August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 1

Groundbreaking Trends on the Horizon

IntroductionWelcome to Blueshift Research’s and SurveyMonkey’s second edition of the business research tracker entitled

Trends on the Horizon. This monthly survey tracks opinions and actions on roughly 20 of what we believe are

the most pressing trends affecting U.S. consumers’ choices, which in turn could affect business and investment

theses. We will continue to monitor consumers’ opinions regarding trends and will update our survey questions

based on topics that emerge from our research and observations.

This month’s survey comprised 1,029 respondents who offer a snapshot of the U.S. public. SurveyMonkey

utilizes U.S. Census data to balance the respondents by gender and age so that the sample aligns with the

general population.

After considering a plethora of trends last month, we decided to eliminate three questions from our tracker

to make room for more pressing matters in both emerging and long–standing markets. We eliminated our

question about climate change after seeing that a resounding 80% of respondents believed in the data.

We also removed questions about car replacement cycles, which are being discussed in other publications

in various forms, and its follow–up questions about what changes consumers are making. We then added

questions discussing wearable technology, electronic cigarettes, preferred grocery stores, video gaming, and

child vaccinations.

Here are our results for the month of August:

Summary of Findings • Our top new trend is consumer adoption of wearable technology. The rate of adoption in this fragmented

market is low, but one–third of respondents said they were likely to adopt wearables in the next three

months. We started tracking this space ahead of the possible launch of Apple Inc.’s (AAPL) wearable

technology to see if the release will push the technology further into consumers’ homes.

o Approximately a third of respondents are likely to adopt wearable technology in the next three months, while 4.5% of respondents already have wearable tech devices.

• We also started tracking the use of electronic cigarettes, or e–cigs or vaporizers, this month. Tobacco use

in general was low among our respondents, and cigarettes were the few users’ primary method. Still, e–cigs

are starting to emerge in low–income households looking to save money. This respondent group also had

the highest percentage of smokers, so e–cigs could pose a threat to cigarette giants.

o 8.8% of respondents using tobacco primarily consume it in the form of e–cigs. Also, e–cigs are seeing the highest adoption in low–income households.

• We are looking at the grocery space to determine if big–box stores are seeing decreased grocery sales

and if specialty grocers like Whole Foods Market Inc. (WFM) are seeing increased adoption. The winner in

this space, however, was local grocery chain stores, a development worth monitoring during the upcoming

months as big–box stores try to adapt to consumer interests and as specialty stores attempt to drop prices

and shake off their high–priced reputation.

o More than one–half of respondents did the majority of their grocery shopping at local grocery chain stores, while one–fourth primarily shop for groceries at big–box stores.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 2

• Gaming, a trend suggested by our respondents in July’s survey, is shifting as both computer and smartphone

gaming outpaces console use. Smartphone gaming is being pushed to new heights by consumers ages 30

to 44, who are getting back into gaming. These devices are aiding the growth of game app developers and

should be a big warning to console developers Nintendo Co. Ltd. (TYO:7974), Microsoft Corp. (MSFT) and

Sony Corp. (TYO:6758).

o 30.8% of gamers indulge in computer gaming most often. Still, 27.1% prefer smartphone gaming, and 22.5% primarily use a video game console. Most smartphone gamers were 30 to 44 years old.

• Our final new issue was to determine the rate of parents opting not to vaccinate their children, but almost all

of our respondents believe in childhood vaccinations. Diseases like measles are starting to reappear in the

United States as citizen opt to not vaccinate their children. We will monitor such disease outbreaks and the

rate of anti–vaccination parents.

o 95.5% of respondents said they believe children should be vaccinated.

• The first trend from July that remains at the forefront is the rising opposition of GMO foods and the public’s

call for GMO product labeling. We again found respondents in all age groups opposing GMO foods as well

as a rising tide of consumers wanting GMO labeling. The GMO debate is at a critical tipping point as a large

number of consumers are indifferent in the matter, and could push oppositions to new heights or help aid in

the continued use of GMOs. Kellogg Co. (K), Post Holdings Inc. (POST), Target Corp. (TGT) and many other

companies are not taking any chances and are already in the process of removing GMO products from their

respective operations.

o Currently 53% oppose GMO foods, a 3–percentage point increase from July, while 38.3% are indifferent and 8.7% are in favor and buy GMO foods.

