Online Holiday Sales Forecast

OCTOBER 22, 2008


Jeffrey Grau, Senior Analyst

This year online holiday sales (excluding travel) will total $32.1 billion, up 10.1% over 2007. This is a sharp decline from growth rates in the low-to-mid 20% range seen over the past few years.

The weak economy is placing downward pressure on e-commerce sales this season. That pressure accentuates the already declining sales growth, which is a sign of the inevitable maturation of the online shopping channel.

Financially strapped consumers will use a variety of strategies to save money on holiday gifts. More than ever, they will turn to the Internet to get gift ideas, find bargains and locate retailers that stock desired products. Shoppers will shift a larger share of their purchases from stores to the Internet to save gas money and avail themselves of retailers’ free shipping offers.

The main engine of e-commerce growth is incumbent online buyers who are shifting a greater percentage of their total spending from stores to the Internet.

The spending shift from stores to Websites is expected to continue this holiday season, according to a recent survey sponsored by ATG and conducted by the e-tailing group. This year 49% of holiday gift spending among US Internet users will occur online, compared with 44% in stores—making this the first time the Web has surpassed the store as the preferred channel for Internet users to purchase holiday gifts.

'Social-Shopping Study' Defines New Breed of Shopper: The 'Social Researcher'

Shopgirl can search, too

A new breed of online shopper, the "Social Researcher," who places increased significant emphasis on peer feedback in product reviews when making purchasing decisions, is the focus of a recently completed study by the e-tailing group, writes MarketingCharts.

The Social Shopping Study 2007, commissioned by PowerReviews, surveyed 1,200 consumers who shop online at least four times per year, spending $500 or more annually.

The study sought (1) to understand how online shoppers use reviews to make informed buying decisions, and (2) to explore consumers' preferences and interests in "Social Navigation" - or the ability to narrow product selections based on reviews from like-minded people with similar interests.

Some 70 percent of all online shoppers said customer reviews and ratings on a retailer's website were extremely or very important when they are selecting and purchasing products, followed by 62 percent citing a top-rated products list (as rated by customers):

Among the respondents, 65 percent were identified as Social Researchers - consumers who actively (always or most of the time) seek out and read customer reviews prior to making a purchase decision:

Social Researchers were found to engage in the use of reviews across all behavioral areas at a rate 20 percent higher than average online shoppers:

• 86 percent of Social Researchers find customer reviews extremely or very important, vs. 70 percent of all online shoppers.
• 76 percent of Social Researchers find "top rated product" lists to be extremely or very important, vs. 62 percent of all online shoppers.
• 64 percent of Social Researchers research products online more than half the time, no matter where they buy the product (store, web, catalog, etc.)

How online shoppers, particularly Social Researchers, perceive Social Navigation was also examined:

• Some 82 percent of Social Researchers (vs. 75 percent of all online shoppers) found reading reviews better than researching a product in-store with a knowledgeable sales associate.
• 76 percent of Social Researchers (vs. 69 percent of all online shoppers) are more likely to shop on a retailer's website - vs. its competitor site - if it offers social navigation.
• 75 percent of Social Researches (vs. 64 percent of all online shoppers) found it extremely or very helpful to narrow product selection based on feedback from people like them (with similar interests).

PowerReviews and Endeca Partner to Deliver Customer-Guided Shopping Experiences Based on User Generated Content

Tag-based Reviews and Guided Navigation Experience Drive Social Navigation of Shopping Sites

http://www.powerreviews.com/social-shopping/news/press_endeca_partner_08212007.html

Cambridge, Mass. & Millbrae, Calif.--(BUSINESS WIRE)--PowerReviews™ (www.powerreviews.com), a leader in customer reviews and social merchandising solutions for online retailers, and Endeca Technologies, Inc. (www.endeca.com), an enterprise information access software company, today announced a partnership to enhance the online shopping experience by extending Guided Navigation®, search and dynamic merchandising capabilities through the use of “tag-based” customer reviews. Endeca’s signature Guided Navigation experience combined with PowerReviews’ tag-based customer reviews gives shoppers first-of-their kind abilities to explore, find and compare products by uniquely relevant criteria and peer recommendations. Shoppers can narrow product selection based on their specific lifestyles, intended uses and desired “pros” and “cons” in the product. The resulting experience offers a preview of the next generation storefront, and is designed to boost conversion rates, increase customer satisfaction and provide competitive differentiation over sites that simply offer product page level reviews.

