1. business and industrial

Connecting Endless Possibilities SM
BUSINESS PLAN
NOVEMBER 1999
THIS DOCUMENT IS FOR INFORMATIONAL PURPOSES ONLY AND
IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES. ANY REPRESENTATION TO THE
CONTRARY MAY PLACE YOU AND THE ISSUER HEREOF IN
VIOLATION OF SECURITIES REGULATIONS. THIS DOCUMENT IS
CONFIDENTIAL
AND
MAY
NOT
BE
REPRODUCED
OR
REDISTRIBUTED WITHOUT THE PRIOR WRITTEN APPROVAL OF
CONNECTLOCAL.COM, INC.
Mr. Geoffrey F. Walsh, Chairman
Mr. Andrew J. Kuzneski, III, President
8150 Brookriver Drive, Suite S-400A
Dallas, TX 75247
(214) 631-3222
E-Mail: [email protected]
v1029
CONFIDENTIAL BUSINESS PLAN
This Confidential Business Plan, (the “Business Plan”) has been prepared solely for information purposes and is
being provided to prospective investors in connection with a possible private investment in ConnectLocal.com (the
“Company”).
This Business Plan has been prepared by the Company. The information contained herein has been obtained from
sources both within and outside of the Company and while believed to be reliable, does not purport to contain all of
the information a prospective investor may desire, consequently, prospective investors are urged to conduct their
own investigation and analysis of the Company. The Company makes no representations or warranties as to the
accuracy or completeness of this Business Plan and shall have no liability for any representations, expressed or
implied, or any statement made herein, or for any omission from the Business Plan, or any written or oral
communication transmitted to you in the course of your investigation. In addition, no liability will attach except as
provided in a definitive stock purchase agreement, when and if this is executed and subject to such limitations as may
be provided in such an agreement.
By accepting this Business Plan, you acknowledge and agree that:
1)
You will keep the information herein and all information provided by the Company strictly confidential;
2)
You will not reproduce the Business Plan in whole or in part and will not distribute all or any portion of the
Business Plan to any person other than a limited number of your employees or representatives who have a need to
know such information for the purpose of evaluation only and who are informed by you of the confidential nature of
such information and agree to be bound by this Agreement;
3)
You understand that the Company will conduct its process of exploring possible investments in the
Company as they, in their sole discretion, may determine (including, without limitation, negotiating the terms with
any prospective investor and/or entering into definitive agreements without notice to you or any other person), that
any procedures relating to any possible investment may be changed at any time, and that any discussions regarding
any possible involvement may be terminated by the Company at any time;
4)
The financial information set forth in this Business Plan has been prepared by the management of the
Company for inclusion in the Business Plan. Projected financial information set forth in this Business Plan is based
upon the Company’s current estimates of the future financial condition and results of the operation of the Company,
and the actual financial condition and the results of operations may vary and such variance may be material;
5)
If requested by the Company, you will return to the Company any copies of the Business Plan or other
material relating to the Company which you may have received, in accordance with this agreement;
6)
You agree to maintain confidentiality with the Company with respect to each and every discussion
concerning a possible investment in the Company, all terms thereof and any subsequent action appurtenant thereto
for a period of three (3) years from your receipt of this Business Plan;
Any prospective evaluation and investment is based upon representations made by each investor as to their
qualification as an accredited investor, that each warrants it is investing for its own account, that it shall not syndicate
nor resell any investment in any manner, and that funds invested in the Company are specifically designated for that
purpose.
2
TABLE OF CONTENTS
MISSION ......................................................................................................................................................................................... 4
EXECUTIVE SUMMARY....................................................................................................................................................................... 5
BUSINESS CONCEPT
Our Message to Local Communities ............................................................................................................................... 14
Questions and Issues ....................................................................................................................................................... 14
Do Solutions Already Exist? ...................................................................................................................................................15
Our Solution .............................................................................................................................................................................15
How We Will Succeed ..................................................................................................................................................... 16
PRODUCTS AND SERVICES
Community Based ........................................................................................................................................................... 17
Consumer Products, Services, and Local Portal Features................................................................................................ 17
Business Products, Services, and Packages............................................................................................................................18
Non-Profit Organization Products, Services, and Packages .................................................................................................19
Education and Distance Learning ..................................................................................................................................... 20
Technical Overview......................................................................................................................................................... 20
MARKET OVERVIEW
Size of Market ...........................................................................................................................................................................21
Demand for Products and Services...........................................................................................................................................22
ConnectLocal’s Barriers to Entry .............................................................................................................................................23
Competitive Assessment, Positioning and Response ...............................................................................................................23
Market Entry Strategy...............................................................................................................................................................28
Sales Force Structure ................................................................................................................................................................29
User Acquisition .......................................................................................................................................................................30
Affinity Programs and Incentive Marketing.............................................................................................................................31
Strategic Alliances and Affiliate Marketing .............................................................................................................................31
ROLLOUT STRATEGY........................................................................................................................................................................34
MANAGEMENT OVERVIEW
Founding Members of Management.........................................................................................................................................36
Advisors and Board of Directors ..............................................................................................................................................38
FINANCIAL OVERVIEW
Overview ...................................................................................................................................................................................40
Accountant's Compilation Report.............................................................................................................................................42
Comparative Prospective Financial Statements........................................................................................................................43
Summary of Significant Forecast Assumptions and Accounting Policies...............................................................................46
EXHIBITS
A - Proposed Seminars............................................................................................................................................................. A1
B - Market Entry Plan .............................................................................................................................................................. B1
C - Additional Members of the Key Management Team......................................................................................................... C1
D - Products and Services Addendum..................................................................................................................................... D1
E - Sales Structure.....................................................................................................................................................................E1
F - Affinity Programs ................................................................................................................................................................F1
G - Articles of Interest.............................................................................................................................................................. G1
H - Detailed Forecasted Financial Statements Months 1-12................................................................................................... H1
I - Detailed Forecasted Financial Statements Years 1-4 ............................................................................................................I1
3
MISSION
Connecting Content, Community & Commerce SM
C
onnectLocal’s mission is to drive the growth of electronic commerce and information
exchange in non-urban communities by providing vision and leading-edge technology
products and services.
