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

News Digital Media Insight Report

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

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 FreudensteinChief 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

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

For media enquiries about the News Digital Media Insight report, please contactLuke Dean, senior public relations executive, News Digital Media on 02 8114 7399 or 0414 535 433

3

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

“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.

6.6 7.1

16.1

23.326.9

32.234.7 36.2

54.057.3 57.6

62.667.7

84.3

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4

Economic perceptions and concerns

74 per cent• are concerned enough to say they are being more careful in how they spend money, but they are not sufficiently concerned to stop spending. 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.

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 vaguely concerned about the future but are not making any major changes to their behaviour.

“I’m not an expert, but I’ve just got that feeling and I’m sure people will be okay.”

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

FAST FACTFalling petrol prices are good news for 52 per cent of respondents who said they’d spend more if fuel came down.

“While the newspaper headlines are screaming ‘doom and gloom’, there has been a definite upturn in retail activity during the past few months.”

Paul Greenberg, CEO Deals Direct, Australia’s largest online department store

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.”



5

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.

49.1

8.3

42.7

0

10

20

30

40

50

60

More Less The same

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

Average less time spent 1:58 (H:M)

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.”



6

Online Behaviour - Now

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

12.8

15.3

19.4

21.5

24.9

32.4

35.7

37.9

38.8

44.4

49.2

67.5

69.8

73.5

82.0

94.5

0 10 20 30 40 50 60 70 80 90 100

Shopping - Selling

Reading or contributing to blogs

TV & video

Playing online games

Looking for a job

Using instant messaging

Music

Photos

Using social networking sites

Searching maps

Shopping - Buying

Research and information gathering (not work or school related)

Shopping - Research

Personal banking

Reading news/ weather

Using internet email

%

Percentage of respondents undertaking online activities in a typical week

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)



7

Shopping Online - Now

Category Researched Bought

Travel 82.1% 45.7%

Entertainment Bookings

55.8% 28.3%

Books 42.2% 21.9%

DVDs 39.3% 21.1%

Subscriptions & Memberships

29.5% 17.6%

Fashion 35% 16.6%

Music Downloads 27.4% 15%

Insurance 34.9% 14.4%

Cosmetics 24.3% 13%

Games & Software

25.8% 12.8%

Technology 41% 12.3%

Financial Services

37.3% 9.4%

Category Researched Bought

Homewares 22.7% 8.7%

Gambling 11.1% 7.8%

Fast Food Delivery

12.9% 7.4%

Alcohol 14.2% 6.3%

Home Entertainement

30.8% 6.2%

Groceries 17.3% 4.5%

Car 38.4% 3.2%

White Goods 22% 3.2%

Mobile Ring Tones 4.7% 2.3%

Jobs 38.1% n/a

None 1.3% 17.4%

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?

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.



8


Online expenditure July-Sept 20087

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.

0 10 20 30 40 50 60 70 80 90

Mobile ring tones

Fast food delivery

Games and software

Cosmetics

Fashion

Groceries

Alcohol

Technology

Home entertainment

Financial services

Car

%

$2,000 or more

$1,000-$1,999

$500-$999

$200-499

$100-$199

$50-$99

Under $50



9


Online and on the footpathThere 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.”

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

“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



10

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.”



11

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.

“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

cars•groceries•travel•insurance•home entertainment•entertainment bookings•technology•fashion•financial services•

A majority of respondents plan to spend the same or more on:

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.”

homewares•games and software•whitegoods•music downloads•subscriptions and memberships•DVDs•books•cosmetics•alcohol•



12

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

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

Shopping outlook – battle for the bargain hunters

FAST FACTFollowing a trend or buying something new is importantto almost 30 per cent of online shoppers.

24.6

35.0

59.2

65.8

71.0

74.9

0

10

20

30

40

50

60

70

80

Organising your sociallife

Buying products andservices

Making informeddecisions

Keeping up to date withthe latest news, weather

and sport

Managing your personalfinances

Researching productsand services prior to

buying

%



13

“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 how much they believe it should cost before they walk into the store. Increasingly their decisions have already been made.

Consumers are deriving satisfaction from doing their own •research, organising their own holidays and finding the 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.

The democratisation of shopping

FAST FACTS Forecasts predict that total online advertising market revenues in Australia will increase by 24 per cent year-on-year in 2008, growing from

$387 million to $481.4 million.10

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.

“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

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

14

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 female72 per cent aged 25-5478 per cent employed55 per cent worked in professional, managerial or supervisory roles49 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 [email protected] Danny Bass 02 9288 3000VIC Jonathon Smith 03 9292 1203QLD Sheridan Comino 07 3666 6458SA Stuart Pool 08 8206 2446WA Spencer Retallack 08 9326 8342

Always on for Aspiring Australians

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