American Customer Satisfaction Index

Annual E-Business Report

August 18, 2009

by Larry Freed
President and CEO, ForeSee Results

© 2009 ForeSee Results

ACSI Annual E-Business Report 2009

Key Findings
• The ACSI E-Business Sector reaches an all-time high in terms of customer satisfaction, 81.5 on the
ACSI’s 100-point scale
• The leading search engine is Google, maintaining a stellar score of 86 from last year.
• Yahoo, which does search and also acts as a portal, bests the other portals (MSN and AOL) but
trails Google substantially.
• AOL is the only company in the portal/search engine category to see customer satisfaction in-
crease, year-over-year, but it remains the lowest scoring company in the e-business sector.
• Satisfaction with news and information websites falls a point since last year to 74.
• USAToday.com is the only measured news and information site to see an increase in satisfaction,
and they also recently enjoyed a 200% increase in market share.

Customer Satisfaction With E-Business Reaches All-Time High

In 2009, the American Customer Satisfaction Index (ACSI) score for the e-business sector rises to
an all-time high of 81.5 on the ACSI’s 100-point scale, a 29% increase in customer satisfaction since
the industry was first measured in 2000. The aggregate e-business score is comprised of an average
of many individual portals, search engines, and news websites, all of which were also rated on the
ACSI’s 100-point scale and are discussed later in the report.

The ACSI e-business sector is made up of two major industries and measures the players with the
greatest market share in each industry: search engines and portals (AOL, Ask, Google, MSN, and
Yahoo) and news and information sites (ABCNews.com, CNN.com, MSNBC.com, NYTimes.com, and
USAToday.com). The following report examines the satisfaction trends for companies and industries
within the e-business sector.

ACSI E-Business Scores Over Time

85

81.5
79.3
80
ACSI Score (100-point scale)

75.9 76.5

75
75.2
71.4
72.5
70

68.7

65
65.0
63.0
60
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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ACSI Annual E-Business Report 2009

Customer Satisfaction Drives Business Success

Customer satisfaction as measured using the University of Michigan’s American Customer Satisfac-
tion Index (ACSI) is a proven predictor of financial performance. Academic research and corporate
experience shows that satisfied customers are more loyal, more likely to engage in positive word
of mouth recommendations and more likely to buy in the future. This link has been proven on the
macro-economic, industry-wide and company-specific levels. For example, a stock fund comprised of
high-scoring ACSI companies has consistently outperformed the S&P 500, and the ACSI has consis-
tently predicted ups and downs in the U.S. GDP.

Based on this proven link between ACSI scores and financial performance, this year’s e-business re-
port may provide guidance to investors. Google’s revenues and profit growth have remained steady
and strong, along with consistently impressive ACSI scores since 2002. After a comparatively disap-
pointing 2007, Google has roared back and appears poised to capitalize on a marketplace in which
most of its main rivals are in disarray. Yahoo, Microsoft, and AOL appear to have reached a point of
stasis, while Ask.com must look for ways to continue the company’s general trend of increased cus-
tomer satisfaction without the periodic backsliding.

Search Engines and Portals: Google Rules the Roost Again

Since Google’s inclusion in the Index in 2002, it has been the industry leader in customer satisfac-
tion every year but 2007, when it was temporarily overtaken by Yahoo. In 2008, Google rebounded
by posting the highest customer satisfaction score ever recorded in the ACSI e-business survey, an
impressive 86. Google maintains that high score into 2009, securing the second-highest score by any
non-manufacturing company (online or offline) measured by the ACSI. The company with the top
spot is Newegg, measured as part of the February E-Commerce Index.

% Change % Change
  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Since Since 1st
Last Year Year

Internet
Portals &
Search Engines
63 65 68 71 72 76 77 75 80 83 3.8% 31.7%
Aggregate

Google NM NM 80 82 82 82 81 78 86 86 0.0% 7.5%

All Others 67 72 72 78 78 77 78 75 76 78 2.6% 16.4%

Yahoo! 74 73 76 78 78 80 76 79 77 77 0.0% 4.1%

MSN 71 67 72 74 75 75 74 75 75 75 0.0% 5.6%

Ask.com NM NM 62 69 71 72 71 75 74 74 0.0% 19.4%

AOL 56 58 59 65 67 71 74 67 69 70 1.4% 25.0%

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ACSI Annual E-Business Report 2009

Google, Yahoo, MSN, and Ask.com all remain static, with no increase or decrease in satisfaction year-
over-year. For Google, this is good news because it has a huge lead over nearest competitor Yahoo and
the rest of the pack. All Google has to do to succeed is maintain its position—no easy task consider-
ing the recent entry of Bing into the marketplace. Next year’s satisfaction report on Google vs. Bing
should bring some indication of whether Bing has the satisfaction chops to challenge Google in the
future (the surveys conducted for this research were done before Bing was officially introduced in
late May 2009, so Bing was not measured as part of the ACSI E-Business report this year). Based on
both customer satisfaction trends over time and on market share, the introduction of Bing couldn’t
come at a better time; Google is leaving both Yahoo and MSN in the dust.