By helping to eliminate the anxiety and fear of technology through education and human
touch, ConnectLocal will provide local communities an opportunity and platform to
prevail and prosper in the future with a greater sense of cohesion, unity and participation.
By creating and building a local community's Internet infrastructure, ConnectLocal:
•
Web enables its constituents sooner rather than later,
•
Brings the ubiquitous reach of the Internet to non-urban localities,
•
Facilitates and derives a share of the local e-commerce transaction.
4
EXECUTIVE SUMMARY
"For small business, technology can be both a blessing and a curse.1"
--Thomas J. Donahue, President & CEO, the U.S. Chamber of Commerce
Opportunity
P
eople still spend most of their time and money within their local communities, which
traditionally have been the foundation of this great country. Throughout America, this
foundation is beginning to crumble as local non-urban communities are slow to embrace
the fast-paced evolutionary transformation into the Internet Era. A core reason for this
hesitancy is a basic fear of technology and the ongoing changes it creates. The resulting
resistance tends to retard the growth of these outer-lying non-urban communities and their ability
to establish a thriving, local Internet economy.
ConnectLocal’s opportunity and challenge is to strengthen America’s foundation by devising a
strategy that builds the knowledge, confidence and acceptance levels within local communities to
the point which enables them to enter the new age of information and e-commerce.
In response to the opportunity, ConnectLocal has devised a unique strategy that is based on the
understanding of the current and psychological issues prevalent within local non-urban
communities. As ConnectLocal successfully executes its strategy, it will become the leading
source of local information, e-commerce and promotion in non-urban communities across
America. The company will attain this market position by utilizing local marketing teams
powered by technology to systematically build a national network of standardized Local Portals.
These portals will be set-up free of charge for individual communities, and will benefit the
residents, consumers, local businesses, and Non-Profits (charities, schools, clubs, civic groups,
etc.) by providing them with a destination and/or presence on the Internet.
A cohesive sales, marketing, promotion and content aggregation strategy has been developed that
incorporates human touch and community education as key components which clearly
differentiate ConnectLocal from the competition.
The human touch component of our strategy is delivered through local sales teams, customer
service representatives, local networks of community volunteers and local sponsors. It is
designed to break down the barriers to entry and help people within local communities embrace
the evolving technological changes taking place around the world.
1
IBM, U.S. Chamber of Commerce Announce Results of New Study on U.S. Small Business and Technology.
http://www.uschamber.org/news/sb980601a.htm (also refer to Exhibit G).
5
Community education is provided through a series of interactive seminars and distance learning
hosted by local County Chambers of Commerce and other sponsors. This educational
component is designed to help alleviate the fear and resistance toward new technologies within
the community, which is the first step in forming long-term bonded relationships with its
constituents.
Together, these strategies help ConnectLocal build a critical mass of traffic, content, commerce,
and information to grow and sustain our Local Portals.
Imagine the revenue possibilities a national network of Local Portals offers, beyond the obvious
ones such as advertising and e-commerce. Local information gathered will be sold and
syndicated to other sites to provide them with content. We will facilitate the formation of buying
cooperatives among our various clients and vertical market groups. ConnectLocal will have the
ability to promote a product, service, or new Internet site nationally, yet on a local basis through
our Local Portals and seminar programs.
The revenue possibilities are endless!
Now imagine the lifestyle changes a national network of Local Portals will create. Local
consumers will be able to search online for their favorite fast food at midnight, order it, and
receive a discount. While they are waiting for the food to arrive, they can see which team won
the high school football game that afternoon, what events are happening in town the next day,
and move an interesting event to their online calendar. While they are eating, they can join a
forum to discuss the local election and check their e-mail for the weekly newsletter they receive
from their local bank.
ConnectLocal will create positive and everlasting change throughout America by
strengthening communities and their desire for a united and cohesive family, township,
county and country.
Products and Services
ConnectLocal is deliberately offering a standardized array of Internet-oriented products and
services for the community, consumers, residents, businesses, and Non-Profits. Some services,
such as e-mail, are commodity products and will be offered for free to drive traffic. Others, such
as sponsorships and advertising, are fee-based and will be revenue generators.
The goal is to provide a fully integrated system of established products with innovative local
features that more quickly attains users and provides customers access to the most current
applications available in one platform. Offering a current and standardized assortment of
products and services that effectively hide technology and are easy to use, will help build
confidence and usage among both consumers and businesses. Once users appear ready for more
complex applications, more innovative and proprietary products will be introduced by
ConnectLocal.
6
For the Community
Each targeted local community will be given a free, customized Local Portal. In addition, they
will receive free, online software tools that facilitate content cross-publishing, in addition to the
free systems and support needed to generate the ongoing community participation required for
success.
For Consumers
For consumers and residents, ConnectLocal is providing free products, services, and Local Portal
features that help them stay organized, access local information, and conduct local e-commerce2.
Free e-mail, chat, calendars, news, auctions, coupons, games, etc. will be available, with a
local emphasis. ConnectLocal wants to make their lives easier, help them save money, and
expose them to new products and services by providing a totally integrated, locally focused,
Internet experience.
