Introducing the Digital Frame Market Index (DFMI)

Wikipedia defines index (as it relates to economics or finance) as a single number calculated from an array of prices or of quantities. We are most familiar with the Consumer Prices Index (CPI) or the Gross Domestic Product (GDP). Values of an index in successive periods summarize level of the activity over time or across economic units.

Today, we introduce our readers to the Digital Frame Market Index (DFMI). The objective of the DFMI will be to summarize the level of activity associated with the emergence of the digital frame market.

Markets are defined by buyers and sellers and as such it is important that our index incorporate both parties. The “public web” provides us with a variety of tools and corresponding data to gauge and quantify buyers and sellers in a specific market. These tools are not fool proof and the data which is produced will require an appropriate level of review. Data structure and reporting intervals may also change resulting in disjointed results. Additional worthwhile data sets may be introduced. We will make our best effort to identify and discuss issues associated with any inconsistently of this data. We will update the Digital Frame Market Index monthly.

Buyers

As sales data is not specifically available for the digital frame market, we looked at the number of search queries conducted on the web as a proxy for demand (buyers). A wonderful tool from Yahoo’s Overture provides an estimate of the number of searches associated with specific search terms. Combining Digital Photo Frame and Digital Picture Frame, Overture estimates that there were 430,952 searches on Yahoo in the month of December. SearchEngineWatch estimates that Yahoo accounts for 28% of all web searches. Extrapolating, it is estimated that there were 1.5 million digital frame related searches in December of 2006.

Sellers

We present a view into the seller through three different lenses.

First, we identified the number of digital frame SKUs (system used to distinguish individual items within a retailer’s systems) being offered by Best Buy, a leading consumer electronics reseller (both on and offline). This provides a view into allocated shelf space at a national “brick and mortar” leader. Currently, BestBuy promotes six models of digital frames.

Next, we dig deep into the online marketplace at CNET, a recognized leader in technology content and shopping links. CNET provides a venue for online retailers to offer technology product pricing and availability information. Here we calculated the number of unique combinations of online retailer and digital frame SKUs. For example, there were four online resellers selling the Pacific Digital MemoryFrame MF-810S and five online resellers selling the Westinghouse Digital Photo Frame DPF-0801. At present, there are 46 combinations of reseller and frame SKU.

Finally, we looked at the demand for advertising space through Google’s AdWords. The control was to set our maximum price of a click to $2.00 (Maximum CPC: 2.00) and a daily budget of $5000. Selecting the same search phrases from above, Google presented us with an estimate of between 86 and 109 clicks (midpoint of 97.5).

December Searches: 1,500,000

SKUs available from Best Buy: 6

Retailer/SKU Combinations on CNET.com: 46

Number of expected daily clicks on AdSense: 98

We acknowledge significant seasonality in the Digital Frame market. Historically the holiday season has defined the success of this emerging industry. At present, the index is not adjusted for seasonality. The graph below from Google Trends shows the significant fourth quarter spikes (as well as a small increase around Mother’s Day).

The index value for December 2006 will be set at 100. In February, we’ll update the index and discuss the methodology used to construct the index, as well as provide an update to each of its components. Stay tuned … Upward and onward, we hope!

Sources

http://inventory.overture.com/d/searchinventory/suggestion/

http://www.cnet.com/

http://www.bestbuy.com/

http://www.google.com/trends

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