Customer reviews and ratings have become an integral part of online shopping decisions – 71% of online shoppers read reviews before they purchase a product online, based on a recent Forrester Research study. In addition, customer reviews and ratings are rated the #1 most helpful website feature in making informed product decisions, with 92% of customers finding them extremely or very helpful in making online shopping decisions, according to an April 2006 study by the eTailing group and J.C. Williams Consultancy.

“Customer reviews have long played an important role informing the purchase of new products both on and off line. By working with pioneers like PowerReviews -- and combining the best of both technologies -- we’re now able to inject this valuable information seamlessly into the user’s shopping experience in ways that were not previously possible,” said Matt Eichner, SVP Strategic Marketing and Development, Endeca. “Our early work with PowerReviews highlights the extensibility of the Endeca platform and foreshadows innovations to come in the very near future.”

Social navigation is an emerging capability that leverages user generated content – reviews, opinions, recommendations, posts – to create new ways to explore, find and analyze information. In the case of Endeca and PowerReviews, this is achieved by leveraging user-generated tags (pros, cons, and best uses of products reviewed using PowerReviews) combined with product characteristics (price, brand, specifications) to present a cohesive and comprehensive collection of refinements and navigation options. This is made possible using Endeca’s core MDEX Engine™ technology, which takes PowerReviews’ ever-changing user-review content and displays dynamic refinements with the speed and flexibility to allow shoppers to choose the path that suits them best.

The first live example of this “tag-based” approach to social navigation can be seen on PowerReviews’ shopping research portal -- Buzzillions.com. Buzzillions demonstrates the ease and power of customer-guided shopping, utilizing the combined capabilities of PowerReviews and Endeca. For instance, the Digital Camera page on Buzzillions.com (www.Buzzillions.com/digitalcameras) illustrates how a consumer can find a digital camera that is ideally suited to him based on his photography lifestyle, interests and intended camera uses. With just a few clicks, the consumer answers questions relating to his affinity group (people like him), intended uses, pros he is seeking and cons he would like to avoid, and narrows the product selection from 536 digital cameras to a handful to look at more closely.

“As both a client and a partner, we have seen first hand the incredible opportunities this partnership creates with the use of social navigation on our shopping research portal Buzzillions.com,” said CEO Andy Chen. “And as we see it, we provide the “social” and Endeca provides the “navigation,” and together we provide the opportunity for any retailer to experience the customer satisfaction, trust and sales benefits first hand.”

About Endeca™
Endeca is a next-generation information access company, uniting the ease of search with the analytical power of business intelligence. Combining patented intellectual property, breakthrough science and a deep focus on user experience, the Endeca Information Access Platform helps people find, analyze and understand information in ways never before possible. Leading global organizations like ABN AMRO, Bank of America, Boeing, Cox Newspapers, Dice, The (US) Defense Intelligence Agency, The Home Depot, Hyatt, IBM, John Deere, The Library of Congress, Nike, and Walmart.com rely on Endeca to power business-critical applications that increase revenue, reduce costs and streamline operations. Headquartered in Cambridge, MA, USA, Endeca is a private company with worldwide operations. For more information: www.endeca.com or info@endeca.com.

About PowerReviews
PowerReviews is an enterprise solutions company that provides customer reviews and social merchandising solutions to multi-channel retailers, driving higher conversion and increased purchase satisfaction. PowerReviews’ patent-pending PowerTags™ technology captures customer opinions in their own words, making reviews more useful for shoppers, empowering them to make more informed and confident purchase decisions. Its customers include Staples, ToysRus, Ace Hardware, Ritz Camera, The Sports Authority, over 100 more. With the introduction of Buzzillions.com, the company has entered the consumer shopping portal market, leveraging its tag-based technology to introduce social navigation and affinity recommendations into the shopping research process for consumers. Based in Millbrae, California, PowerReviews is a privately held company with funding from leading venture capital firms Menlo Ventures and Draper Richards. For more information on the company, visit www.PowerReviews.com To experience the shopping benefits from Buzzillions, visit www.Buzzillions.com.