For Businesses and Non-Profit Organizations
Our products, services, and packages for business clients are designed to integrate tightly with
our marketing and sales strategies. The concept is to create an assembly line process that builds a
business’ Internet presence over time through educational seminars and distance learning, the
sales system, and product/service packages.
ConnectLocal will start a business client with a simple, free web site that ultimately evolves into
a sophisticated, revenue generating3, e-commerce and information site. Various online
promotional packages will be available to help businesses publicize their site, such as targeted
ads and channel sponsorships. Our goal is to advance clients quickly along their Internet
Lifecycle, using education and our digital nervous system4 along the way to initiate product upsells and to reassure them of positive progress.
For Non-Profits, ConnectLocal will offer products, services, and packages very similar to those
offered to businesses. The main difference is that most of what is offered to the Non-Profits will
be free of charge, thereby accelerating implementation and usage.
2
The Consumer Strategy focuses on making it easy for consumers to find what they need and positions ConnectLocal to
potentially share in an e-commerce transaction.
3
"...SMBs (small to medium-sized businesses) that use the Internet have 40% higher revenues than other SMB's." --- Joseph
Diodati, Director of Medium Business Marketing, Cisco Systems at "THE eVENT FOR BUSINESS", October 21, 1999.
4
Digital Nervous System – digitizing information so that it is readily available to all levels of an organization, thus empowering
associates to more efficiently and quickly respond to client needs and progress.
7
Seminars
ConnectLocal’s seminar programs are an integral part of our overall strategy5 since they will
drive the sales and marketing system, particularly from a market entry standpoint. The seminars
will be delivered in-person and remotely using streaming technology and are designed to raise the
community’s knowledge and confidence level, generate interest in products and services, and
create trust and loyalty.
Market Potential
Our business derives revenues predominantly through online advertising, sponsorships, affiliate
marketing, and business-to-business (B2B) and business-to-consumer (B2C) e-commerce. A
Goldman Sachs Group Inc. study on B2B e-commerce highlights that the U.S. B2B market will
explode to $1.5 trillion by 2004. The eConsumer Shopping Report projects that a steady growth
trend will continue through 2002 when the total U.S. B2C market is expected to reach $65.6
billion. The report also projects the number of online buyers will grow at an average annual rate
of 20%, rising from 38.8 million at year-end 1999 to 67.2 million in 2002.
"Revenues from the consumer-directed segment, despite being dwarfed by B2B in dollar size,
will grow significantly over the next several years," states Geoffrey Ramsey, eMarketer's6
Statsmaster. "The business to consumer segment will provide thousands of retailers with new
revenue opportunities and new ways of reaching new customers and enhancing customer
relationships."
Based on our penetration model, we estimate the size of our targeted local community market to
exceed $5.4 billion in B2B and B2C electronic commerce. That market potential along with
ConnectLocal’s strategic combination of human touch and education, will posture us to capture
and retain a huge percentage of the online advertising, sponsorship, affiliate marketing and
B2B/B2C e-commerce generated within the local communities that we establish online.
5
Providing education will help us Web Enable the untapped masses of Small Businesses and consumers in non-urban local
markets to achieve our mission of creating the Web infrastructure necessary to participate in the non-urban e-commerce
transaction.
6
eMarketer Bullish on eConsumer Spending
- http://www.emarketer.com/estats/092799_retail.html
8
Key Management
The following are brief backgrounds of the anticipated members of our executive management
team. Founding members are further discussed in the Management Overview section (also refer to
exhibit C for in-depth biographies of additional executive management team members).
Geoffrey F. Walsh, Chairman, CEO, and Founder
Mr. Walsh is the founder and Chairman of Venture Initiatives, LLC, a world leader in innovative
consumer products. He is a graduate of the University of Pennsylvania’s Wharton School and is a
life-long entrepreneur. Geoff has received such notable awards as “Young Entrepreneur of the
Year,” Entrepreneur’s “The Top 40 Under 40,” and Inc. Magazine’s “Entrepreneur of the Year”
award finalist.
Andrew J. Kuzneski, III, President and Founder
Mr. Kuzneski is a partner in Kuzneski Financial Group, one of the largest private insurance
agencies in Pennsylvania, and has extensive experience working with local communities and their
constituents. Along with Mr. Walsh, he was a founder of ArtWatch International, Inc., the market
maker of ArtWatch. Andrew is a graduate of the University of Pennsylvania’s Management and
Technology program.
Kenneth T. Logsdon, Executive Vice President, Sales
Mr. Logsdon is the Executive Vice President of Venture Initiatives, LLC with overall responsibility
for sales and marketing. Prior to his current position, Ken was Vice President and General
Manager of Gerson-Mayfair Company, President of Mayfair, Incorporated, and Assistant Brand
Manager of the Folgers Coffee Company, a subsidiary of Proctor & Gamble.
Robert Prosen, Executive Vice President, Affinity Programs
Mr. Prosen led the marketing and operations in North, South and Central America for Sabre
Technology Corporation and its direct alliance with American Airlines. Mr. Prosen's
relationships will enable us to quickly develop strategic alliances with major corporations in the
airline, rental car and hotel industries.
Stephanie Gradwell, Vice President, Seminar and Distance Learning
Ms. Gradwell is a Senior Project Manager and an Instructional Designer at Strategic
Management Group, and is currently enrolled at Drexel University as a Ph.D. student majoring in
Educational Leadership Development and Learning Technologies.
9
Financial Summary
ConnectLocal's financial plan reflects management's adoption of an aggressive strategy for
growth. Summarized prospective financial data is presented below.