• Support for marijuana legalization remains strong and stable. Poll after poll, including ours, shows a growing

number of consumers in support of legalization or medicinal marijuana. Even the federal government is

trying to loosen marijuana laws; it released a new bill that would allow the legal growing of cannabis plants

with low percentages of THC.

o 41.7% of our respondents want marijuana to be completely legal, roughly the same as in July.

• Solar installations have stalled during August after seeing a rising tide of residential solar installations in the

previous months. We altered our question to specifically reflect solar installation in respondents’ homes,

which may account for the slight dip, but other factors like odd laws that inhibit solar panels in areas of

development and bad reviews from early adopters could slow solar installations in the United States.

o The number of respondents interested in installing solar for their homes fell 5 percentage points; 30% of respondents already have solar power in their homes or are likely to install panels during the next six months. The largest group (15.7%) was only slightly likely to adopt home solar.

• The rise in healthy living habits we saw last month is here to stay. Fast–food companies should be worried

about their unhealthy image or suffer the consequences. McDonald’s Corp. (MCD) is campaigning to change

its image, but whether its efforts work remains to be seen.

o Three times the number of respondents have improved their living habits as those who noted a decline in habits during the past six months—consistent with our July findings. Interest in products like kombucha has increased.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 3

• The rate of first–time homebuyers stabilized after the housing market for these consumers dropped in

the first quarter. This could create pent–up demand in the upcoming months as foreign buyers gobble up

U.S. housing and as cash–in–hand–investors compete for lower–priced or foreclosed units. Homebuilder

confidence is rising; if supply also increases, first–time homebuyer demand could be eased.

o 9.3% of respondents are in the market for a house during the next six months, with first–time homebuyers representing 38.7% of that group. This is approximately the same as historical averages during this time.

• Respondents were split on their views of the United States’ economic prospects and did not congratulate or

blame any political party. The move away from relying on specific political parties was evident in July, when

we saw respondents voting by candidate instead. That same notion holds and with neither party being

held accountable for economic prospects. Respondents ages 18 to 29 are leading the charge of not being

swayed by political party views. Currently, Reuters poll shows economic trends improving but consumer

views being disconnected.

o 47.6% of respondents believe U.S. economic prospects are improving, while 52.4% believe they are declining.

o 45.7% believe neither political party is responsible for the country’s economic prospects.

o 61.4% of respondents ages 18 to 29 hold neither party responsible—a 26.68 percentage point gap from those age 60 and up.

• Over–the–top (OTT) services continue to chip away at cable companies’ customers at a rate of 1% a month.

Cable remains a staple in most households, but cable companies will continue to see their user base decline

as subscriptions for Internet cable and OTT services like Netflix Inc. (NFLX) rise.

o Roughly 30% of respondents do not have cable in their households. In June, Internet subscriptions outpaced TV subscribers for the first time for the top nine cable providers in the United States.

• Facebook Inc. (FB) continues to bleed young users while older generations help to keep it atop other social

media platforms. Younger users are slowly flocking to Facebook’s Instagram, while those ages 30 to 44 are

frequenting Facebook and Twitter Inc. (TWTR). Advertisers will have a harder time getting to Millennials and

instead will reach their parents.

o 55.8% of consumers use Facebook the most out of all social media platforms, a 3 percentage–point decrease from last month.

o Instagram is frequented the most by those ages 18 to 29, while Twitter and Facebook are used most often by those ages 30 to 44.

o Google Inc.’s (GOOG/GOOGL) Google+ and LinkedIn Corp. (LNKD) are used most often by consumers ages 45 to 60.

• Apple’s reign as the leading smartphone continues, trailed by Samsung Electronics Co. Ltd. (KRX:005930).

The iPhone’s share of lower–income households is picking up, possibly because of an influx of lower–priced,

refurbished or older models. Both Apple and Samsung gained a few percentage points since July.

o Apple captured 44.4% of the smartphone market, while Samsung held 30.2%.

o 31.5% of respondents with a household income up to $24,999 have an iPhone, compared with last month’s 25.8%.

• Consumers still are not convinced they need to adopt a mobile or digital wallet. Younger respondents

continued to be most likely to adopt this payment form.

o 10% of respondents have used a digital or mobile wallet in the last month. Of those, 27% use them on a regular basis, while 9% signed up and started within the last month.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 4

• Internet delays are not getting worse but not improving either. Roughly one–third of respondents

experienced delays or slowdowns compared with six months ago. Netflix is showing the most signs of

slowing Internet services, while Google and Comcast Corp. (CMCSA) are taking matters into their own

hands and building out their own networks.

o 32.7% of respondents have experienced slow or delayed Internet services compared with six months ago, roughly the same as in July.

