Adobe Digital Economy Project - December 2016

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

© 2016 Adobe Systems Incorporated. All Rights Reserved.© 2016 Adobe Systems Incorporated. All Rights Reserved.
Main takeaways: December
2
 The last month of 2016 shows several categories with MoM inflation between November and December, including televisions (7.8%), appliances (6.0%),
tablets (5.4%), electronics (2.8%), and toys (2.7%)
 The Adobe DPI introduces three new categories this month:
 Alcoholic beverages (0.5% YoY inflation, 0.0% inflation MoM). Within alcohol, beer had the highest YoY inflation (2.9%), while spirits and wine both had YoY deflation (-0.6%)
 Auto parts (-1.8% deflation YoY, -0.1% deflation MoM)
 Tools & home improvement products (-2.1% deflation YoY, 0.7% inflation MoM)
 At the close of the holiday shopping season, prices increased between November and December for all categories (except toys) by a larger margin in 2016 than
in 2015 (1.9% average increase in 2015 vs. 3.55% increase in 2016)
 In the U.K., computer prices rose as they did in the U.S. while televisions bucked the U.S. trend and saw MoM price declines in December, likely reflecting lower purchases of
televisions in the U.K. over the same time period
 Despite these large MoM increases, almost all categories show continued cumulative deflation year-over-year, especially in televisions (-19.8%), tablets (-16.1%),
electronics (-9.7%), and toys (-6.9%)
 Groceries, a category that represents the largest share of consumer spending in the DPI showed 0.5% inflation MoM
 Contributing to inflation this month in groceries include MoM price increases in ice cream (2.0%), bakery products (1.7%), and milk (1.2%)
 In the U.K., the Adobe DPI shows significant MoM inflation for computers (3.9%), slight inflation for groceries (0.4%) and slowing deflation (0.7%) for televisions

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:
• $7.50 ofevery $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, 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

© 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 Methodology
(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: Digital Price 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

Methodology – U.S.
8
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: Digital Price 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
9
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
10
• Televisions have seen higher-ticket items
deflate faster than lower-ticket items in 2015
• For computers, mid-range models priced
between $700 and $1,200 showed the
highest deflation last year
*Price bins are determined based on the price the product had when originally launched
(first price).

The Importance of detail: Black Friday discount comparisons
11
• DPI captures the effect of major discount holidays
like Black Friday and Cyber Monday because it
measures quantities and does so in real-time
• Prices online for Televisions dropped later in
November 2016 than in 2015, with more discounts
during the Black Friday week (Monday 11/21 through
Cyber Monday), which accounted for more than half
of all Televisions units purchased between
November and December
• Television prices then increased more in December
2016 than they did in December 2015, a sign that
retailers were able to capitalize on later shopping

Measuring rapidly shifting consumer preferences
12
• Electronics see an average of 77% of online
spend on new* products**
• 17% 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)

Digital Price Index Findings
(DPI)

Adobe DPI Findings in the United Kingdom
14
• Our Digital Price Index in the U.K. for groceries shows that grocery
prices have deflated by 1.9% YoY in December. Prices increased 0.4%
between November and December, the second largest MoM increase
in food prices in the U.K over the past 12 months
• For computers, the DPI reveals a YoY deflation of 4.3% while MoM
prices increased by 3.9%, by far the largest (and first double-digit) MoM
price increase in the U.K.
• Main YoY price increases for computers priced between £1,200 and
£1,600
• Main MoM inflation also for computers priced between £1,200 and
£1,600 (6.5%)
• TV prices continue to fall YoY; the DPI shows YoY deflation of 23.2%
between December 2015 and December 2016. Prices are declining
slower this month (down 0.7% in December) than they were between
October and November (down 6.0%) but still are lower than in
November (unlike in the U.S.) Sluggish T.V. sales in the U.K. in
December could explain the difference.
• Main YoY price declines were for televisions priced over £ 2,000
• Main MoM deflation for TVs priced above £ 2,000 (-3.4%)

