The pace of spending growth has slowed this season
By Heidi Dawley Jan 3, 2008
This year was never expected to be a big Christmas for retailers, and as it turns out, it wasn't, and for all the reasons one would expect, from the bum housing market to rising gas prices.
Offline sales will be lucky to hit the 4 percent growth forecast by the National Retail Federation, making it one of the weakest of recent years.
Of course, online will come in much stronger. ComScore, the internet research outfit, has put out a preliminary growth estimate of 19 percent over last year for online retail sales from Nov. 1 to Dec 27.
That's about what forecasters had expected, and yet that's down dramatically from last year, when sales grew 26 percent. Says Andrew Lipsman, senior analyst at comScore: “It is clear that we saw a 7 percent decline versus last year. That’s pretty notable."
The big question is why. Is online retail finally maturing? Were online consumers spooked by the economy?
While these two forces appear to have played some role, the answer appears to be one of proportion, reflecting the larger base this year compared to last. The actual growth this year versus last was about the same in terms of new dollars spent. But in percentages it was slower because those new dollars came off this year's larger base.
As Patti Freeman Evans, a senior analyst at JupiterResearch, explains it, "The lower percentage increase is a matter of mass rather than any kind of slowdown. This has been true over the last few years as the growth rate has declined but not the dollars. This is the trend of a market that is pretty big.”
Last year, holiday online spending came in at $24.6 billion, up $5 billion over 2005, and this year spending is expected to come in at $29.5 billion, up nearly $5 billion over last year, according to comScore.
And while there are signs online retail is maturing, she says it's still some time off, noting that online shopping still continues to attract significant numbers of converts in a way that is more new market than mature market.
Freeman Evans believes the holiday growth rate will hit 20 percent, and of that she expects six percentage points will come from people who were brand new to online shopping. The other 14 percent will be from increased spending from existing online shoppers.
“We expect it to show signs of maturing in 2010 or 2011 or 2012, where we will see annual increases dip below two digits,” she says. “That will show us that we are beginning to mature.”
As for whether economic conditions hit online retail sales, opinions were split.
Sucharita Mulpuru, a principal retail analyst for Forrester, is not convinced that the growth rate will be much lower this holiday season than last, but if it is, she doesn’t believe it’s due to the economy. That’s because online shoppers are generally far less affected by adverse economic conditions than the general population.
Freeman Evans agrees. “Most of the spending comes from people that are much more affluent than average consumers. They tend to be a bit more insulated from the pressure of the market,” she says.
But ComScore’s Lipsman believes the dicey economy has had some effect.
When he looked at the spending by income segments, spending for the highest bracket -- $100,000-plus — was up 28 percent this holiday period. That compares to 17 percent for the $50,000 to $100,000 bracket and 10 percent for those earning $50,000 or less.
“This illustrates where the economic pinch was felt within the different segments,” he says.
Meanwhile, in online ratings for the week ended Dec. 23, according to Nielsen Online, Google claimed the top spot among parent companies, followed by Microsoft, Yahoo, Time Warner and News Corp. Online. The top five brands were Google, Yahoo, MSN/Windows Live, Microsoft and AOL Media Network.
NexTag was the No. 1 advertiser with 6.4 million impressions, followed by No. 2 HSBC Holdings at 4.2 million. With just over 37 million ads served, Yahoo was again the top advertising site, well ahead of No. 2 MySpace at 4 million.
Sessions per person per week were down one from the previous week to 16, and domains visited per person were down two to 38. PC time per person slumped more than 8 percent compared with the previous week, to 16 hours and 42 minutes.
Top 25 parent companies Through Dec. 23
#
Parent
Unique Audience (000)
Reach %
Time Spent per Person (hh:mm:ss)
1
Google
88,089
63.0
0:33:04
2
Microsoft
86,208
61.7
0:41:16
3
Yahoo!
77,934
55.8
1:03:47
4
Time Warner
68,812
49.3
1:21:15
5
News Corp. Online
42,597
30.5
0:50:35
6
eBay
33,861
24.2
0:50:04
7
Amazon
29,116
20.8
0:15:37
8
InterActiveCorp
27,531
19.7
0:12:23
9
Apple Computer
24,709
17.7
0:31:18
10
Wikimedia Foundation
21,814
15.6
0:07:54
11
Landmark Communications
20,172
14.4
0:08:52
12
AT&T Inc.
19,764
14.2
0:19:49
13
Walt Disney Internet Group
18,653
13.4
0:19:20
14
New York Times Company
18,281
13.1
0:10:18
15
RealNetworks, Inc.
17,041
12.2
0:21:49
16
E.W. Scripps Company
15,418
11.0
0:06:34
17
Wal-Mart Stores
14,127
10.1
0:09:31
18
Bank of America
13,416
9.6
0:20:44
19
Verizon Communications
13,163
9.4
0:17:13
20
Comcast Corp.
13,057
9.3
0:28:56
21
Target Corp.