• Respondents considered robot usage to be just another part of having surgery. Adoption of robotic

assistants, like Intuitive Surgical Inc.’s (ISRG) da Vinci, already is growing at some hospitals and will not be

met with consumer resistance as long as results are good.

o 82.9% of respondents have a varying degree of comfort with a doctor using a robot to assist in a surgery. 30%, the largest group of respondents, is moderately comfortable with robot–assisted surgeries, while 37.3% are very or extremely comfortable.

• 11main.com will remain unknown until Alibaba Group opens the platform to the general public. One analyst

does not view 11main.com as a threat to online retailers, including Amazon.com Inc. (AMZN), but we will

not be able to assess its effect on the market until the general public can try it out and share their opinions

and money.

o 98.6% of respondents had not heard about 11main.com, the same percentage as in July.

• Facebook’s social experiments have had minimal effect on usage of its site. Most respondents were not

aware of these social experiments, and those who were aware still frequent the site at the same rate as the

overall respondent group.

o 40.2% of consumers knew about Facebook’s social experiments.

o Adoption decreased for 25.4% of respondents but increased for 11.6% in August, which is consistent with those who knew about Facebook’s social experiments.

• Fitness apps are becoming more popular. Other frequently downloaded apps include the 2048 puzzle

game, the Waze GPS app, the Lyft and Uber ride services, and the Clash of Clans game.

• Social media campaigns can raise awareness about a specific topic and cost no money to start. Two such

examples cited by respondents were the ALS Ice Bucket Challenge and the #IfTheyGunnedMeDown

campaign. Respondents also noted the trends of wearable technology, drones, streaming live, and organic,

locally grown food.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 5

New Trends

1) Wearable technology adoption is minimal but interest is high

The use of wearable technology is an emerging trend in the United States. Currently slightly more than one–

third of respondents are likely to adopt or already have wearable technology. The devices primarily are being

adopted or considered by those 44 years or younger, likely as an aid in monitoring health. Consumers are

eagerly awaiting the possible release of Apple’s wearable technology, which we will continue to monitor.

How likely are you to adopt wearable technology in the next three months?

• 37.4% of consumers are likely to adopt wearable technology in the next three months.

o 18% of those are slightly likely to adopt wearable technology.

o 4.5% of consumers already have wearable technology.

• 51.6% of consumers ages 18 to 29 are likely to adopt wearable technology in the next three months.

• 42.4% of consumers 30 to 44 years old are likely to adopt wearable technology in the next three months.

• Some respondents believe that Apple’s pending entry into the market will create an influx in wearable

device adoption.

• Some analysts believe wearables will be the next big market, much as tablets were, but not until consumer

adoption rises.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 6

2) E–cigs threaten cigarettes’ biggest market: low–income households

Tobacco is consumed by only 18.1% of our respondents. Those who do use the substance prefer cigarettes

over any other method. E–cigs’ real threat comes in the demographic it is primarily attracting: households with

incomes up to $24,999, the primary users of regular cigarettes. Industry experts view electronic cigarettes,

or e–cigs, as a disrupter to this age–old trend and the cigarette companies that produce them. Pew Research

predicted the electronic cigarette market would grow 24% annually through 2018, but so far e–cig sales have

been minimal and still trail sales of cigarettes and cigars.

How do you smoke most of your tobacco?

• Only 18.1% of respondents consume tobacco.

o 66.9% of those primarily use regular cigarettes.

o 18.2% primarily use cigars.

o 8.8% primarily use e–cigs or vaporizers.

o 6.6% primarily use a hookah.

• Lower–income households (up $24,999) were the most likely to use tobacco (27.4%) and most likely to

adopt e–cigs (5.5%).

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 7

3) Local grocery chain stores dominate the grocery space

Local grocery chain stores like The Kroger Co. (KR) and Safeway Inc. (SWY) are ruling the grocery market and

are significantly outpacing the second most frequently used destinations: big–box stores like Walmart Stores

Inc. (WMT) and Target. If big–box stores cannot adapt to the latest consumer requests, like gluten–free and

organic products, their user base and expansion will be stifled. Local grocery stores are attracting customers

across all age groups and household incomes, more than double the percentage points of big–box stores.