November 2016 U.S. Recap
15
MoM: October
to November
MoM: October
to November
Difference
(percentage)
Same
Sign?
YoY: Cumulative
November 2015-2016
YoY: Cumulative
November 2015-2016
Difference
(percentage)
Same
Sign?
DPI CPI DPI vs. CPI DPI vs. CPI DPI CPI DPI vs. CPI DPI vs. CPI
Appliances -6.7% -2.1% -4.6% Yes -6.0% -4.1% -1.9% Yes
Alcohol*** -0.6% -0.3% -0.3% Yes -0.3% 0.6% -0.9% No
Auto Parts*** -0.8% -0.8% 0.0% Yes -2.0% -1.4% -0.6% Yes
Computers -2.1% -0.3% -1.8% Yes -8.1% -6.7% -1.4% Yes
Flights 1.6% 1.4% 0.2% Yes -1.6% -6.8% 5.2% Yes
Furniture and bedding -2.4% -0.7% -1.7% Yes -3.3% -2.7% -0.6% Yes
Grocery -0.5% -0.5% 0.0% Yes -1.3% -2.2% 0.9% Yes
Hotels -4.5% -7.3% 2.8% Yes 4.3% 1.8% 2.5% Yes
Medical equipment and supplies 0.8% 0.3% 0.5% Yes 0.7% -0.2% 0.9% No
Nonprescription Drugs 0.0% -0.2% 0.2% No 0.5% -1.4% 1.9% No
Sporting Goods -4.5% -0.7% -3.8% Yes -5.6% -1.7% -3.9% Yes
Televisions -12.9% -5.5% -7.4% Yes -23.0% -24.8% 1.8% Yes
Tools & Home Improvement*** -1.3% 0.1% -1.4% No -2.4% -1.0% -1.4% Yes
Toys -4.5% -0.8% -3.7% Yes -7.0% -9.4% 2.4% Yes
Weighted Average Inflation* -1.2% -0.8% -0.4% Yes -1.7% -2.5% 0.8% Yes
Weighted Aggregate Inflation, Less
Grocery** -2.2% -1.3% -1.0% Yes -2.3% -2.9% 0.7% Yes
* Weighted average inflation is calculated using CPI-U relative component weights (2014-2015) across the shared categories in the DPI and the CPI
** Grocery is a large component of the current CPI weights, so changes in grocery prices drive the majority of weighted average inflation. As we add more categories (like housing, auto etc.), these
aggregate numbers will change.
*** New categories introduced in this month’s Adobe DPI

December 2016 U.S. Summary
16
• Main deflation in December:
• Domestic hotels, international hotels, domestic
flights
• Main inflation in December:
• Televisions, appliances, tablets, electronics, toys,
sporting goods
YoY MoM
Alcohol*** 0.5% -2.1%
Appliances -4.6% 6.0%
Auto Parts*** -1.8% -0.1%
Computers -6.5% 1.2%
Electronics -9.7% 2.8%
Flights 3.3% -0.7%
Domestic Flights 1.8% -1.1%
Intl Flights 3.5% 0.6%
Furniture and bedding -3.8% 1.7%
Grocery -0.7% 0.5%
Domestic Hotels 4.1% -1.6%
Intl Hotels -2.6% -1.1%
Medical equipment and supplies -1.4% -0.2%
Nonprescription Drugs -0.2% 0.4%
Sporting Goods -5.7% 2.1%
Tablet -16.1% 5.4%
Televisions -19.8% 7.8%
Tools & Home Improvements*** -2.1% 0.7%
Toys -6.9% 2.7%
Weighted Average Inflation* -1.1% 0.5%
Weighted Aggregate Inflation, Less Grocery** -1.7% 0.6%
* Weighted average inflation is calculated using CPI-U relative component weights (2014-2015) across the shared categories in the DPI and the CPI
** Grocery is a large component of the current CPI weights, so changes in grocery prices drive the majority of weighted average inflation. As we add more categories (like housing, auto etc.), these aggregate
numbers will change.
*** New categories introduced in this month’s Adobe DPI

Alcohol
17
• Adobe DPI shows cumulative inflation of 0.5% YoY
(December 2015 to December 2016)
• Main price increases for Alcohol priced below $10, with main price
decreases for Alcohol priced between $40 and $80
• Prices for Beer show YoY inflation of 2.9%
• Prices for Spirits show YoY deflation of -0.6%
• Prices for Wine show YoY deflation of -0.6%
• For December 2016, prices decreased -2.1% vs November
2016 MoM
METHODOLOGY:
• The data used reflect transactions for ~150 K products

Auto Parts
18
• Adobe DPI shows cumulative deflation of -1.8% YoY
• Main YoY price decreases for Auto Parts priced greater than
$200
2016 MoM
METHODOLOGY:
• The data used reflect transactions for ~1.3 M products

Airfare
19
2016 MoM
METHODOLOGY:
• The data used contains transactions for ~370 K flight routes
• Includes associated fees, where applicable

Airfare: domestic
20
• Largest price increases in airfare were to Ohio, with YoY inflation
of 9.7%
• Other large price increases for airfare were to Pennsylvania,
with YoY inflation of 8.4%
• Other significant price decreases for airfare are to Georgia, with
YoY deflation of -0.7%
• Largest price decreases are to airfare to Colorado, with YoY
deflation of -1.7%
2016 MoM
METHODOLOGY:

