Report: Adobe Digital Economy Project June 2016

2. © 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

4. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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

5. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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

6. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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

7. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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%

8. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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).

9. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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

10. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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)

11. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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

12. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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

13. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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%

14. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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.

15. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Airfare 15 • Adobe DPI shows cumulative deflation of -4.2% YoY (June 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

16. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Airfare: domestic 16 • Adobe DPI shows cumulative deflation of -6.6% YoY (June 2015 to June 2016) • Main YoY price decreases in Washington, Tennessee, Oregon • Main YoY price increase in Florida • For June 2016, prices decreased -0.2% vs May 2016 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable

17. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Airfare: international 17 • Adobe DPI shows cumulative deflation of -0.6% YoY (June 2015 to June 2016) • Main YoY price decreases are for flights destined to Africa and Europe • Main YoY price increases are for Latin America • For June 2016, prices increased 2.5% vs May 2016 MoM METHODOLOGY: • The data used contains transactions for ~370 K flight routes • Includes associated fees, where applicable

18. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics 18 • Adobe DPI shows cumulative deflation of -10.5% YoY (June 2015 to June 2016) • Main YoY price decreases for Electronics priced between $200 and $500 • For June 2016, prices decreased -1.8% vs May 2016 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,printersetc..

19. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics: computers 19 • Adobe DPI shows cumulative deflation of -12.3% YoY (June 2015 to June 2016) • Main YoY price decreases for Computers priced between $700 and $1200 • For June 2016, prices decreased -1.6% vs May 2016 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,printersetc..

20. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics: televisions 20 • Adobe DPI shows cumulative deflation of -17.5% YoY (June 2015 to June 2016) • Main YoY price decreases for Televisions priced greater than $2000 • For June 2016, prices decreased -2.2% vs May 2016 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,printersetc..

21. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Electronics: tablets 21 • Adobe DPI shows cumulative deflation of -19.9% YoY (June 2015 to June 2016) • Main YoY price decreases for Tablets priced between $350 and $550 • For June 2016, prices decreased -3.5% vs May 2016 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,printersetc..

22. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Furniture and Bedding 22 • Adobe DPI shows cumulative deflation of -4.0% YoY (June 2015 to June 2016) • Main YoY price decreases for Furniture and bedding priced between $100 and $150 • For June 2016, prices decreased -1.3% vs May 2016 MoM METHODOLOGY: • The data used contains transactions for ~173 K products • Products include interior and exterior furniture, mattresses and other bedding products

23. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Groceries 23 • Adobe DPI shows cumulative deflation of -0.1% YoY (June 2015 to June 2016) • For June 2016, prices decreased -0.6% vs May 2016 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 for online shopping is drinks (nonalcoholic), while for oﬄine shopping it is meat

24. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Hotels: domestic 24 METHODOLOGY: • The data used contains transactions for ~250 K hotel properties • Includes associated fees, where applicable • 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. • For June 2016, prices decreased -1.0% vs May 2016 MoM

25. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Hotels: international 25 • Adobe DPI shows cumulative deflation of -4.0% YoY (June 2015 to June 2016) • Main price decreases for hotels in Africa and South America • Main price increases for hotels in North America and Oceania • For June 2016, prices decreased -3.2% vs May 2016 MoM METHODOLOGY: • The data used contains transactions for ~250 K hotel properties • Includes associated fees, where applicable

26. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Medical Equipment and Supplies 26 • Adobe DPI shows cumulative deflation of -0.6% YoY (June 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 June 2016, prices decreased -0.2% vs May 2016 MoM • 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

27. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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 • For June 2016, prices increased 0.5% vs May 2016 MoM 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.

28. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Sporting Goods 28 • Adobe DPI shows cumulative deflation of -5.1% YoY (June 2015 to June 2016) • Main YoY price decreases for Sporting Goods priced between $40 and $100 • For June 2016, prices decreased -0.6% vs May 2016 MoM METHODOLOGY: • The data used contains transactions for ~300 K products • Products include small equipment and accessories (balls, gloves, uniforms) as well as large equipment such as treadmills, weightlifting tools etc.

29. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Toys 29 • Adobe DPI shows cumulative deflation of -4.9% YoY (June 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 • For June 2016, prices increased 0.3% vs May 2016 MoM METHODOLOGY: • The data used contains transactions for ~249 K products • Products include toys, games as well as playground equipment

30. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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

31. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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

34. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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 =

37. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. 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

40. © 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved. Job Seeking Online: Traffic Sources • Direct traffic to employment-listing websites is higher than search traffic • Search ranks second