Year 1
Year 2
Year 3
Year 4
Revenues
$1
$ 25
$ 93
$ 181
Net Operating Income
(7)
(7)
29
77
Net Income
(10)
(7)
24
48
(10)
(6)
26
55
Proceeds From Equity
30
20
-
-
Investing Activities
(3)
(4)
(3)
(5)
Net Cash Flow
17
10
24
51
Ending Cash
17
27
51
102
Total Assets
20
34
61
116
Total Equity
$ 20
$ 33
$ 57
$ 105
INCOME (in millions)
CASH FLOW (in millions)
From Operations
BALANCE SHEET (in millions)
See accountant's compilation report and summary of significant forecast assumptions and accounting policies in the financial overview
section.
Forecasted Sales in Millions
Forecasted Net Income in Millions
200
50
40
150
30
100
20
10
50
0
0
Year 1
Year 2
-10
Year 3
Year 4
Year 1
Year 2
Year 3
Year 4
Investment Requirements and Staging
To further execute its business concepts and take advantage of the opportunities in the
marketplace, ConnectLocal is seeking to raise $30 million of which $10 million will be 1st round
funding staged during the first month of operations. A follow-on 2nd round of $20 million is
staged for month six of operations. An additional $20 million [standby commitment] 3rd round is
slated for the 2nd year of operations.
10
Capitalization
The company has received an initial commitment for equity seed capital that includes offices and
operational infrastructure. Additional investment in the company is anticipated to be in the form
of warrants, redeemable and convertible preferred stock, and voting and non-voting classes of
common stock. A post-infusion capitalization schedule has not been finalized; however, the
company's prospective financial statements assume the entire amount of funding will be in
exchange for common stock.
Operating Cash Flow in Millions
Net Cash Flow in Millions
60
60
50
50
40
40
30
30
20
10
20
0
10
-10
Year 1
Year 2
Year 3
0
Year 4
Year 1
Year 2
Year 3
Year 4
Use of Proceeds
Proceeds raised in year 1 will be used to fund operations until the company achieves break-even,
fund software development and capital expenditures, fund strategic affiliate and local portal
acquisition cash requirements, and build cash reserves as follows:
Research and development ................................................................................................... $1,300,000
Marketing and sales ................................................................................................................ 4,000,000
General and administrative..................................................................................................... 2,500,000
Financing costs........................................................................................................................ 3,000,000
Software and web site development....................................................................................... 2,600,000
Capital expenditures .................................................................................................................. 200,000
Investment in strategic affiliates and local portal acquisitions ................................................. 500,000
Cash reserves ........................................................................................................................ 15,900,000
Total .................................................................................................................................... $30,000,000
11
Exit Strategies
The optimal way for investors to realize the greatest return on investment is via an Initial Public
Offering. TicketMaster Online-CitySearch and Infospace are recent examples of highly
successful publicly traded companies that operate in a similar category. Another exit strategy,
and one potentially as rewarding as an IPO, would be the eventual acquisition of the business by
a media concern or by one of the company's online competitive counterparts such as
TicketMaster Online-CitySearch and AOL Digital Cities. ConnectLocal's strong presence in the
non-urban middle and minor markets will be complementary to these players in that they are
seeking to dominate the much larger metropolitan markets.
Market Cap
Based on a median value of $5007 per user at the top 10 major sites and portals, the company will
have a theoretical $2.6 billion post IPO market cap by the end of year 4, based on an
anticipated population of 5.2 million registered users8. This equates to a potential internal rate
of return of 224%.
7
July 1999 Internet Stock Report. Computed by taking the publicly traded site’s market capitalization and then dividing it by the
number of monthly visitors to the web site. Unique User Values Climb 3.4 Percent--July 22, 1999.
8
Based on an average registered user base of 10,000 people per locality.
12
Under-served Markets - How We Win9
Non-urban markets are sometimes passed over by big business because of cost-benefit
constraints. These markets aggregate hundreds of billions of dollars annually in personal
consumption yet because of marketing, sales, and density issues, they cannot be profitably
served. The ubiquitous reach of the Internet eliminates these financial and geographical barriers
to entry; hence, if we're first and execute properly, ConnectLocal and its shareholders win big!
9
OneMain.com, NASDAQ (ONEM), a consolidator of rural ISPs, validates that our target markets are indeed under-served by
national online service providers and that a great opportunity exists to meet the growing demand for Internet services in these
markets. See http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=onem&script=2100&layo. Their recently successful $215
million initial public offering and acquisition of over 600,000 connectivity customers better exemplifies the potential of these
markets. We view OneMain.com as a potential strategic partner.
13
BUSINESS CONCEPT
“..Instead of large businesses beating small businesses, fast businesses are
beating slow businesses..”
-- Doug Karmin, Business Development, Cisco Systems10
A
s the evolution of the Internet facilitates continued change in the world, it is imperative
that the nucleus of traditional core values within communities prevails and prospers in
order to maintain societal structure and cohesive nations. With the allure of profit, it is
easy for companies and governments to forget that the local family and community comprise
the basic foundations that allow individuals to flourish in all aspects of life.
Recognizing that the Internet is an integral part of everyone’s future, it is imperative that
ConnectLocal provide the education, products and services that allow the Internet to become a
practical and useful part of life for local communities, since this is where most people still spend
the majority of their time and money.
Our Message to Local Communities
ConnectLocal has a very important message to deliver to local communities. That message is
“the Internet and other technological advances are changing the rules of the game for
everyone on a local basis.” This includes local businesses, consumers, and Non-Profit
organizations.
