News Limited - Digital Insights

News Digital Media Insight Report
A quarterly analysis of what Australians are doing online

ANXIETY,
THE INTERNET
AND THE
HIP-POCKET
Australian
Purchasing
Behaviour In A
Changing World

November 2008


Introduction

It’s anxious times.

Everything’s changing. Especially our attitude to money, how we spend it - and where.

Just as consumers are becoming more careful about their money, increasingly looking for the best deals before
parting with their hard-earned cash, business is also looking to find the most cost effective way to deliver results
from their marketing budgets.

These trends are nothing new during an economic downturn. But what is new is that this is the first time we
have experienced this set of circumstances during the digital age.

Since the last major downturn in 1991, the way we access news and information has been transformed. The
world wide web was in its infancy. Amazon had not started to sell books. Online banking was still several years
away. The PhD research project that became Google had not yet begun.

Now, the internet is a major sales channel for some of the world’s biggest retailers and has produced a
generation of online retailers building brands selling to the world without a shopfront. Online sales in the United
States are expected to reach $204 billion this year.1 And regardless of whether consumers buy online or in-store,
they are doing their research online - actively researching brands, products and services across thousands of
websites to inform their purchasing decisions.

What is happening to this new form of purchasing as we confront the economic downturn is the subject of this
second News Digital Media Insight Report - Anxiety, The Internet And The Hip-pocket.

As events have unfolded over the past eight weeks, we have surveyed NDM’s audience of 9.9 million unique
browsers2 about their shopping habits, how they have changed and how they expect them to change.3 We
spoke in depth with groups of users to better understand why.4 And we’ve drawn on the experience of our News
Corporation colleagues and friends around the world about how deteriorating economic conditions are affecting
online spending behaviour, and the opportunities emerging to reach consumers in this increasingly uncertain
world.

We found some surprises, particularly around the resilience and ongoing confidence of our audience. So while
they are increasingly dollar sensitive and more focused on value, they also continue to put a high value on their
time. And they plan to continue - and in many cases increase - their spending over the months ahead.

We know that our audience is not representative of the entire Australian population. They are more affluent and
motivated, spending twice as long online as the average Australian.5

But they are a reliable barometer of how online purchasing behaviour will be impacted by the changes we are
experiencing now, and provide us with guidance about how to best meet their needs in the months ahead.

Richard Freudenstein
Chief Executive Officer
News Digital Media

1 Forrester Research, Inc. The State of Retailing Online 2008: Marketing Report http://www.forrester.com/ER/Press/Release/0,1769,1205,00.html
2 Nielsen Online, Market Intelligence, Australian domestic traffic – publisher level September 2008.
3 Survey conducted from September 11 to September 25 2008 by Core Data on behalf of News Digital Media. 5,343 survey respondents were self-selected from existing users of all News Digital Media sites.
4 Focus groups held in Sydney by Roadmap on behalf of News Digital Media on October 1 & 2 2008
5 News Digital Media Insight Report July 2008


Economic perceptions and concerns

• There is broad acknowledgement that economic conditions are deteriorating but no sense of “doom and gloom’.
58 per cent are worried about the future and almost 60 per cent say the economy is going to get worse before
it gets better. But just 16 per cent are worried about losing their jobs with 32 per cent admitting to struggling
financially.

“It’s having little direct impact on me in terms of my financial situation, apart from the interest rate on my
savings account and stuff.” 6

• Some feel their circumstances have been getting tougher for a long while, with fuel and grocery prices having
a greater impact then concerns about the economy, job security or housing prices. 84 per cent believe that
everything costs more now.

Percentage of respondents agreeing with the statement

90 84.3

80
67.7
70
62.6
57.3 57.6
60 54.0

50
%
40 34.7 36.2
32.2
30 26.9
23.3

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10 6.6 7.1

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“It hasn’t really affected me in the last six months. I don’t have a mortgage. I have very little debt. Yeah, to be
honest, I don’t particularly care.”