88

86

84

82
ACSI Score

80

78

76

74

72

70
2002 2003 2004 2005 2006 2007 2008 2009

Google Yahoo! MSN

Despite the good timing, Bing has a very difficult road ahead. Where will Bing’s market share come
from? From Yahoo and MSN initially, and maybe from Ask.com, though Ask is a niche player with
stable customer satisfaction and market share. But it seems unlikely that customers will actually
leave Google in enough numbers to allow Bing to seriously challenge Google’s market dominance,
given Google’s extremely high customer satisfaction. People are happy with Google, so why would
they switch? They might switch if Bing is better, and that’s a tall order considering Google is the sec-
ond-highest scoring ACSI service-sector company, behind Newegg.com. Bing has been called a search
engine war “game changer,” but Google’s game will be very hard to change at this point. If anyone can
do it, it’s the combined resources and market share of Yahoo and MSN.

Satisfaction as measured by the ACSI is a predictor of future success on both the micro and macro level.
Google’s huge 10 point jump in satisfaction from 2007 to 2008 preceded a 7% increase in search mar-
ket share from 2008 to 2009. Satisfaction with Yahoo, on the other hand, dropped 2.5% from 2007 to
2008, preceding a 17.5% decrease in search market share and a 5% drop in portal market share.

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ACSI Annual E-Business Report 2009

There may also be stock price implications. A landmark Yahoo!

  Google
and ongoing study shows that ACSI scores predict stock Search
prices; an ACSI-based portfolio has beat the market 10 May-09 73.7% 15.6%
years in a row, in up and down markets. The fortunes Jun-09 74.0% 16.2%
of these two companies support that research.  Google
MoM 0.5% 4.1%
saw an increase in satisfaction from 2007 to 2008 and
Jun-08 69.2% 19.6%
while its share price fell 23% from 2008 to 2009 (June-
June comparison), the S&P 500 Average fell 31% over YoY 7.0% -17.5%
that same time frame. Meanwhile, Yahoo saw satisfac- Note: Data is based on four-week rolling periods (ending
tion decline two points from 2007 to 2008, and its stock June 27, 2009; May 30, 2009; and June 28, 2008) from
the Hitwise sample of 10 million U.S. Internet users.
price fell 33% from June 2008 to June 2009. In short, Source: Hitwise, an Experian company.
Google’s high customer satisfaction may have inocu-
lated it to some degree from market volatility. Google
dropped far less than the market average, while Yahoo
dropped more.

  June ‘08 average price per share* June ‘09 average price per share* Difference

S&P $1,338 $922 -31%

Google $552 $424 -23%

Yahoo $24 $16 -33%

*price reported is a median price between high and low prices for the month of June

Meanwhile, AOL is the only portal or search engine other than Google (and the All Others category,
which represents all portals and search engines not otherwise mentioned by name) to see an in-
crease in satisfaction since 2007, when it took a deep dive from 2006. While AOL’s score improved
25% since it was first measured in 2000, it has not come close to regaining its high score from 2006
(74) and still lags far behind the other portals measured in the category (Yahoo at 77 and MSN at 75).
Usually when an industry laggard sees increasing satisfaction, it’s because all of its customers have
left except for the truly loyal and satisfied base. Although AOL has lost only 1% of the portal market
share over the past year (from 5.3% to 5.25, according to Hitwise), there are indications that it has
lost substantial search market share. Therefore, the users who are still with AOL are the most satis-
fied and loyal, which may be slightly skewing their satisfaction scores up. However, even with the
increase, AOL is four points behind closest competitor Ask.com and 16 points behind Google.

News and Information Sites: Struggling to Remain Relevant

Satisfaction with online news and information sites is down 1.3% this year, from a 75 in 2008 to this
year’s score of 74. Every website included in the online news and information category falls in sat-
isfaction this year except for USAToday.com, which increases one point to 74, giving it a slight edge
over the other sites included in the category. Even the All Others category, which is made up mostly of
smaller, local news websites, falls one point from last year.