Specialty stores like Whole Foods are attracting consumers ages 18 to 29 and with high incomes.

Where do you shop for the majority of your groceries?

• 61.1% of consumers do the majority of their grocery shopping at local grocery chain stores.

• 23.6% primarily shop for groceries at big–box stores.

• A Wall Street analyst predicted that big–box stores like Walmart will lose out to online competitors and

smaller local competitors.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 8

4) Computer and smartphone gaming outpaces console gaming

Based on respondents’ suggestions in July, we set out to determine how U.S. consumers are primarily

conducting their gaming. Roughly half of our respondents reported playing video games and preferred

a computer to other forms. However, smartphones outpaced consoles for gaming, threatening console

companies Microsoft, Nintendo and Sony.

How do you play the majority of your video games?

• 48% of respondents do not play video games.

o 30.8% of those who do play video games primarily use their computers to do so.

o 27.1% primarily use their smartphones for gaming.

o 22.5% use their gaming consoles.

o 2.1% use handheld consoles.

o 17.3% use tablets for gaming.

• Console gaming is most prevalent among those ages 18 to 29 and those with household income up to $24,999.

• Those who use smartphones for gaming ranged from 30 to 44 years old and with incomes from $25,000

to $49,999.

• Tencent Holdings Ltd. (HKG:0700) revenues jumped during the past quarter on the back of smartphone gaming.

• Xolo is seeing such a rise in smartphone gaming that it recently launched a HD smartphone specifically

aimed at gamers.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 9

5) Respondents believe in vaccinating children

The United States is starting to see outbreaks of diseases previously eradicated by vaccinations. This

development has been aided by the growing number of parents not vaccinating their children, often swayed

by celebrities claiming that vaccinations can be harmful. However, 95.5% of our respondents support childhood

vaccinations. We will continue to monitor the rate of parents foregoing vaccinations and determine whether

the 4.5% of respondents in favor of this development shrinks or grows.

Should children be vaccinated?

• 95.5% of respondents viewed vaccinations as a must for children.

Previous Trends6) Respondents are opposed to GMO foods and want to have GMO foods labeled

The number of respondents opposing GMO foods rose from July, and those in favor of GMOs have significantly

dropped off and moved to being indifferent or in opposition. This marks a critical time for GMO prevention or

endorsement efforts to win over consumers who are on the fence. Respondents, whether for or against GMO

foods, agreed that GMO foods should be labeled; the number in favor of labeling grew by a small percentage

point from July. Companies such as Kellogg, Post and Target already are in the process of removing GMO

products from their operations to meet the growing consumer demand. Vermont is the first state to pass a

law to require GMO labeling by July 2016, and countries like Mexico are refusing to allow companies such as

Monsanto Co. (MON) to plant GMO crops.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 10

What are your views on GMO foods?

• 53% oppose GMO foods, 38.3% are indifferent, and 8.7% are in favor and buy GMO foods.

• The number of respondents opposed to GMO foods is slowly growing, rising 3.4 percentage points from July.

• Respondents from each age group opposed GMO foods, but the number of those age 60 or older in

opposition has risen since July.

• The percentage of respondents opposed to GMO foods rose in all household income levels except in $25,000

to $49,999, which dropped 4.7 percentage points since July.

• In addition to Ben & Jerry’s (Unilever/UN/UL), General Mills and plethora of companies removing GMO

products, Post is removing them from its Grape Nuts cereal, Target already has 80% of its brand products

labeled as GMO–free, and Kellogg’s Kashi brand is slowly transitioning to organic ingredients. The Non–GMO

Project has certified more than 20,000 products since 2007 and is seeing an increase in labeled products.

o One barrier to reducing/eliminating GMO usage is in finding organic products, which has slowed Kellogg’s transition. Currently 90% of soybeans and corn produced in the United States are GMO and, in turn, are used to feed animals that produce eggs, milk and meat.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 11

Should GMO foods be labeled?

• 83.1% of respondents want GMO foods labeled; only 4% are against the labeling efforts.

• Vermont is the state to watch in the GMO labeling battle, as it was the first to pass a law requiring GMO

labeling but without needing neighboring states to do the same. A group of food manufacturers responded

with a lawsuit.