12,340
8.8
0:05:58
22
Viacom Digital
12,273
8.8
0:27:13
23
CNET Networks
11,417
8.2
0:06:16
24
Facebook
11,041
7.9
0:35:38
25
United Parcel Service
10,871
7.8
0:10:21
Source: Nielsen Online
Top 25 brands Through Dec. 23
Parent
Unique Audience (000)
Reach %
Time spent per person (hh:mm:ss)
1
Google
80,090
57.3
0:25:14
2
Yahoo!
77,079
55.2
1:04:02
3
MSN/Windows Live
62,104
44.5
0:40:04
4
Microsoft
56,487
40.4
0:18:16
5
AOL Media Network
56,242
40.3
1:30:17
6
Fox Interactive Media
36,776
26.3
0:54:37
7
YouTube
32,799
23.5
0:22:32
8
eBay
28,512
20.4
0:52:44
9
Apple
24,709
17.7
0:31:18
10
Amazon
24,295
17.4
0:15:55
11
Wikipedia
21,628
15.5
0:07:53
12
Weather Channel
18,686
13.4
0:08:56
13
Real Network
17,041
12.2
0:21:49
14
Ask Search Network
16,209
11.6
0:14:05
15
Blogger
15,508
11.1
0:07:12
16
CNN Digital Network
14,663
10.5
0:17:58
17
AT&T
14,349
10.3
0:23:58
18
About.com
13,340
9.6
0:02:59
19
Bank of America
13,240
9.5
0:19:59
20
Target
12,193
8.7
0:05:58
21
Wal-Mart Stores
12,091
8.7
0:09:23
22
Facebook
11,041
7.9
0:35:38
23
UPS - United Parcel Service
10,852
7.8
0:10:20
24
Comcast
10,288
7.4
0:34:46
25
U.S. Postal Service (USPS)
9,417
6.7
0:07:41
Source: Nielsen Online
Top 25 advertisers (excludes house ads)
Through Dec. 23
#
Company
Impressions (000)
1
NexTag, Inc.
6,360,053
2
HSBC Holdings plc
4,211,644
3
Experian Group Limited
4,050,252
4
AT&T Corp.
3,280,730
5
Netflix, Inc.
3,191,076
6
Countrywide Financial Corporation
3,055,259
7
Deutsche Telekom AG
2,684,175
8
Low Rate Source
2,153,929
9
InterActiveCorp
1,890,890
10
Cadbury Schweppes
1,072,764
11
Wachovia Corporation
902,418
12
Verizon Communications, Inc.
898,230
13
Ford Motor Company
894,562
14
GiftFreebies.com
815,690
15
American Express Company
621,888
16
Bose Corporation
592,046
17
General Motors Corporation
543,060
18
Scottrade, Inc.
536,026
19
E*TRADE FINANCIAL Corp.
534,454
20
Sears Holdings Corporation
516,310
21
Echostar Communications Corporation
500,906
22
Hydroderm Beverly Hills
493,645
23
Privacy Matters
453,151
24
Fidelity Investments
444,939
25
Bank of America Corporation
442,025
Source: Nielsen Online, AdRelevance
Note: Nielsen Online, AdRelevance service estimated online advertising expenditures account for CPM-based image-based advertising. All reported estimated expenditures and impressions do not account for the following placement types: text only, paid fee services, performance-based campaigns, sponsorships, barters, in-stream ("pre-rolls") players, messenger applications, partnership advertising, promotions and email campaigns. AdRelevance currently does not report estimated spending for paid search advertising. Also, Nielsen Online, AdRelevance reporting data reflects advertising activity served on pages accessible via the World Wide Web and not within AOL's proprietary service.
Top 25 advertising sites (excludes house ads)
Through Dec. 23
Company
Impressions (000)
1
Yahoo!
37,055,749
2
MySpace
4,009,178
3
MSN
1,600,951
4
AOL.com
1,177,333
5
MSNBC
1,110,314
6
eBay
737,519
7
FOXNEWS.COM
664,372
8
Juno
623,505
9
Facebook
596,295
10
New York Times
499,485
11
NetZero
463,756
12
The Weather Channel
448,668
13
Amazon
433,729
14
Comcast.net
414,115
15
ESPN.com
400,001
16
YouTube
386,293
17
MyPoints
346,450
18
IMDb
329,004
19
Photobucket
314,301
20
CBS SportsLine
240,951
21
Excite
192,267
22
NFL.com
171,188
23
CNN Money
160,443
24
CNN
159,137
25
Drudge Report
155,478
Source: Nielsen Online, AdRelevance
Note: Nielsen Online, AdRelevance service estimated online advertising expenditures account for CPM-based image-based advertising. All reported estimated expenditures and impressions do not account for the following placement types: text only, paid fee services, performance-based campaigns, sponsorships, barters, in-stream ("pre-rolls") players, messenger applications, partnership advertising, promotions and email campaigns. AdRelevance currently does not report estimated spending for paid search advertising. Above data does not include any house advertising activity. Also, Nielsen Online, AdRelevance reporting data reflects advertising activity served on pages accessible via the World Wide Web and not within AOL's proprietary service.