6 Unless otherwise referenced, quotes are from comments made by NDM users during group discussions in October 2008.

3
For media enquiries about the News Digital Media Insight report, please contact
Luke Dean, senior public relations executive, News Digital Media on 02 8114 7325 or 0401 535 433


Economic perceptions and concerns

• 74 per cent are concerned enough to say they
“While the newspaper headlines are screaming ‘doom are being more careful in how they spend
and gloom’, there has been a definite upturn in retail money, but they are not sufficiently concerned
activity during the past few months.” to stop spending. Most respondents have
increased their expenditure in the last six
Paul Greenberg, CEO Deals Direct, Australia’s largest months and predict that they will continue to do
online department store so in the next six months.

Recession? Not in my world

• Our audience is struggling with the concept that Australia is heading
towards a recession and what that may mean for them. They are FAST FACT
vaguely concerned about the future but are not making any major Falling petrol prices are
changes to their behaviour. good news for 52 per cent of
respondents who said they’d
“I’m not an expert, but I’ve just got that feeling and I’m sure people will spend more if fuel came down.
be okay.”

“There hasn’t been a whole lot of change on a personal level.”

• Younger consumers are really unsure about what a recession could mean for them, having not really
experienced a true recession as mature adults. Some remember the last recession and its impact on their
parents, but have no real sense of major deprivation.

“The last recession didn’t really affect me or my family.”

• They sense that Australia is isolated and buffered from the
global crisis by Asian exports and strong regulation.

“With what’s going on in America, you have a sense of
confidence in the Australian system. We will get a bit of an
effect from it but we do seem to be buffered by the regulations
we’ve got in place but America doesn’t seem to have as much
regulation.”

4


Online behaviour - Now

• Nearly half the respondents indicated that they are now spending more time online compared to six months
ago – with an extra 1 hour and 35 minutes additional time each day on average.

Percentage of respondents spending more, the same or less time online.

60

50 49.1

42.7

40

% 30 Average
additional time
spent
1:35 (H:M)

20

10 8.3
Average less time
spent
1:58 (H:M)
0
More Less The same

• Their use of the internet is seamless. It’s become second nature to check out prices on the internet before any
major purchase or to read the news. White-collar workers are online at work and are online again at the end of
the day to wind down, completely blurring any distinction between work-time and down-time.

“I spend eight hours a day on the computer and then I go home and it’s like ‘Oh, I’ll have some downtime now
and go on the internet’. It’s a really big part of my life.”

• The top 5 online activities were emailing, reading news and weather, personal banking, shopping research
and general non work/school related research. Keeping up with the news, sport and weather is most
important for those aged 30-49. The importance of researching products and services tended to increase with
age and income.

“If I’m looking at news nowadays, more or less I’m going to a website.”

5


Online Behaviour - Now

Percentage of respondents undertaking online activities in a typical week

Using internet email 94.5

Reading news/ weather 82.0

Personal banking 73.5

Shopping - Research 69.8

Research and information gathering (not work or school related) 67.5

Shopping - Buying 49.2

Searching maps 44.4

Using social networking sites 38.8

Photos 37.9

Music 35.7

Using instant messaging 32.4

Looking for a job 24.9

Playing online games 21.5

TV & video 19.4

Reading or contributing to blogs 15.3

Shopping - Selling 12.8

0 10 20 30 40 50 60 70 80 90 100
%

“The internet is absolutely crucial for what I do at work and at play.”

What annoys our audience about the internet?
- Slow download speeds and limits – especially when it comes to video
- Online grocery stores which don’t have stock or are more expensive than in-store
- The delayed gratification of having to wait for a product purchased online to arrive
- Discovering you paid more than retail
- Video ads which start with the sound on (where it’s hard to find the mute button)

6


Shopping Online - Now

Q. Thinking about researching products and services online, which of the following products and services
have you researched or bought online in the past 3 months?