7) Support of marijuana legalization is strong and stable

Complete legalization of marijuana is supported by 41.7% of our respondents, roughly the same as in July. We

found a slightly lower rate of support than other polls, which may have been caused by the answer gradients

that we supplied to respondents. We saw a slight rise in the number of respondents wanting marijuana laws to

be used for medicinal purposes only or controlled on a state–by–state basis. Any punishment for marijuana use

or possession is losing support among our respondents; we found a few percentage points decrease in those

wanting marijuana to be illegal and to carry a punishment. Change is even occurring at the federal level; a new

bill was introduced to allow plants with low THC percentages be grown.

What should the current law be regarding marijuana?

• 41.7% of respondents want marijuana to be completely legal, roughly the same as in July.

• Respondents ages 18 to 29 are the most supportive of marijuana legalization.

• Oregon, Alaska, Florida and Washington, D.C., will be voting on legalizing marijuana within the year. Alaska

could become the first red state to legalize marijuana.

• Support for medical use in Florida is very strong, and slightly more than half of its residents support legalization.

o 88% of Florida voters support marijuana used for medicinal purposes, while 55% support complete legalization.

• 57% of Oregon voters support the legalization of marijuana.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 12

8) Solar installations stall

Adoption of solar, one of our top trends last month, has taken a 5 percentage–point dip in interest. Thirty

percent of respondents already have solar power or are likely to install in their homes during the next six

months, but the largest group (15.7%) of those respondents were only slightly likely to adopt solar. We altered

the question to reflect consumers’ solar power adoption for their homes rather than for business or for

portable chargers, which could be the cause for the slight change. Another cause could be from specific laws

that inhibit installations in developing neighborhoods, as well as a lack of communication and of customer

services from energy providers and solar installers, which has resulted in some poor reviews.

How likely are you to adopt solar power in your home during the next six months?

• 30.8% of consumers are likely to adopt solar in the next six months, but roughly half of those consumers are

only slightly likely to adopt.

• Adoption was more likely in those with household incomes above $150,000, and increased 6 percentage

points within this demographic from July. All other income levels had a decreased in the number of

respondents likely to adopt solar.

• Respondents ages 30 to 44 now are most likely to adopt solar during the next six months, compared with in

July when those 45 to 60 years old were most likely.

• Although prices have dropped dramatically over the years, and more companies are offering solar

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 13

installations, some laws still dampen the adoption. One such law is in Texas where solar panels cannot be

installed in areas still under development.

• A lack of communication between customers, solar providers and energy companies is resulting in

problems with installations and energy payments. One solar adopter reported regretting installing panels

after his energy bill increased during the first year of use and none of the energy created by the panels was

credited to him.

• We adjusted our question to reflect only solar adoption for homes, so some of the decrease could be from

respondents who used solar for business or were likely to use portable solar chargers such as NRG Energy

Inc.’s (NRG) Goal Zero.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 14

9) Improved living habits are here to stay, spelling disaster for fast–food companies

After decades of fast food, U.S. consumers are starting to greatly improve their living habits. Three times the

number of respondents have improved their living habits as those whose living habits have declined during

the last six months—consistent with our July findings. Products like kombucha, a fermented tea, are seeing

increased interest. Companies that adhere to this shift will survive, but those stuck in the past will suffer. Fast–

food companies like McDonald’s may not be able to survive this shift as consumers continue to associate them

with their long–standing reputation for unhealthy meals.

Compared with six months ago, how have your living habits (diet, exercise, sleep, etc.) changed?

• Three times the number of respondents reported that they have improved their living habits during the past

six months as those who reported a decline in habits. This is consistent with our July findings.

• Kombucha is seeing a rise in interest in the United States. Blueshift observed that many cafes, bars and

restaurants in Portland, OR, have Kombucha on tap to meet the heightened demand.

• McDonald’s is taking notice to the new focus on being healthy but faces an uphill battle in changing its fast–

food image. It currently is targeting influencers in the blogging space with events that serve all McDonald’s

foods, and has added multiple healthier items.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 15

10) Rate of first–time homebuyers stabilizes after Q1 drop, but they face increased competition

The housing market is stabilizing since dropping in the first quarter, as we saw in July. More recently 9.3% of

our respondents reported being in the market for a home for the next six months. Also consistent with our

July findings is that 38.7% of respondents in the market for a home are first–time buyers, showing a return to

historical averages. First–time buyers may start to create pent–up demand as they fight with investors and

foreign buyers for lower–priced housing.