# # #

Editor's Contact:

Lisa Tarter
TidalWave PR
415-440-4278
lisatarter@yahoo.com

Comparison Shopping Site Analytics and Optimization

Comparison Shopping Site Analytics and Optimization
By Sally Curran
August 14, 2007

Comparison shopping engines (CSE) are a valuable sales channel for e-tailers, but as is the case with any marketing plan, you have to track performance and continually adjust your campaign accordingly to get the most out of the effort.

Michael Lambert, CEO of MerchantAdvantage, a company that provides CSE feed management and analytics, recently outlined approaches to successful CSE statistical analysis for those wondering how to interpret the data these sites provide. Lambert discussed what level of tracking detail is necessary to help e-tailers with marketing decisions and why it's necessary and showed how some performance-tracking data can be misinterpreted, and therefore, cause marketers to make poor choices about their campaigns. Before getting into the details of analysis, however, he offered the following tips for listing at and analysis of CSEs:

• Optimize content by providing as many product attributes as possible — most CSEs don't require much information, but by filling out all the data fields available, you increase your click-to-purchase ratios and return-on-ad spending.
• Optimize product inventory by removing high-cost per-click items with low or no sales, but do not remove items with low or no-cost per click, and he emphasizes this, regardless of sales performance.
• Reporting tools should cover clicks and purchases — not just clicks — and e-tailers should prioritize their analysis by focusing first on high-click costs on products with low sales within a specific channel and then on any products or categories with low sales within a channel. Sellers should also test new products within a channel and watch their performance.

Too Much Of A Good Thing?
To illustrate how some performance-tracking mechanisms don't always provide positive outcomes, Lambert first explained how CSEs work to track consumers. Perhaps a consumer is in the market for an indoor bike trainer. He heads to a CSE, mulls the options the site provides, and clicks the one he feels best suits him. The site shoots the Lance Armstrong-wanna be to a redirect page, which is the first point of tracking. From there, he lands at the product page, where he (hopefully) puts the product in his shopping cart and checks out. Finally, he ends up at the thank you or invoice page, which is the most important tracking point of all. After all, marketing is all about sales. Lambert then pointed out that some performance-monitoring systems insert a tracking point between the redirect page and the product page, which he believes to be risky. While not likely, there could be an Internet-connection failure or computer glitch at that point, which could prevent the consumer from reaching the product page. He said there's no reason to introduce another point of failure and that you'll otherwise glean enough data to make informed marketing decisions.

The Devil's In The Details
Lambert emphasized that it's important to strike a balance between too much information and not enough, so that marketers can make informed decisions about how best to present their products to consumers. Ideally, when evaluating data about CSEs, you'll want to know which CSE the consumer came from, the product code, the approximate cost-per- click and the keywords for which the consumer searched. The MerchantAdvantage chief also recommends that e-tailers review the click-through path of the consumer: If while searching for his trainer, the biker also bought a helmet, it's important to know that the click for the trainer led to the sale of the helmet. Otherwise, the tracking is misleading. In regard to evaluating the statistics, ratios are best for evaluating performance. A reasonable click-to-purchase ratio, Lambert said, is key. Marketers need to know where each click came from and the approximate cost-per-click. To make sure your statistics aren't tainted, Lambert said it's important to keep product information updated. Most CSEs grab product information from product sites, so merchants need to be vigilant about keeping prices and information accurate. He also said that marketing high-performing products through CSEs and not including your slow-moving products is tempting, but to be wary: Striking the right balance of products sent to CSEs — without losing critical mass — is important.

