State of the Market - The Global eCommerce Environment

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State of the Market - The Global eCommerce
Environment
Mark Iverson- Director of DR Shareware and Stephan
ie Wu- Shareware Sales Manager, DR
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The Path of True Globalization
Going Local

• USA
• Minneapolis (HQ)
• Chicago
• Mountain View
• San Diego
• Pittsburgh
• Kayesville, UT
• Colorado Springs, CO
• Lincoln, NE

• Europe
• Köln
• London
• Dublin
• Shannon

• APAC
• Tokyo
• Taipei
• Seoul

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The Global eCommerce Environment
The State of eCommerce Analysts Projections

• Global eCommerce Projections
• US eCommerce Projections

Digital River Shareware - Global Overview

• Sales Performance on a Global Level
• Key Findings and Trends

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The Global eCommerce Environment
We Rely Heavily on Industry Analysts. Those used
for this presentation include

• Jupiter Research (www.jupiterresearch.com)
• Forrester Research (www.forrester.com)
• eMarketer (www.emarketer.com)
• International Data Corporation (www.idc.com)

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Electronic Software Distribution Growth3.3 of
All Software Sales by 2009
Worldwide Software Sales Projections
(in millions )
Source IDC, 2005
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Electronic Software Distribution Growth3.3 of
All Software Sales by 2009
Worldwide Software Sales Projections
(in millions )
Source IDC, 2005
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Electronic Software Distribution Growth34
Annual Growth Rate Through 2009
Electronic Software Distribution by Region,
2004-2009
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Source IDC, 2005
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Electronic Software Distribution Growth34
Annual Growth Rate Through 2009
Electronic Software Distribution by Region,
2004-2009

• Asia Pacific download sales will remain a longer
  term opportunity.
• Key factors
• Localization and payment methods remain a
  challenge
• Broadband and online adoption expansion
  continues
• Pricing and piracy remain a concern to publishers

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Source IDC, 2005
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Electronic Software Distribution Growth34
Annual Growth Rate Through 2009
Electronic Software Distribution by Region,
2004-2009

• Western Europe will realize significant growth.
• Key factors
• localization
• Broadband expansion
• Consumer online adoption (more EU retailers are
  coming online)

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Source IDC, 2005
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Electronic Software Distribution Growth34
Annual Growth Rate Through 2009
Electronic Software Distribution by Region,
2004-2009
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Source IDC, 2005
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Electronic Software Distribution Growth34
Annual Growth Rate Through 2009
Electronic Software Distribution by Region,
2004-2009

• The Rest Of the World (Eastern Europe, Africa,
  South America) will present minimal opportunity
  for significant software sales growth.
• Key factors
• Primarily economic related conditions and lack of
  broadband will lessen the need for electronic
  software distribution

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Source IDC, 2005
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Finding Customers Worldwide

• Selling to US Consumers is Relatively Easy
• One Language
• One Currency
• One Payment Method (Credit Card)

• Selling to Western Europe is Much More Complex
• Multiple Languages
• Multiple Unique Payment Methods
• Country-Specific Laws and Regulations (Privacy)
• Value Added Tax (VAT)

June 2006, Forrester Research, Trends Europes
eCommerce 2006 To 2011
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Forecast European Online Retail Sales By
Country, 2006 To 2011
Who to Target in Europe for Online Sales Growth
June 2006, Forrester Research, Trends Europes
eCommerce 2006 To 2011
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Forecast European Online Retail Sales By
Country, 2006 To 2011
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June 2006, Forrester Research, Trends Europes
eCommerce 2006 To 2011
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Forecast European Online Retail Sales By
Country, 2006 To 2011

• The UK will continue to be the largest market in
  Western Europe (although growth is MUCH below
  other countries).
• Key factors
• UK consumers are less sensitive to non-European
  Websites.

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June 2006, Forrester Research, Trends Europes
eCommerce 2006 To 2011
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Forecast European Online Retail Sales By
Country, 2006 To 2011

• Germany remains the second biggest market with
  much great growth.
• Key Factors
• Germans will represent 1/4 of all EU shoppers
  online by 2011.
• Expansion of credit card use.
• Localization (specifically currency and payment
  methods VERY important).

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June 2006, Forrester Research, Trends Europes
eCommerce 2006 To 2011
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Forecast European Online Retail Sales By
Country, 2006 To 2011

• The French will purchase virtually anything
  online.
• Key Factors
• French retailer are quickly coming online.
  Consumers are following.
• However, their reluctance to buy from a
  non-French or non-EU site makes them a difficult
  market for outsiders to reach.