Are you looking to buy a home in the next six months?

• 9.3% of consumers are in the market for a house over the next six months.

o 38.7% of those are first–time homebuyers.

• The housing market is set to rebound after dropping in the first quarter because prices remain low,

inventory is building, and mortgage rates are hanging around year lows.

• Investors who pay in cash are taking entry–level housing from first–time homebuyers. Additionally, home

supply dropped by 17% for the bottom third of pricing but rose 6.5% for overall housing in June year to

year. This may be creating backed–up demand from first–time buyers as they fight for lower–priced homes

around the country.

• Homebuilders’ confidence is increasing as they see more first–time buyer prospects this month.

• Chinese buyers continue to flood the U.S. housing market, adding to the stiff competition in California,

Washington state, and New York. The influx has pushed up housing costs in already pricey areas like

San Francisco.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 16

11) Consumers are mixed on U.S. economic prospects but hold no political party responsible

Respondents were split in their opinions about the United States’ economic prospects. Those who view the

economy as improving did not credit any particular political party, while those who see the economy as declining

pinned the blame slightly more on Democrats—roughly 1 percentage point above blaming neither party and

2.5 percentage points above blaming the Republican party. Our respondents’ views varied by age group. Those

ages 18 to 29 years were substantially more likely to believe that neither party was to be held responsible for the

improving or diminishing the economy; older respondents were more likely to blame a specific political party.

Reuters also indicated this disconnect between consumer views and actual economic trends.

Do you think the United States’ economic prospects are improving or declining? Which political party, if any,

is responsible?

• 47.6% believe economic prospects in the U.S. are improving, while 52.4% believe prospects are declining.

• The largest group (27.8%) believes economic prospects are improving and that neither political party

is responsible.

• 45.7% believe neither political party is responsible for the country’s economic prospects.

• 61.4% of those ages 18 to 29 hold neither party responsible, a 26.68 percentage–point gap from those age

60 and up.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 17

12) OTT services continue to slowly chip away at cable companies’ hold on U.S. consumers

Cable still remains a staple in 70.1% of U.S. households, and a little less than half of those users subscribe

to add–on services like Time Warner Inc.’s (TWX) HBO. However, cord–cutting is happening at a rate of 1%

a month, and consumers will continue to move away from cable services as OTT services like Netflix gain

viewers. Subscriptions to Internet cable for the top nine companies now outpaces cable TV subscriptions. The

large number of respondents who still subscribe to cable services decreased in size by 1%, consistent with our

July findings. Younger generations are more likely to never have cable and also are less likely to have add–on

services if they have cable.

Do you use cable in your household?

• 32.4% of respondents have cable with add–on services like HBO.

• 37.7% subscribe to just basic cable service.

• 29.9% do not have cable in their households, and this number continues to grow roughly 1% each month.

• Broadband Internet subscribers (49,915,000) outpaced the number of TV subscribers (49,910,000) for the

top nine cable companies during June.

• Netflix subscriptions surpassed 50 million subscribers worldwide and added 570,000 users in the United States.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 18

13) Facebook is bleeding young users but their absence is being filled by older generations

Facebook remains the king of social media, but is starting to lose its stranglehold on its user base. 55.8% of

respondents indicate using it the most out of all social media platforms, but that represents a 3 percentage–

point decrease from July. Younger users continue to decrease their Facebook use, while those ages 30 to

44 have increased their visits to the site. Facebook’s average user age now is 40.5 years old. Google+ and

LinkedIn were the second most frequented social media sites, with 6.1% of respondents.

Which social media platform do you use the most?

• 55.8% use Facebook the most out of all social media platforms, but this is a 3 percentage–point decrease

from July.

• 6.1% of consumers frequent Google+ and LinkedIn most often.

• Instagram is frequented the most by those 18 to 29 years old, while Twitter and Facebook are used most

often by those ages 30 to 44. Google+ and LinkedIn are used most often by respondents ages 45 to 60.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 19

14) Apple continues it reign atop the smartphone market

Samsung is the only other company close to challenging Apple’s stranglehold on the market. Our numbers are

consistent to a second–quarter poll done by the International Business Times, with Apple capturing 44.4% of

the smartphone–only market and Samsung, 30.2%. Apple’s lower–priced, refurbished or older–model iPhones

have started to infiltrate households with incomes up to $24,999; we noted a 6 percentage–point increase in

adoption for this demographic compared with July. Meanwhile, Samsung saw a 7 percentage–point decrease in

adoption.