Tips for Optimizing Feeds
And, if you're wondering how to optimize your CSE feeds, Leigh Vosler, of SierraTradingPost, recently outlined 22 tips at the July Shop.org merchandising conference in San Diego. Some key advice from Vosler includes the following: watch and budget for the Q4 CPC price increase that occurs on nearly all engines, request the product categories from each of the shopping engines and take the time to map your products to the CSE categories for quicker and better data matching and remember that return-on-ad-spending is not important if you are bidding too low to be found on the engine in the first place. Alan Rimm-Kaufman of Rimm-Kaufman Group, a search marketing agency located in Charlottesville, Va., also participated in the panel and posted the entire list at his blog here. Sally Marek Curran is a regular contributor to ECommerce-Guide.com.

80% of Online Customers Trust Brands More with Reviews | Bazaarblog

80% of Online Customers Trust Brands More with Reviews Bazaarblog: "80% of Online Customers Trust Brands More with Reviews August 11th, 2007 by Sam Decker Chief Marketing Officer We recently published a joint study with Vizu Research on reviews. The key finding is that US and UK shoppers have more trust and respect for Brands that enable product reviews. In fact, 8 out of 10 shoppers trust and respect brands more if they have authentic, user generated reviews on their site. So, not only do reviews help improve conversion, average order value, returns, satisfaction, natural search traffic, RSS feed click through, email revenue, and offline impact (ask us for any of these case studies)…they also improve brand perception! Another finding: US shoppers consider ratings and reviews to be the most useful eCommerce site feature (44 percent). Product comparison (15 percent), product navigation (12 percent), and privacy information (11 percent) followed in the distance. We knew this already from site surveys with PETCO and CompUSA, but it's always helpful to get another data point! We're sort of maniacal about data "

Hearst Ups Digital Ante: Buys Kaboodle

by Erik Sass, Thursday, Aug 9, 2007 8:30 AM ET

HEARST CORP. WENT DIGITAL SHOPPING--AND it came home with Kaboodle Inc. Billed as a "social shopping community," it allows members to browse and share product recommendations. The new acquisition will be jointly managed by Hearst Interactive Media and the Hearst Magazines digital media unit. Kenneth Bronfin, president of Interactive Media for Hearst, predicts that "Kaboodle will bring to social shopping what MySpace has brought to social media." He added that the acquisition "will enable Kaboodle to further expand its content and service offerings, while also significantly increasing its advertiser base." Kaboodle's novel take on social networking brings together consumers on the basis of their product tastes. It combines the social network function with an e-commerce platform. The site, which launched in 2006, attracts over 2 million unique visitors a month. Cathleen Black, president of Hearst Magazines, touted the synergies that will result from the purchase: "We think Kaboodle has terrific potential for many of our brands, especially in the fashion, beauty and consumer technology categories. Our readers will be able to find the products featured in our magazines, shop electronically with their friends and get their feedback." The Hearst-Kaboodle deal is just the latest in a series of acquisitions of online-only companies by magazine publishers that want to increase their online audience and build online distribution platforms for their content. In July, Hearst bought Ugo.com, described as "a first-stop destination for the latest news and content on games, movies, television, film, DVDs, music, sports, women and comic books." It mostly targets a young male audience, including more than 11 million unique visitors in the U.S. In January, the company acquired eCrush.com, along with related sites eSpin.com and HighSchoolStyleBoard. The first two sites currently have about 3.4 million registered, active users. Other magazine companies have followed suit. Time Inc.'s Sports Illustrated bought FanNation.com, a social networking and news site for sports enthusiasts, in February. The site will serve as a model for social networks built around Time Inc.'s other magazine brands. And in April, Hachette Filipacchi purchased JumpStart, an online automobile ad network, which is being integrated with the publisher's CarandDriver.com, RoadandTrack.com and CycleWorld.com properties. JumpStart's network of sites, which include NADAguides.com, Vehix, and J.D. Power & Associates Autos, reach 5 to 7 million potential car buyers a month.

