc.

Toys
31
• Main YoY price decreases for Toys priced between $70
and $200
MoM
METHODOLOGY:
• Products include toys, games as well as playground equipment

Job Seeking Index
(JSI)

Online job seeking sees steep decline
33
METHODOLOGY:
• Based on analysis of aggregated and anonymous data frommore than 1 billion visits to U.S. employment-search websites and top employercareer pages
• Adobe Marketing Cloud powers 20 of the top 30 U.S. employers**
• US online job seeking is down 17.9 % YoY in August
• This is indicative of a strong labor market and fewer
workers looking for jobs. These data reinforce recent
findings from the U.S. Department of Labor stating
that U.S. jobless claims are the lowest in decades

Digital Housing Index
(DHI)

Online housing search growth rises
35
METHODOLOGY:
• Based on analysis of aggregated and anonymous data frommore than 2 billion visits to U.S. housing search websites
Online search for purchases and rentals up 17.0% YoY in
September, the strongest housing market in the DHI
since April 2016, signaling that the housing sector is
picking up more steam heading into the fall

Appendix
36

Digital Price Index: Fisher Ideal Price Index
∑ 𝑃#$ 𝑈#$&'
(
#)'
∑ 𝑃#$&' 𝑈#$&'
(
#)'
∗
∑ 𝑃#$ 𝑈#$
(
#)'
∑ 𝑃#$&' 𝑈#$
(
#)'
• The Fisher Ideal Price Index uses quantities purchasedon the current period (month) and a previous period
(previous month) to determine actualconsumer’s preferences. Insteadof 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.
𝐹𝑖𝑠ℎ𝑒𝑟 𝜋$ =

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

Adobe Digital Economy Project - September 2016

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