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ACSI Annual E-Business Report 2009

% Change Since % Change Since

  2002 2003 2004 2005 2006 2007 2008 2009
Last Year 1st Year

Internet News
& Information 73 74 75 75 73 75 75 74 -1.3% 1.4%
Aggregate
All Others 73 75 75 78 74 77 76 75 -1.3% 2.7%

USATODAY.com 71 72 72 72 74 72 73 74 1.4% 4.2%

MSNBC.com 73 74 74 73 72 74 76 73 -3.9% 0.0%

NYTimes.com 71 70 72 72 72 73 75 73 -2.7% 2.8%

ABCNEWS.com 74 74 74 74 73 74 75 71 -5.3% -4.1%

CNN.com 72 72 74 72 74 73 73 71 -2.7% -1.4%

USAToday’s rise in satisfaction may be a result of their ability to deliver high quality compared to
the quality readers expect. NYTimes.com, in contrast, may be suffering from an inability to deliver
the high quality that readers expect from the Times, no doubt higher than what readers expect from
USAToday.com. Since satisfaction is a combination of what you expect and what you actually get, new
organizations can in some way benefit from lower expectations.

In a trend matching up with USAToday.com’s rise in satisfaction, Hitwise shows USAToday.com with
the largest increase in market share year-over-year. ABC News, which actually had the largest decline
in the category (5.3%) also showed an increase in market share, but we would expect that to erode in
the coming year given their low satisfaction, while USAToday.com continues to increase.

Market Share of Visits within News & Media category

Date CNN MSNBC NYTimes USAToday ABC News

Jun-08 3.40% 3.12% 1.70% 0.56% 0.28%

May-09 3.08% 2.66% 1.78% 1.67% 0.28%

Jun-09 3.29% 2.79% 1.75% 1.67% 0.31%

Month-Over Month Change 7% 5% -1% 0% 11%

Year-Over-Year Change -3% -11% 3% 200% 13%

*source: Hitwise, an Experion Company

None of these news websites has differentiated itself enough to gain significant market share. Even
industry darling HuffingtonPost.com increased its market share 87% from June 2008 to June 2009
(source: Hitwise), but still has less than 0.70% of the news market share.

These websites are all competing for advertiser dollars with the search engines and portals also re-
ported on this month. Ask.com, MSN, Yahoo, and Google all outperform or match the news and in-
formation websites in terms of customer satisfaction. Since customer satisfaction predicts loyalty,
return visits, and even engagement, a site with higher customer satisfaction can deliver more adver-
tising value to its advertisers.

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ACSI Annual E-Business Report 2009

Reports are widespread that the news industry has not yet figured out a truly successful model, and
the ACSI scores for this industry certainly reinforce that assessment. Despite the challenges faced
by online news, people still seem to prefer offline news. The ACSI measured satisfaction with offline
news outlets in the first quarter of 2009. Satisfaction with online news (74) still substantially outper-
forms satisfaction with broadcast and cable television news (71) and with print newspapers (63).

About the Author

Larry Freed is an expert on web effectiveness and web customer satisfaction. He is also President and
CEO of ForeSee Results, a market leader in customer satisfaction measurement on the web, which
utilizes the methodology of the American Customer Satisfaction Index (ACSI).

About ForeSee Results

As the leader in online customer satisfaction measurement, ForeSee Results uses online voice of cus-
tomer data to help organizations around the globe increase sales, loyalty, recommendations and web-
site value. Using a proven, patented technology, ForeSee Results identifies the improvements to web-
sites and other online initiatives with the greatest ROI. With over 37 million survey responses collected
to date and benchmarks across dozens of industries, ForeSee Results offers our clients unparalleled
expertise in customer satisfaction measurement and management. ForeSee Results works with clients
across media and content sites, retail, financial services, healthcare, manufacturing, and government.

ForeSee Results, a privately held company, is headquartered in Michigan and can be found on the web
at www.ForeSeeResults.com.

About the ACSI

ACSI is a national indicator of satisfaction with the quality of products and services available to house-
holds in the United States as viewed by the actual customers of those products and services. Data
from interviews with approximately 70,000 customers annually are used as inputs into an economet-
ric model to measure satisfaction with more than 200 companies in 45 industries and 10 economic
sectors. Results are released on a quarterly basis with all measures reported using a 0-100 scale.

ACSI data have proven to be strongly related to a number of essential indicators of micro and macro-
economic performance. For example, firms with higher levels of customer satisfaction tend to have
higher earnings and stock returns relative to competitors. Stock portfolios based on companies that
show strong performance in ACSI deliver excess returns in up-markets as well as down-markets. And
at the macro level, customer satisfaction has been shown to be predictive of both consumer spending
and gross domestic product growth.

The Index is produced by the Stephen M. Ross School of Business at the University of Michigan in
partnership with the American Society for Quality and CFI Group.

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