It is vital that we create awareness among these groups of the changes that are occurring around
them, help them to ask the right questions about these changes, and ultimately give them
solutions to the problems and issues they discover.
Questions and Issues
For local businesses, the question of how to survive in this new era of technology and the Internet
is the most important one. Once survival seems likely, then the question of how to thrive will
also become important.
For consumers the issues are different. Instead of worrying about survival, the question becomes
one of how to benefit from the new opportunities presented by technology and the Internet. In
other words, how can consumers find and organize information that enables them to save time
and money as they interact and transact on a local basis?
For local Non-Profits, the issues are different once again. Tight budgets, inefficient operations,
and lack of publicity and exposure are some of the issues that Non-Profits encounter on a daily
basis. How can technology and the Internet help them overcome some of these issues?
10
USA Today – Internet Economy Section, October 27, 1999.
14
Do Solutions Already Exist?
For all three groups, a complete and integrated, community supported, online gathering place
(or Local Portal) to exchange local information, create awareness, and to conduct secure
commerce would help them conquer many of the current issues being faced today. The problem
is that there is not such a place – yet.
Certainly there are national sites such as Yahoo Get Local, and AOL Digital Cities they can turn
to, but these sites lack the community support necessary to achieve the critical mass of local
information and e-commerce required for them to be effective. Although Yahoo and AOL have
the resources to continue to develop their sites, they lack the focus and appropriate business
model to build the type of Local Portals ConnectLocal envisions.
In addition to the national sites, most towns have independent local sites that attempt to create an
online community gathering place. Although these sites show initiative and validate our concept,
they tend to lack useful content, are poorly organized, and suffer from inadequate resources.
This results in sites that are ignored by everyone. Although there are efforts being made on both a
national and local basis, existing solutions have not solved the problem. There is a definite void
in the marketplace that needs to be filled.
Our Solution
ConnectLocal’s solution to fill this void is to combine the resources and standardized technology
available to a national site, with the local flavor and grassroots marketing of a small independent
site. ConnectLocal has devised a unique strategy that is based on this “best of both worlds” mix
and its understanding of the issues present in local communities.
As ConnectLocal successfully executes its strategy, it will become the leading source of local
information, e-commerce and promotion in non-urban communities across America. The
company will attain this position by utilizing local marketing teams powered by technology to
systematically build a national network of standardized Local Portals. These portals will be setup free of charge for individual communities, and will benefit the consumer, resident, local
business, and Non-Profit organization by providing them with a destination and/or presence on
the Internet that helps them achieve their unique goals.
For the local business, these Local Portals will enable them to conveniently and inexpensively
communicate information to consumers about the products and services they offer, as well as
showcase the knowledge and experience they possess in their particular business. They will also
be able to target local residents who fit their customer profile based upon the data we collect.
Ultimately, they will possess all the essential tools to build a thriving, local, e-commerce
business that complements their existing business models. For the consumer and resident, these
Local Portals will provide dynamic, accurate information on local specials and sales, coupons,
current events, issues, and just about anything else that is occurring on a local basis. This will
save the consumer time and money, and increase their enjoyment of local life since it will
provide awareness of what is available within their community.
15
Local Non-Profit organizations will benefit greatly from our Local Portals. Charities, schools,
and other organizations are having a consistently harder time getting noticed in today’s faced
paced environment. ConnectLocal provides them the opportunity to promote themselves and
conduct fundraising campaigns on these Local Portals for little or no cost.
ConnectLocal’s motto is that no community or small business shall be left behind with
regard to technology applications, electronic commerce, and the free flow of information
during the emerging era of the Internet in the new millennium. Creating a local forum and
platform allows communities to offer consumers, residents, small businesses and Non-Profit
organizations the venue to communicate, conduct business, and reach beyond their typical
geographical boundaries in the future.
How We Will Succeed
Obviously, reaching out to the world on a community by community basis is a mammoth task.
Therefore, a cohesive and evolving sales, marketing, promotion and content aggregation strategy
has been developed utilizing human touch, strategic alliances and various affinity programs to
drive ongoing and continuous traffic, commerce, and information to our non-urban Local Portals.
One of the key alliances in the strategy involves local County Chambers of Commerce.
ConnectLocal will form mutually beneficial relationships with local County Chambers across the
country by offering them free and discounted Internet services for their membership, and a
revenue sharing plan. In return, the local County Chamber will provide ConnectLocal with
ongoing promotion to its membership, as well as credibility and access to their community that
will help overcome the initial barriers to market entry. The County Chamber of Commerce
strategy is strictly a market entry plan that allows access to communities as an insider versus
outsider.
This Internet venture is one of the first to combine emerging technologies and human touch.
This will be accomplished through a proactive national sales teams and a network of motivated
volunteers offering a broad range of Internet related products and services to the local
community. Simultaneously, ConnectLocal will provide community education through a series
of interactive seminars and distance learning in conjunction with local County Chambers of
Commerce and other host sponsors. The educational component is designed to help alleviate the
anxiety, fear and resistance toward technology within the community, which is the first step in
forming a long-term bonded relationship with its constituents.
ConnectLocal will forever change the way business is conducted in local non-urban
communities across America by providing innovative Internet tools, education, and
products and services that level the competitive playing field allowing for prosperity in the
new millennium.
16
PRODUCTS AND SERVICES
C
onnectLocal will offer a hybrid of commodity and fee-based Internet-oriented products
and services to the community, consumers, residents, businesses, and Non-Profits. Some
services, such as e-mail, are commodity products with minimal long-term revenue
potential and will be offered for free to drive traffic. Others, such as sponsorships and
advertising, are fee-based and will be revenue generators. All products and services provided by
ConnectLocal are current industry applications; however, they are all featured and modified to
highlight unique and innovative local attributes.