Who made the smartphone you currently own?

• 35.6% of respondents owning a mobile phone have an iPhone, while 24.2% have a Samsung smartphone.

o Among respondents with smartphones only, 44.4% had an iPhone and 30.2% had a Samsung device.

• Apple and Samsung both saw a 2 percentage–point increase in adoption among all respondents compared

with July.

• 31.5% of respondents with a household income up to $24,999 have an iPhone, compared with July’s 25.8%.

• 17.8% of these lower–income consumers have a Samsung smartphone, compared to 25% the previous month.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 20

15) Digital and mobile wallet adoption remains sluggish

Digital and mobile wallet adoption has not shifted for the U.S. consumer and still hovers around one in 10

consumers, but roughly a quarter of our respondents ages 18 to 29 had adopted this new form of banking. Our

results of digital or mobile wallet users fall between the numbers of daily and monthly users in a recent study

done by Thrive Analytics, which includes using eBay Inc.’s (EBAY) PayPal on a computer. Amazon became the

next entrant to an already fragmented market with its Amazon Wallet. The initial interest from the younger

generation is promising for this developing industry, but adoption will remain low until other consumers and

retailers start to use the technology.

Have you used a digital or mobile wallet in last month?

• 10% of respondents have used a digital or mobile wallet in the last month.

o 27% of those use digital or mobile wallets on a regular basis.

o 9% have signed up and started within the last month.

• Those ages 18 to 29 are the most likely to adopt this new form of banking.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 21

16) Internet delays continue to plague consumers

The rate of consumers experiencing slower or more delayed Internet service was consistent with our July

findings, but still comprised one–third of respondents compared with six months ago. Some companies like

Netflix are experiencing slowing speeds, while others are taking matters into their own hands and expanding

high–speed Internet networks to meet demand.

Are you having more problems with slow or delayed Internet compared with six months ago?

• 32.7% have experienced slower or more delayed Internet services compared with six months ago, roughly

the same as in July.

• Netflix released ISP streaming speeds for the month of July, and the United States ranked 13th out of the 20

countries evaluated by the company. Net neutrality is one of the factors at play in the slower speed.

• Companies are reacting to the slowdown in Internet speeds. Google has funded a $300 million high–

speed Internet trans–Pacific cable between the United States and Japan, while Comcast is building out its

all–fiber network.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 22

17) To consumers, robots are just another part of having surgery

Respondents’ openness to robot–assisted surgeries will fare well for hospitals that adopted devices like the

da Vinci and need to pay off the related lofty costs. Increased use of robot–assisted surgeries already is

happening in one Pennsylvania hospital. Companies like Intuitive Surgical will benefit from this trend as long

as results from robot–assisted surgeries are positive. The da Vinci has been around since 2000, and more than

200,000 surgeries were performed in 2012. The newest da Vinci Xi surgical robot was used for the first time in

California at the end of July.

How comfortable would you feel about a doctor using a robot to assist in your surgery?

• 82.9% of respondents voiced varying degrees of comfort in having a robot–assisted surgery.

• 30% of those respondents were moderately comfortable with robot–assisted surgeries.

• 37.3% were very or extremely comfortable with robot–assisted surgeries.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 23

18) Alibaba’s 11main.com remains unknown, even as the company approaches its IPO

Alibaba’s 11Main.com is currently an invitation–only platform with no general release date in sight. It continues

to remain unknown in the United States; 98.6% of our respondents were unaware of the site. 11Main.com will

not gain mindshare and organic growth from word–of–mouth until it is fully available to those seeking an

alternative to Amazon. Also, a review of the site’s beta version left a lot to be desired. We will see if Alibaba

opens up its new platform when it IPOs as early as next month.

Have you heard of 11main.com?

• 98.6% of consumers had not heard about 11Main.com, the same percentage as in July.

• Alibaba is shooting for an IPO date after Labor Day in September, which has the potential to be one of the

biggest ever at an estimated $20 billion. This IPO also will help Yahoo! Inc. (YHOO), which has a 22.5% stake

in the company.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 24

19) Social experiments introduced by Facebook have minimal effect on the site’s usage

Social experiments introduced by Facebook are having a minimal effect on use of the social media site.