Peer Reviews Significant To Shoppers in Consumer Brand Trust

A recent survey on current attitudes towards customer ratings and reviews by Bazaarvoice and Vizu Corporation, shows that about three out of four shoppers say that it is extremely or very important to read customer reviews before making a purchase, and they prefer peer reviews over expert reviews by a 6-to-1 margin.
The summary notes that Shop.org and MarketingSherpa report usage of ratings and reviews nearly doubling in the US over the last year, while the Bazaarvoice and Vizu survey revealed that 44 percent of US shoppers consider ratings and reviews to be the most useful eCommerce site feature. Product comparison (15 percent), product navigation (12 percent), and privacy information (11 percent) followed in the distance.

ValueClick to Acquire Leading U.S. Comparison Shopping Site Operator MeziMediaMonday

July 16, 8:30 am ET
Fourth-Largest U.S. Comparison Shopping Company Will Also Provide Search Expertise and Presence in China

WESTLAKE VILLAGE, Calif.--(BUSINESS WIRE)--ValueClick, Inc. (Nasdaq:VCLK - News) today announced that it has agreed to acquire privately-held MeziMedia, Inc., a leading operator of U.S. comparison shopping websites. MeziMedia ranked fourth in the June 2007 comScore "Retail - Comparison Shopping" category with approximately 10.5 million U.S. unique visitors through its Smarter.com comparison shopping and CouponMountain.com online coupon websites.
ValueClick anticipates three key strategic benefits from the MeziMedia acquisition:
MeziMedia will add scale to ValueClick's fast-growing Comparison Shopping segment and give the Company a leadership position in the U.S. comparison shopping market. ValueClick currently is a major comparison shopping provider in Europe under the PriceRunner brand.
MeziMedia will enhance ValueClick's search engine optimization (SEO) and search engine marketing (SEM) capabilities. MeziMedia has a sophisticated, proprietary SEM platform and significant expertise and experience in SEO and SEM, which can be leveraged across ValueClick's businesses and clients.
MeziMedia will give ValueClick a formal presence in China. MeziMedia has a world-class engineering and operations center in Shanghai and has also launched websites in China for comparison shopping, coupons and search.
"MeziMedia is consistent with our acquisition philosophy and gives ValueClick comparison shopping scale in the U.S., greater search marketing expertise and a presence in China, all three of which are key growth initiatives for the Company," said Tom Vadnais, chief executive officer of ValueClick. "This is an exciting acquisition and we look forward to welcoming the MeziMedia team to the ValueClick family."
"We are proud of our significant accomplishments in comparison shopping, SEO and SEM and believe that the time is right to join forces with ValueClick, one of the largest and most diversified online marketing services companies," said Talmadge O'Neill and Harry Tsao, co-founders of MeziMedia. "We are confident that MeziMedia and ValueClick will enjoy important benefits from this transaction and generate meaningful synergies across the combined businesses."
Under the terms of the agreement, ValueClick will acquire all outstanding equity interests in MeziMedia for approximately $100 million in cash at the time of closing, and contingent cash consideration based on revenue and adjusted-EBITDA(1) performance from the closing date through December 31, 2009. Total cash consideration will range between $100 million and $352 million, depending on whether performance thresholds are met. ValueClick anticipates the acquisition will be accretive on both an adjusted-EBITDA and diluted net income per common share basis.
The transaction has been approved by the board of directors of each respective company and all the stockholders of MeziMedia. ValueClick anticipates the acquisition will close in August 2007, subject to customary closing conditions and regulatory approvals. Upon the transaction's close, MeziMedia's management team will join ValueClick's management team and continue to lead the MeziMedia business. MeziMedia will be included in ValueClick's Comparison Shopping business segment.
Founded in 2001, MeziMedia employs approximately 160 people globally in its Los Angeles area headquarters and Shanghai, China and Tokyo, Japan offices. In 2006, MeziMedia generated approximately $40 million in revenue and was EBITDA, operating income, and net income profitable. For more information on MeziMedia, please visit http://www.mezimedia.com.
ValueClick intends to update its 2007 business outlook upon the close of this acquisition.