Community Based
Each targeted local community will be given a free, customized Local Portal. In addition, they
will receive free, online software tools that facilitate content cross publishing, as well as the
free systems and support needed to generate the community participation required for success.
Many of the features of the Local Portal will be discussed below.
Consumer Products, Services, and Local Portal Features
For consumers, ConnectLocal is providing an array of free and inexpensive products, services,
and Local Portal features that enable them to access local information and conduct local ecommerce. ConnectLocal wants to make their lives easier, help them save money, and expose
them to new products and services by providing a totally integrated, locally focused, Internet
experience.
Following are brief descriptions of our products, services, and features, with an emphasis on
unique local features.
•
Auctions - items auctioned on our Local Portal may be displayed nationally, or just locally.
Some advantages of a local auction are that the consumer may be able to see the item before
bidding, and receive a quicker and less expensive delivery process.
•
Channels - the Local Portal will contain channels (both local and national in scope) on
subjects such as art, education, finance, weather, sports, news and technology.
•
Chat Rooms / Local forums - local chat rooms, message boards, etc. are a great way to get
people and groups communicating on issues that are important locally.
•
Classified and Personal Ads - will be displayed on the Local Portal, may be entered online,
and will be cross-published to other online sites.
•
Calendars - the community calendar will display the local event data gathered, and allow it
to be searched and filtered by the consumers and residents in different ways.
17
•
Coupons - electronic couponing will be an important part of the Local Portal. Coupons may
be attained and/or redeemed online in an e-commerce transaction.
•
Directories - online white and yellow pages that link to our business members' web sites.
•
E-Mail - we will provide an e-mail package that is accessible through our Local Portal that
allows a user to access e-mail from any computer with an Internet connection.
•
General News - news will be offered on both a local and national basis, 24 hours a day, 7
days a week, with content personalization.
•
Games and Contests - will be used to drive traffic and as a venue to capture additional user
information and demographics. Also, they will be a vehicle for advertisers and sponsors to
continually promote themselves.
•
Life Changes Help - marriage, birth of a child, death of a loved one, etc. We will offer
advice from experts and provide chat and links to other relevant sites.
•
My ConnectLocal - consumers will have the ability to customize their experience on the
Local Portal.
•
Additional Products and Services - we will offer electronic greeting cards, horoscopes,
genealogy services, free home pages, gift registry services, online ticketing, and others.
Further details of Consumer Products and Services is highlighted in Exhibit D.
Business Products, Services, and Packages
ConnectLocal products, services, and packages for business clients are designed to integrate
tightly with our marketing and sales strategies. The concept is to create an assembly line process
that builds a business’ Internet presence over time (the Internet Lifecycle) through educational
seminars and distance learning, the sales system, and product/service packages.
ConnectLocal will start a client with a simple, free web site that ultimately evolves into a
sophisticated, revenue generating, e-commerce and information site. Various online
promotional packages will be available to help businesses publicize their site, such as targeted
banner and button ads, and channel sponsorships. The goal is to advance clients quickly
along their Internet Lifecycle, using education along the way to initiate product up-sells and to
reassure them of their progress. This process is perfected using our methodology and digital
nervous system that clearly identifies when a business is ready to be upgraded and moved further
along the cycle.
Listed below are our business product and service offerings:
•
Domain name and search engine registration, web site design and hosting - we will
register a business’s domain name and submit their web site to the top search engines. Also,
ConnectLocal will provide access to web site design and hosting companies.
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•
Vertical market web site templates - we will develop and license custom web site templates
specific to certain industries. This levels the competitive playing field for clients in that they
can "rent" from us what would otherwise be cost-prohibitive for them to develop on their
own.
•
E-Commerce - our application will provide all the normal functionality such as shopping
carts and secure payment processing. A portion of the revenues generated from e-commerce
sales will be shared with ConnectLocal.
•
Content cross-publishing - is the process of entering information once and posting it to
multiple web sites automatically. Clients must be able to cross-publish information to their
own site as well as to ConnectLocal, which further enables us to build extensive content
databases, and then syndicate that content to other major portals.
•
Online Business Promotion - these services are designed to give our business clients many
affordable methods of gaining exposure such as:
•
•
•
•
targeted advertisements11 / sponsorships.
exchange ads on their site for ads on other sites.
multiple hyperlinks including links from directory services to members' homepages.
electronic newsletters.
Although many of these promotional concepts appear similar to traditional media in some ways,
there are major differences. First, there is the dynamic nature of the information on
ConnectLocal, compared to the static nature of traditional advertising. Second, we can track the
behavior of consumers by demographic variables and use the results to refine our client’s
promotional programs. Finally, businesses can test-market ideas inexpensively before making
large investments.
Non-Profit Organization Products, Services, and Packages
For Non-Profit organizations, ConnectLocal will offer products, services, and packages very
similar to those offered to businesses. The main difference is that most of what is offered to the
Non-Profits will be free of charge, thereby making implementation and usage faster. This will
provide valuable publicity and exposure within the community while increasing local content.
11
July 28, 1999 Internet Marketing Report - the Internet has become a leading advertising and promotional medium
for businesses in local markets. Only Yellow Pages and local newspapers outranked Web sites in most localities,
with the Web surpassing direct mail which is more costly.
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Education and Distance Learning
ConnectLocal’s seminar and distance learning programs are an integral part of our overall
strategy since they will drive our sales and marketing system, particularly from a market entry
standpoint. Examples of the seminar topics, arranged by audience type, are located in exhibit A.
