STATE OF VIDEO IN E-COMMERCE

Quarterly Research Report Q1 2011

WELCOME NOTE
This quarterly report focuses on the state of video in e-commerce websites in Q1 2011. The report highlights statistics and emerging trends in the implementation and usage of online videos by the top U.S. online retailers.

In this report we will review the following topics:

Online video presence in top e-retailers websites Video indexing by search engines

SEO impact of using online retail videos

Revenue potential of an effective online video strategy.

KEY FINDINGS
Mass-scaled videos on the rise. The number of retailers who mass-scaled their videos increased by nearly 50%. Still, a staggering 68% of retailers are not yet exploiting the obvious and accessible rewards of using videos on their sites. [slide 4]

Bing search engine surpassed Google in retailers video indexing [slide 6]

Consumers continue to embrace e-commerce videos. The number of subscribers to online retailers YouTube channels increased by more than 20% [slide 7] Online retailers respond to audience demand. The number of retailers posting >100 videos on YouTube channels increased by 15% [slide 8] Huge potential for video SEO profit [slide 9]

Nearly 18% of the major search engine result pages contain video results Most video results for retail-related keywords are still posted only on YouTube Certain keyword categories (e.g. computer gaming) have a higher presence of video results than
others (e.g. furniture, office supplies) Featured case study: Zappos generates more than $500K in incremental revenue simply by following video SEO guidelines [slide 11]

VIDEO PRESENCE ON E-COMMERCE SITES

TOP 10 RETAILERS BY VIDEO PRESENCE
Video Rank
1 2 3 4 5 6 7 8

VIDEO PRESENCE PER SITE

Retailer
Overstock Amazon* * HSN

Est. No. of Videos

95,000 72,635 29,620 17,687 11,198 9,000

IR 2010 Rank
28 1 25

QVC
Buy.com Barnes and Noble Target Nike

11
32 42 21 48

7,870
4,070 3,625 3,617

9
10

Systemax
Cabelas

22
35

* Video count for Amazon.com does not include Amazons on-demand video services or Zappos.com.

Scale to fit. More retailers turn to mass video 32% of retailers scaled to >1,000 videos on their sites, compared to only 22% in the previous quarter. Race to the top. Over the last three months, the cut-off to enter the top 10 video-using retailers list increased from 2,500 to 3,600 videos per site.
4

THE SEO EFFECT

TOP 10 RETAILERS BY NUMBER OF INDEXED VIDEOS
Video SEO Rank Retailer Indexed Videos IR 2010 Rank

1 2 3

HSN Overstock Nike

12,500 6,310 4,070

25 28 48

4
5 6 7 8

HP
Buy.com Systemax Apple Symantec

1,894
1,638 695 658 570

17
32 22 4 33

9
10

Redcats USA
Victoria's Secret

455
136

31
18

Strive to thrive. Over the last three months, the cut-off to enter the top 10 retailers by number of indexed videos increased from 51 to 136 indexed videos.

THE SEO EFFECT: BEYOND GOOGLE

VIDEOS INDEXED BY BING VIDEOS INDEXED BY GOOGLE

Bing passes Google in retailers video indexing. Google experienced a decrease in the number of websites indexing 10 videos or more. Meanwhile, Bing has seen a significant leap this quarter - from 18% to 36% - literally doubling the number of websites with >10 indexed videos.

THE YOUTUBE STARS

TOP 10 RETAILERS ON YOUTUBE
Video Rank Retailer Number of Videos Posted on YouTube IR Rank

TOP 10 RETAILERS VIEWED ON YOUTUBE

Video Rank Retailer Number of YouTube Views IR Rank

1 2 3 4 5 6

HSN Systemax Buy.com QVC Dell Nike

79,034 3,625 3,080 1,243 1,105 1,096

25 22 32 11 3 48

1 2 3 4 5 6

Nike Systemax HSN Apple Victoria's Secret ToysRUS

146,737,586 83,829,667 43,010,377 26,029,660 23,439,804 15,636,281

48 22 25 4 18 37

7
8 9 10

ToysRUS
Redcats USA Musician's Friend BestBuy

974
715 479 473

37
31 38 10

7
8 9 10

Musician's Friend
Redcats USA Dell HomeDepot

15,530,062
9,171,843 8,038,749 7,308,990

38
31 3 39

Impressive growth in retail YouTube presence. Nearly 96K retail videos posted on YouTube in Q1 2011 a 9% QOQ increase. 420M views of retail videos on YouTube a 13% QOQ increase. 571K subscribers to retailer channels on YouTube a 21% increase from previous quarter.