Category Researched Bought Category Researched Bought

Travel 82.1% 45.7% Homewares 22.7% 8.7%

Entertainment 55.8% 28.3% Gambling 11.1% 7.8%
Bookings
Books 42.2% 21.9% Fast Food 12.9% 7.4%
Delivery
DVDs 39.3% 21.1% Alcohol 14.2% 6.3%

Subscriptions & 29.5% 17.6% Home 30.8% 6.2%
Memberships Entertainement
Fashion 35% 16.6% Groceries 17.3% 4.5%

Music Downloads 27.4% 15% Car 38.4% 3.2%

Insurance 34.9% 14.4% White Goods 22% 3.2%

Cosmetics 24.3% 13% Mobile Ring Tones 4.7% 2.3%

Games & 25.8% 12.8% Jobs 38.1% n/a
Software
Technology 41% 12.3% None 1.3% 17.4%

Financial 37.3% 9.4%
Services

Why online?

• 85 per cent say they buy online because the internet helps them compare products.
• 82 per cent say shopping online is more convenient (saves time and resources).
• 68 per cent believe they have more choice online (access to a bigger market with more choice and more price
competition).
• 60 per cent of respondents believe it is cheaper to shop online than in-store (no middle-man or overheads).

“A large part of going online is about economising to save money where you can so that you can use it for other
things.”

“I guess you want your money to go further. It’s part of the reason for going online.”

• More than 50 per cent have increased their expenditure on their cars and groceries online over the past
six months. At least 33 per cent are spending more on travel and technology, and just over 25 per cent are
spending more on financial services, home entertainment, music downloads, entertainment bookings and
games/software.

7



Online expenditure July-Sept 20087
$2,000 or more
Car
$1,000-$1,999
$500-$999
Financial services $200-499
$100-$199
Home entertainment $50-$99
Under $50
Technology

Alcohol

Groceries

Fashion

Cosmetics

Games and software

Fast food delivery

Mobile ring tones
0 10 20 30 40 50 60 70 80 90
%

Percentage spending more than 1 hour each week either researching purchasing decisions or
buying online and on the footpath

7 The per cent is calculated out of those that purchased each item rather than off the total sample. Figures based on user responses to survey.

8



Online and on the footpath
There is a high degree of interaction between online and offline
shopping among the News Digital Media audience. Consumers
think nothing of integrating the two into their behaviour.
Shoppers may go in-store to look at a TV, go online to do more
research and compare prices, then back to the store to see if
they can price match and perhaps purchase online.

US-based Forrester Research estimates that almost $US400
billion of store sales — or 16 per cent of total retail sales in
the United States — are directly influenced by the web as
consumers research products online and purchase them offline.
This will grow at a 17per cent CAGR (compound annual growth
rate) over the next five years, resulting in more than $US1 trillion
of store sales by 2012.8

“I’ll buy where I can get the best bargain. I’ll research online and
in store, and I’ll buy in either depending on where the price is
best.”

“Often I’ll go into a store to have a look at something, then I’ll go
online to research it and visa versa. I take a lot of time.”

“Multichannel shoppers spend more and spend more often. Fifty per cent of people who purchase an item in
store have researched the item online – they know what they’re looking for once they get to the shop. People
want to look and feel but their preliminary research is being done online, searching for the best product for their
needs a long time before they search for the best price.”

Ross McDonald, Industry Marketing Manager Retail, Google Australia

8 www.forrester.com May 7, 2007 (updated June 1, 2007) The Web’s Impact On In-Store Sales: US Cross-Channel Sales Forecast, 2006 To 2012 by Tamara Mendelsohn

9


The good, bad and the ugly of online advertising

• Online advertising is regarded positively compared to other media.

“I enjoy them more than TV. They are generally more clever.”

• It’s not (mostly) regarded as being as intrusive as broadcast media.