Seminar and distance learning programs are designed to:
•
•
•
•
•
Raise the community’s knowledge and awareness level.
Generate interest in products and services, and provide ConnectLocal market access.
Teach users how to benefit from and use our Local Portals.
Create trust and loyalty, which is the key to building our brand.
Create a bond between the instructor and the attendees where the instructor becomes viewed
as an expert.
The seminars and distance learning will be delivered in-person and by remote presenters and will
be developed and produced in conjunction with a strategic partner, utilizing state-of-the-art
production and post-production facilities.
The entire presentation will also be made available to registered users over the Internet utilizing
standardized Windows Media, Real-Player, and Apple QuickTime streaming technology. The
seminars will be designed to educate people, but will also subtly promote the Local Portal and
the various product/service offerings.
Technical Overview
ConnectLocal’s Internet products and services are delivered to the user through a standard web
browser. The application will be built upon a client / server architecture that has the following
characteristics:
•
The client layer requires no specialized plug-in or software. A client is able to access and
operate the application through Internet Explorer, Netscape Navigator, and AOL.
•
The application layer will be implemented using Active Server Pages with Microsoft Internet
Information Server. These applications are implemented on the Microsoft Windows NT
Server operating system.
•
Microsoft SQL Server will provide complete relational database capabilities.
Many software features within the ConnectLocal site will be built / licensed from specific
application service providers.
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MARKET OVERVIEW
Size of Market12
T
he ConnectLocal business model derives revenues predominantly through online
advertising, sponsorships, affiliate marketing and business-to-business (B2B) and businessto-consumer (B2C) e-commerce. The Size of Market analysis starts by exploring the
potential growth in these markets, and then calculates an estimate of the size of our part of the
overall market.
The online advertising industry continues to grow at a metamorphic rate. The Internet
Advertising Bureau released its tally of advertising in the first quarter of 1999, pegging the total
at $693 million, nearly twice the $351 million in the first quarter of 1998. The bureau estimates
the total for 1999 will exceed $3 billion. Meanwhile, Jupiter Communications released a report
predicting that online advertising will exceed $11.5 billion a year in 2003.
Jupiter Communications also predicted that affiliate programs will directly account for 11% of the
$5.8 billion in consumer transactions over the web this year. That figure is expected to grow to 24%
of the $37.5 billion in projected total sales by 2002. eMarketer is even more optimistic, projecting
a total B2C market at $65.6 billion by 2002, up from $18.6 in 1999.
A Goldman Sachs Group Inc. study on business-to-business (B2B) electronic commerce shows
that the U.S. B2B market will explode to $1.5 trillion by 2004 (approximately 10%13 of total
B2B sales) from a base of $39 billion in 1998.
ConnectLocal’s strategic combination of human touch and education, will position us to capture
and retain a large percentage of the online advertising, sponsorship, affiliate marketing and
B2B/B2C e-commerce generated within the local communities that we establish online.
Since ConnectLocal is venturing into uncharted territory, there is little factual evidence regarding
the potential market size of our “space,” versus the entire market size. ConnectLocal is
essentially the market maker; therefore, the best method for determining our market size is the
evaluation of the company's revenue projections, and then examining its estimated market share
to impute overall market potential and size.
12
The Internet Economy produced $301 billion in revenue last year [1998], about 1 percent of total U.S. GDP according to a
study from the University of Texas and Cisco Systems. A new report from the University of Texas says the Internet economy
grew 68 percent between the first quarter of 1998 and the first quarter of 1999, as Net-related revenue surged to nearly $108
billion for the quarter. The study projects a total of $507 billion for the entire year, also a 68% increase year over year.
13
Forrester Research as referenced in the October 4, 1999 issue of Business Week.
21
Assume in year 4 there is projected revenue of $180 million for ConnectLocal, approximately
20% of all U.S. counties / localities will be penetrated (based on Census Bureau data identifying
over 3,100 U.S. Counties), and roughly 33.3% of the eligible businesses in those counties will
become registered members. Finally, the revenue from each member business will be 50% of its
overall potential.
ConnectLocal's Projected Revenues Year 4 ................................................................ $180,000,000
Divided by potential member business revenues .......................................................................50%
Projected Revenues assuming member business revenue @ 100% of potential......... $360,000,000
Divided by penetration of eligible member businesses...........................................................33.3%
Projected Revenues assuming 100% businesses registered @ 100% of potential ... $1,080,000,000
Divided by penetration of all U.S. counties ...............................................................................20%
Estimated size of our target market.......................................................................... $5,400,000,000
Demand for Products and Services
The demand for ConnectLocal’s numerous products and services will be directly related to the
number of people who visit and use our sites. Since ConnectLocal is still in the building stage, and
thus lacks actual site-specific data, the existence of demand potential can be determined by looking
at other related sites to quantify user traffic and demand.
First, our analysis determined how much demand there is for the component services that are
incorporated in the site, such as shopping and news. Then, user demand for comparable services
already in existence, such as metro-market City Guides and directories, was examined. All the
numbers supplied below are from Media Metrix and are for the month of August, 1999.
For shopping sites, Amazon.com had 11,618,000 unique visitors, and Ebay.com had 8,790,000.
For news and information, 13,951,000 unique visitors went to AOL News Channel and 5,573,000
to Weather.com. Infospace.com, a directory service, had 6,425,000 unique visitors.
ConnectLocal will offer shopping, news, and directory services. The five sites listed above that
offer these services had over 45,000,000 unique visitors in the month of August. This validates
demand for these types of services. But will this translate into demand for ConnectLocal’s products
and services?