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June 2006, Forrester Research, Trends Europes
eCommerce 2006 To 2011
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Forecast European Online Retail Sales By
Country, 2006 To 2011
Until the remaining EU countries mature in size,
specific targeting and localization may not yet
be worth the effort.
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June 2006, Forrester Research, Trends Europes
eCommerce 2006 To 2011
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Forecast European Online Retail Sales By
Country, 2006 To 2011
(Same Data in Graphical Format)
June 2006, Forrester Research, Trends Europes
eCommerce 2006 To 2011
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Are you Truly a Global Company?
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How Do DR Vendors Stack Up ?
At Digital River, we classify and track EIGHT
distinct geographic groups of consumers and
software vendors

• US

• China

• Australia

• India

• Canada

• Western European

• All Other (South American, Japan, Africa, etc.)

• Russia

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Russian Vendor Sales
Who Are Digital Rivers Russian Vendors Selling
To?
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Source Digital River Shareware platform data.
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European Vendor Sales
Who Are Digital Rivers European Vendors Selling
To?
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Source Digital River Shareware platform data.
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US Vendor Sales
Who Are Digital Rivers US Vendors Selling To?
3
Source Digital River Shareware platform data.
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Chinese Vendor Sales
Who Are Digital Rivers Chinese Vendors Selling
To?
3
Source Digital River Shareware platform data.
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Conclusions
Why are US vendors winning the fight for
revenue?

• They LIVE in the largest market. They know the
  language, the payment methods, and the customs
• They use multiple marketing methods to reach
  consumers (affiliate marketing, search, email,
  etc)
• They understand the benefit of creating a
  RELATIONSHIP with their customers. (next
  editions of software, upgrades, renewals,
  newsletters, etc.).

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Conclusions
What can Chinese vendors do to grow?

• Continue grow brands and develop software for the
  US market
• It is the largest market and fastest growing for
  ESD
• Diversify marketing channels. (currently 60 of
  Chinese revenue comes from affiliate marketing)
• MS Windows Market Place, Simtel and Retail
  channel
• Learn relationship marketing
• Stop single selling
• Create products with the intention of following
  up with new versions, upgrades and add-on
  merchandise
• Learn to email
• Create a long term relationship with the consumer

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• US Software Trends

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Top Publishers in the US
NPD Data

• MS, Symantec, Intuit and Adobe have high AOVs and
  a strong presence in small business and
  enterprise sales
• EA, Vivendi, Valuesoft, Atari, Cosmi, Acitivison
  and RiverDeep all have mass appeal software
  gaming and productivity titles at lower
  AOVs Source NPD

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What are the US Software Categories?

• Business MS Vista, Windows, Office, and IT
  products
• Education Language, Math, Science and Higher
  Learning Topics
• Finance Accounting, MS Money, Quicken, etc.
• Digital Imaging/Graphics and Music Graphic
  Arts, Design, Professional Digital Imaging, Home
  Digital Imaging Graphics, Video and Music
• PC Games Both Core (World of Warcraft) and
  Casual Games (Sudoku)
• Personal Productivity Home Improvement, Arts,
  Crafts, Personal Development
• System Utilities Anti Virus, Anti Spyware,
  Multi-media and System optimization and
  performance

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Software Development Opportunities
NPD Data

• Overall, AOVs are rising in the US and will
  continue to trend that way, driven by the launch
  of Vista and MS Office 2007
• Software developers are creating new content to
  work with Vista
• New productsnew, higher AOVs
• Educational products are a low cost entry into
  the market, but represent the smallest piece of
  the US software business
• Games, although they are the largest segment,
  have a high cost of development to be competitive
  in the US market
• System utilities and digital imaging/graphics
  show the most logical entry point into the US
  market Source NPD

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What Types of Products Sell in the US?
NPD Data
Source NPD
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Recommendations

• ESD in the US is the fastest growing and largest
  market globally
• Continue to create software for this market
• EARLY adopters of ESD in the US tend to purchase
  system utilities, security, digital imaging and
  graphics products online
• Start making these types of software applications
• To expand your US presence in the software
  market, start developing specialized PC security
  products, system or Vista optimization software
  and digital content creativity/management
  products
• Digital Content is music, movies, online books
  and digital pictures
• Make sure to create an ongoing relationship with
  the consumers with upgrades, specials, renewals
  and emails
• US Technology Enthusiasts are ESD users and
  they like new, smart software products and they
  adopt new technologies quickly- they are a
  trusted source for word-of-mouth advertising

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• Thank you
• Mark Iverson and Stephanie Wu
• Digital River