“I like the ads that you can choose to get, like where you click on
a button and it doesn’t actually go to a big page, you just sort of
interact into it and it brings in a video or comes to a larger picture
and gives you the information. It’s on-demand advertising.”

• The interactivity of online advertising is appealing and generates high recall.

• Respondents have good recall of specific campaigns which involve interactivity.

“I like the idea of interacting whereby if you’re interested in clicking you can get more information.”

“I spent heaps of time there and it was just an ad but it was really interesting.”

“I’d have a go on that. That’s cool.”

“There are the ones which interact with your mouse. I thought ‘Oh, isn’t that clever?’.”

• Targeting ads at the interests of readers is regarded as a positive.

“I wouldn’t mind the ads if they targeted them at my interests.”

“The internet can be better than other visual media because they’ll know what you’re about and they’ll target
advertising that actually will interest you whereas watching TV or at the movies you’re just getting broad
advertising.”

• There is a strong dislike of ads which are too intrusive. Ads which offer choice are the most successful.

“I like the option to play it if I want to. I really don’t like it when it comes on by itself. Yeah, it’s pretty obnoxious.
It’s rude.”

• There is a strong preference for muted sound on video ads - most
have their sound on mute at work anyway.

“Most people in the office have the sound down. The only reason I
keep my sound on mute is because of those pop-ups.”

• Pop-ups are VERY unpopular

“I don’t want the pop-ups. I don’t like them. I click out of them
straightaway.”

10


Shopping outlook – battle for the bargain hunters

• The News Digital Media audience is not overwhelmingly concerned about the recession – but very focused on
value. Value will determine purchasing behaviour.

• 83 per cent of people regard price as an important factor when purchasing non-essential or luxury goods
online. When buying essential goods such as groceries, online shoppers value quality slightly ahead of price.
Women value price more than men.

• Despite economic conditions, most respondents have increased their expenditure in the last six months and
predict that they will continue to do so in the next six months.
A majority of respondents plan to spend the same or more on:

• cars • homewares
• groceries • games and software
• travel • whitegoods
• insurance • music downloads
• home entertainment • subscriptions and memberships
• entertainment bookings • DVDs
• technology • books
• fashion • cosmetics
• financial services • alcohol

“We have ambitious plans for Tesco Direct and it is already making a significant contribution to our like-for-like
sales. Given customers’ increased focus on price we expect an acceleration in online price research - and our
strong online presence makes it simple for customers to find us.”

Laura Wade-Gery, Chief Executive of Dotcom and Direct, Tesco.com UK

• And they plan to be spending less on fast food delivery, gambling and mobile ring tones.

• While they do not plan to curtail their spending 74 per cent of respondents are being more careful about how
they spend their money.

• They want to make sure that they are making the right decision on anything they buy in times when the
perceived cost of making a mistake is much higher. And they do that by undertaking more pre-purchase
research online.

“As the interest rates have gone up it’s more and more important that I do my research and the harder it gets
the more work you have to do to make sure you spend in the right way.”

11


Shopping outlook – battle for the bargain hunters

Percentage ranking the role of the internet for different functions as either important or very
important

80
74.9

71.0 FAST FACT
70
65.8
Following a trend or buying
something new is importantto
59.2
60

50 almost 30 per cent of online
shoppers.
% 40
35.0

30
24.6

20

10

0
Organising your social Buying products and Making informed Keeping up to date with Managing your personal Researching products
life services decisions the latest news, weather finances and services prior to
and sport buying

Slower Economy = faster shift online
UK high street retailers had a 2.6 per cent decline in actually physical visits in the year to July 2008, but an 18.7per
cent increase in internet traffic to their websites, making them more dependent than ever on their online presence as
the economic crisis unfolded.9

“As economic conditions tighten, there has been a marked increase in searches for ‘deals’, ‘compare’ - and a 45 per
cent increase during the past year in retail searches based on price. Use of comparative shopping websites is also
very strong around peak shopping periods, as consumers seek to maximise their disposable spend. The online
shopping channel allows consumers to easily compare products and shop around, making it imperative for retailers to
have a strong online presence.”
Sandra Hanchard, Hitwise Senior Analyst

“I’m not going to shop less – but I’m going to shop smarter.”