BROADCAST YOURSELF: YOUTUBE PRESENCE

NUMBER OF RETAIL VIDEOS POSTED ON YOUTUBE

The more, the better. 48% of retailers posted more than 100 videos on YouTube channels in Q1 2011, as opposed to 42% in the previous quarter.

LEVERAGING SEO WITH ONLINE VIDEO

To test the SEO effectiveness of online video use, 34,000 top keywords within 17 categories* were compiled and analyzed. 18% of these keywords generated video results in search engine result pages.

PERCENTAGE OF KEYWORDS GENERATING VIDEO RESULTS

The vast majority of video results in all categories are videos posted on YouTube. Merely a handful of online retailers leverage videos to drive traffic directly to their site (Zappos, HSN, Organize.com). The online retailers whose videos ranked high in search result pages have all mass-scaled their website inventory to thousands of product videos.

* Keywords were selected from Shopping.coms top searches.

LEVERAGING SEO WITH ONLINE VIDEO

Some categories (e.g. computer gaming) have more video results for related keywords than other categories (e.g. furniture). Similar to standard SEO best practices, producing mass-scale videos to cater to long tail keywords will generate better search engine results, particularly in the more saturated categories. Online video + SEO = Big dollars. Even within the more saturated categories, there is significant SEO value that can be exploited by retailers who will deploy an effective video strategy, by:

Scaling their video deployment to target longtail keywords.

Adhere to video SEO best practices.

10

MORE THAN JUST SHOES THE ZAPPOS VIDEO SEO STORY

Zappos, the subject of this case study, is an e-retailer who chose to bet heavily on a strong video strategy.

Zappos is an example of a retailer who has chosen to mass-scale their online videos and has significant presence in search engine result pages.
The purpose of this case study is to analyze the value Zappos derives from their video SEO efforts. For research purposes, a pool of >21,000 shoe-related keywords were tested*.

SNIPPET OF VIDEO SEO ANALYSIS REPORT FOR ZAPPOS.COM

(As of March 22, 2011)

* Keywords were selected from Shopping.coms top searches for shoes, Zappos brand list and Google s keywords tool.
11

MORE THAN JUST SHOES THE ZAPPOS VIDEO SEO STORY

Analysis of the Zappos video SEO results highlighted the following: 8.1% of the tested keywords generated Zappos video results. The increase in monthly Zappos traffic accredited to video results amounted to 77,316 visits per month. * The increase measured is compared to equivalent textual-page results. * The results are based on ComScore and RankAbove reports comparing click-through results of videos versus text pages. Analysis did not reflect the higher Google rankings gained by videos, therefore actual number of visits is expected to be higher than noted above. In terms of SEM, the total value of traffic derived from the limited keyword pool tested amounts to $551,731 per year.

* The results are based on Googles estimated CPC for each term.

12

CONCLUSIONS AND RECOMMENDATIONS

Retailers are responding to audiences growing demand for retail video. Clearly, the number of retail video views, the number of subscribers to retailer YouTube channels, and the number of videos deployed by online retailers has grown significantly in Q1 2011.

Millions in proven SEO value are still up for grabs.

Retailers who will leverage online video and video SEO as part of their marketing strategy will generate significant revenues in 2011. Deployment of online videos has numerous other benefits aside from the proven SEO benefits, such as user experience and engagement. Video SEO efforts complement and enhance other marketing SEO practices. SEO impact of online video is now measurable.

This report offers a new tool for measuring the net impact of online video SEO.
The days of relying on marketers gut feelings are over the ROI of video SEO practices can now be evaluated before implementation, and success measured over time.

13

ABOUT SUNDAYSKY
SundaySky delivers automated product video production at mass scale and studio quality to increase online sales and drive website traffic. Leading online retailers such as Overstock.com, Discovery Store and Adorama use the SundaySky video solution to cover their entire catalog with product videos resulting in dramatically increased conversion rates, order size and search-engine ranking. Hundreds of thousands of videos are generated daily by SundaySkys Saas-based Automated Video Platform. Videos are generated from existing website content, updated and personalized automatically, engaging millions of viewers and calling them to action.

Yaniv Axen, co-founder and CTO Yaniv.axen@sundaysky.com SundaySky 242 West 27th St., New York, NY 10001 P: 212-929-8111

14