Airfare: international
21
• Adobe DPI shows cumulative inflation of 3.5% YoY (December
2015 to December 2016)
• Largest price increases for airfare were to South America, with
inflation of 17.7% YoY
• Other price increases for airfare include Oceania, with inflation of
2.4% YoY
• Largest price decreases were to Europe, with deflation of -5.7% YoY
• For December 2016, prices increased 0.6% vs November 2016
MoM
METHODOLOGY:

Electronics
22
• Main YoY price decreases for Electronics priced greater than
$1500
• For December 2016, prices increased 2.8% vs November
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..

Electronics: computers
23
• Main YoY price decreases for Computers priced between $700
and $1200
2016 MoM
METHODOLOGY:

Electronics: televisions
24
• Main YoY price decreases for Televisions priced greater than
$2000
2016 MoM
METHODOLOGY:

Electronics: tablets
25
• Main YoY price decreases for Tablets priced between $550 and
$900
2016 MoM
METHODOLOGY:

Furniture and Bedding
26
• Main YoY price decreases for Furniture and bedding priced
between $100 and $150
2016 MoM
METHODOLOGY:
• The data used contains transactions for ~173 K products
• Products include interior and exterior furniture, mattresses and other bedding products

Groceries
27
• Prices for eggs show YoY deflation of -28.8%
• Prices for meat and meat products show YoY deflation
of -1.9%
• Prices for bakery products show YoY inflation of 2.2%
2016 MoM
• Prices for ice cream show MoM inflation of 2.0%
• Prices for bakery products show MoM inflation of 1.7%
• Prices for milk shows MoM inflation of 1.2%
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
28
METHODOLOGY:
• The data used contains transactions for ~250 K hotel properties
• Prices for hotels in Nevada show the highest inflation
among states measured at 11.8% YoY
• Prices for hotels in Florida show the lowest inflation
among states measured at 1.3% YoY
2016 MoM

Hotels: international
29
METHODOLOGY:
• The data used contains transactions for ~250 K hotel properties
• Largest prices increases are for hotels in North America,
with 5.4% YoY inflation
• Largest price decreases are for hotels in Asia, with YoY
deflation of -3.6%
• For December 2016, prices decreased -1.1% vs November 2016
MoM

Medical Equipment and Supplies
30
• Main YoY price decreases for Medical equipment and supplies
priced between $45 and $135
• Prices for diabetes-related medical equipment and supplies
shows YoY inflation of 1.9%
2016 MoM
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
31
• Main YoY price decreases for Nonprescription Drugs priced
between $0 and $10
• Main YoY price increases for Nonprescription Drugs priced
between $15 and $25
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.

Sporting Goods
32
• Main YoY price decreases for Sporting Goods priced between
$40 and $100
2016 MoM
METHODOLOGY:
• Products include small equipment and accessories (balls, gloves, uniforms) as well as large equipment such as treadmills, weightlifting tools etc.

Tools & Home Improvement
33
• Main YoY price decreases for Tools & Home Improvement priced
greater than $600
2016 MoM
METHODOLOGY:

Toys
34
• Main YoY price decreases for Toys priced between $70 and $200
2016 MoM
METHODOLOGY:
• Products include toys, games as well as playground equipment

Job Seeking Index
(JSI)

Online job seeking continues YoY declines
36
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
• Adobe Marketing Cloud powers 20 of the top 30 U.S. employers**
US online job seeking is down 14.5% YoY in December

Digital Housing Index
(DHI)

Online housing search grows YoY
38
METHODOLOGY:
• Based on analysis of aggregated and anonymous data from more than 2 billion visits to U.S. housing search websites
Online search for purchases and rentals is up 13% YoY in
December.

Appendix
39

Inflation rates by price ranges, cont’d (tablets)
40
• Tablets have seen higher-ticket items deflate
faster than lower-ticket items
• The greatest price decrease and increase in
November and December were for tablets
priced between $350 and $600
(first price).

Inflation rates by price ranges, cont’d (televisions)
41
• The highest priced televisions have have
seen faster deflation than lower priced items
• The greatest price decrease in November
and increase in December were for TVs
priced between $600 and $1,000
(first price).

Inflation rates by price ranges, cont’d (televisions)
42
• Mid-range computers have seen faster
deflation than lower and higher priced
models
• The greatest price decrease in November
were for mid range computers between
$700 and $1,200 while the greatest price
increase in December were for lower priced
models between $300 and $700
(first price).

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

Adobe Digital Economy Project - December 2016

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