“Yeah, rather than going out you can stay home and get all of your entertainment on the internet.”

“While overall marketing budgets are being cut, we’re seeing the share dedicated to digital increase. That makes
sense in this environment because of the higher and more transparent ROI.”
Jeff Berman, President Sales & Marketing, MySpace.com

”This is a key moment for the digital sector and a time to prove that measurable forms of advertising are best,
particularly during an economic downturn.”
Suzanne Vranica, Advertising and Marketing Columnist, Wall Street Journal

9 Hitwise media release, London August 6, 2008. http://www.hitwise.co.nz/press-center/hitwiseHS2004/retail2.php

12


The democratisation of shopping

“There’s something about online that brings everyone to an equal level I guess.”

• The internet has not only revolutionised the way consumers approach shopping, but has democratised
shopping itself.

• The ability to find out what products are available, research their strengths and weaknesses, discover the
views of those who have already purchased them and identify a fair price without ever leaving home has
shifted the power towards the consumer.

• Consumers are better informed and more decisive than
ever – often knowing what they want to purchase and FAST FACTS
how much they believe it should cost before they walk Forecasts predict that total online
into the store. Increasingly their decisions have already advertising market revenues in
been made. Australia will increase by 24 per cent
year-on-year in 2008, growing from
• Consumers are deriving satisfaction from doing their own
research, organising their own holidays and finding the $387 million to $481.4 million.10
best deal on whitegoods without relying on others; they
like being able to purchase from anywhere in the world,
and they believe the customer service is often better.

• From their experiences online, they now know that retail prices have many different components –
shipping and freight costs as well as bricks and mortar overheads.

• And they know that it’s possible to bargain – online and in-store - for the best deal.

• As a result of what they’re discovering online everyday, consumer expectations are higher. They demand
better customer service, more competitive prices, consistent quality and a more convenient shopping
experience of both online and in-store retailers.

“Most consumers are looking for peer recognition. It’s the oldest
form of marketing. What we’re doing now is automating that
peer-recognition. It’s been happening for a while now with video
and music and there is no reason why that can’t extend to other
categories.”

Jeff Berman, President Sales & Marketing, MySpace.com

10 After A Brief Slow-Down, Online Advertising Is Set For Continued Solid Growth in 2008-2009. Media release from Frost and Sullivan 17 Sept 2008 quoting their own research report Australia Online
General Advertising Market 2008-2012.

13


News Digital Media’s Insight Report – Anxiety, The Internet And The Hip-Pocket - is based on the findings of an
online poll of News Digital Media users between September 11 and 25, 2008. The survey findings were tested
in in-depth discussions held with a sample of respondents in early October. Interviews with leading executives
from News Corporation and other businesses around the world were held to supplement desktop research into
international trends.

Profile of Respondents to September Insight Survey

5,343 respondents completed the survey.

57 per cent female
72 per cent aged 25-54
78 per cent employed
55 per cent worked in professional, managerial or supervisory roles
49 per cent had an income greater than $70k

They are Aspiring Australians. The market force that builds brands. And they are Always On.

This report represents the views of News Digital Media’s audience at a specific point in time. The research was
undertaken during successive market falls and at the time of the collapse of several USA banks, but prior to recent
Australian interest rate cuts and government intervention.

To advertise on the News Digital Media network

Email advertise@newsdigitalmedia.com.au
NSW Danny Bass 02 9288 3000
VIC Jonathon Smith 03 9292 1203
QLD Sheridan Comino 07 3666 6458
SA Stuart Pool 08 8206 2446
WA Spencer Retallack 08 9326 8342

Always on for Aspiring Australians

14

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