We broke our original question into two parts to eliminate the assumption that consumers knew about the

experiments; we more recently assessed consumers’ use of the site and knowledge of the experiments. We

found the majority (63%) have not changed their use of Facebook in the last month. Also, twice the number

of users have decreased their use of the site as those who have increased their use in August. A shift in user

demographic continues for Facebook. Initial adopters, those ages 18 to 29, are decreasing their usage the most

out of any age group; their absence is being filled by those ages 45 to 60. Only 40% of our respondents were

aware of Facebook’s social experiments.

How has your usage of Facebook changed in the last month?

• Twice the number of consumers decreased their use of Facebook as those who increased their use of the

site in August.

o 11.6% increased their use of Facebook in August.

o 25.4% decreased their use of Facebook.

o 25.7% of respondents who knew about Facebook’s social experiments had decreased their use of the site in August. (Filtered for consumers who knew about the social experiments and cross–referenced with Facebook usage.)

o 11.7% of respondents who knew about Facebook’s social experiments increased their use of the site during August. (Filtered for consumers who knew about the social experiments and cross–referenced with

Facebook usage.)

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 25

Have you heard the news about Facebook’s social experiment on its users?

• 40.2% of respondents knew about Facebook’s social experiments.

o Twice the number of respondents who knew about Facebook’s social experiments decreased their use of Facebook as those who increased their visits to the site.

o 25.7% of those who knew about Facebook’s social experiments decreased their use of the site in August. (Filtered for consumers who knew about the social experiments and cross–referenced with Facebook usage).

o 11.7% of those who knew about Facebook’s experiments increased their use of the site in August. (Filtered for consumers who knew about the social experiments and cross–referenced with Facebook usage.)

• Respondents voiced distaste for these experiments since they were not warned, but did not say anything

about abandoning the site.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 26

20) Fitness apps and apps like 2048, Waze, Lyft, Uber, Clash of Clans are seeing increased downloads

Consumers continue to indulge in apps, and we are keeping track of emerging trends in the app world.

Which apps/mobile games are you using now that you were not using a month ago?

• Respondents’ top downloaded apps during August included a plethora of fitness apps as well as Waze, Lyft,

Uber, 2048, and Clash of Clans.

21) Hot trends include social media campaigns like ALS Ice Bucket Challenge and #IfT-heyGunnedMeDown, as well as wearable technology, drones, streaming live, and organic, locally grown food

Respondents mentioned the following trends, which may influence our future survey questions. Wearable

technology was both discussed by respondents and introduced as a topic in this tracker.

What is the most interesting new trend you have seen in the last month?

• The top trend mentioned by respondents was social media campaigns, like the ALS Ice Bucket Challenge

and #IfTheyGunnedMeDown. The ALS Association has raised $15.6 million through the social campaign—

nine times the group’s normal fundraising. This phenomenon of going viral and having celebrities join in the

movement could create different marketing campaigns for companies and decrease their need to directly

pay for social media advertising.

• Other trends included wearable technology, drones, streaming live, and organic, locally grown food.

August 27, 2014

1 Ferry Building, Suite 255, San Francisco, CA 94111 | www.blueshiftideas.com 27

The Author(s) of this research report certify that all of the views expressed in the report accurately reflect their

personal views about any and all of the subject securities and that no part of the Author(s) compensation was,

is or will be, directly or indirectly, related to the specific recommendations or views in this report. The Author

does not own securities in any of the aforementioned companies.

OTA Financial Group LP has a membership interest in Blueshift Research LLC. OTA LLC, an SEC registered

broker dealer subsidiary of OTA Financial Group LP, has both market making and proprietary trading operations

on several exchanges and alternative trading systems. The affiliated companies of the OTA Financial Group LP,

including OTA LLC, its principals, employees or clients may have an interest in the securities discussed herein, in

securities of other issuers in other industries, may provide bids and offers of the subject companies and may act

as principal in connection with such transactions. Craig Gordon, the founder of Blueshift, has an investment in

OTA Financial Group LP.

© 2014 Blueshift Research LLC. All rights reserved. This transmission was produced for the exclusive use of

Blueshift Research LLC, and may not be reproduced or relied upon, in whole or in part, without Blueshift’s written

consent. The information herein is not intended to be a complete analysis of every material fact in respect to any

company or industry discussed. Blueshift Research is a trademark owned by Blueshift Research LLC.