To answer that question, consider the number of users who visited the metro-market City Guides
such as MS Sidewalk (4,368,000 unique visitors), AOL DigitalCity (5,198,000 unique visitors), and
TicketMaster Online-CitySearch (4,234,000 unique visitors).
Almost 14,000,000 unique visitors went to the sites of ConnectLocal’s largest metropolitan
competitors in August of 1999. These sites are among the top 25 based on total monthly unique
visitors. This further proves the existence of great demand for information of this nature for sites
that focus on larger cities.
Will the same hold true for middle and minor market non-urban communities?
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ConnectLocal expects an even larger per capita demand in local communities than in the metromarkets because the metro-market sites lack the critical mass and comprehensive content to make
their sites an integral part of anyone’s life; yet, they still attract a large number of visitors.
Once a Local Portal reaches critical mass, its value to residents will increase exponentially, which
will drive larger amounts of ongoing and repeat traffic to the site.
ConnectLocal's Barriers to Entry
The key barrier to entry is the effort required to get communities online with ConnectLocal as
their information and e-commerce resource. To understand the nature of this challenge, it is
necessary to understand the concepts of inertia and critical mass and how they pertain to the
business ConnectLocal is building.
As we build a Local Portal in each targeted local community, we will encounter inertia in the
forms of indifference, fear of technology, laziness, resistance to change, lack of knowledge, and
conflicting agendas. Overcoming this inertia will require a focused and structured methodology
that involves education, human touch, incentives, promotion, and good salesmanship.
In the initial phases of growth, a Local Portal will have limited value to its community due to a
lack of local content and online businesses. As each Local Portal continues to expand in terms of
content, business clients and user participation, it will reach critical mass. At this stage there is
enough local content, e-commerce participants, community knowledge, users, advertisers and
sponsors that the portal will be able to sustain itself with little assistance from ConnectLocal. The
portal then becomes an important and integral part of the community - essentially the portal has
developed a life of its own. Inertia now works in our favor because it will require more effort
to shut down the portal than to keep it from expanding.
Until critical mass is reached in a community, ConnectLocal is vulnerable to all sorts of potential
growth disruptions. Once critical mass has been achieved, it will be very difficult for
competitors to dislodge ConnectLocal from an existing community.
Competitive Assessment, Positioning and Response
There are other companies that recognize the huge up-side potential of ConnectLocal’s business
concept. Indeed, most of the metro-market City Guides and web portals offer some variation or
partial element of our concept, which helps to further validate our basic vision and provides
proof of concept.
23
Our competition can be categorized into the following categories:
•
•
•
•
•
•
Portals
Metro-Market City Guides
Local/Minor/Rural Market City Guides
Networks of Local/Minor/Rural Market City Guides
Local Media Sites
ISP’s
Portals
Portals, such as Yahoo Get Local, Excite Local, MSN Communities, Infospace, About.com, and
all major search services, categorize or create directories for local communities. These local
directories provide an infrastructure based on types of business, topics, or areas of special
interest. However, the lack of local information and frequently empty categories prevent them
from creating a real sense of community or making their site useful for the users, community,
residents and local businesses we are targeting.
About.com is the only portal site that uses live “guides” from the actual community to create
content. Ultimately, they will probably develop the best local site among the portals, but a single
guide in each community will fail to achieve the critical mass necessary to competitively equate
to ConnectLocal’s efforts.
Metro-Market City Guides
Competitors such as TicketMaster Online-CitySearch, MSN Sidewalk (which recently sold its
City Guides to TicketMaster Online-CitySearch), and AOL Digital Cities are similar to
ConnectLocal’s overall macro concept except that they target larger metropolitan and urban
markets14. Although they provide further general validation and proof of concept15, their actual
business models are different from ConnectLocal’s in many ways.
Similar to ConnectLocal, these companies all deploy a feet-on-the-street sales force and some
human touch. However, their people focus predominantly on sales, rather than trying to build the
quantity and quality of content, e-commerce, education, and revenue generators necessary to
achieve critical mass within each targeted community.
TicketMaster Online-CitySearch has owned and operated city sites, and partner led sites that are
contract licensed. Conversely, our Local Portals will be set-up for free to provide each
community the means to achieve their unique goals.
14
Refer to Exhibit G - September 20, 1999 Forbes Article - CitySearch, Popular Hangout for Locals.
Refer to Exhibit G - August 15, 1999 Internet World Article - Think Locally, Top City Guides Help People Act on
Clued-in Content.
15
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Other sites, such as AOL DigitalCity (which just announced plans to expand from 60 to 200
metro cities by the Spring of 2000), provide web site design through a contracted third party.
They offer packages to design and host web sites for interested businesses that are then
incorporated into the DigitalCity site. DigitalCity also employs regional sales people but these
employees are focusing on advertising sales rather than attempting to build an online community
that provides valuable content.
Despite the urban penetration of sites such as Microsoft Sidewalk, TicketMaster OnlineCitySearch and AOL Digital Cities, these companies are losing inordinate amounts of money due
to the high cost of content, user acquisition and market penetration in highly populated urban
areas. Before they can strategically shift gears and target the middle and minor non-urban
markets, these companies must first establish critical mass of content and users in the major
metropolitan areas. Also, their current economic structure and losses do not make it easy for
them to change focus quickly with the vast amount of resources currently allocated in their
original markets.
Therefore, none of the aforementioned companies are perceived as a direct threat because they
are focused on the urban markets and also, lack the educational human touch model necessary to
build a true online community gathering place that achieves critical mass, which is of utmost
importance in a non-urban environment. Certainly, if they change their focus and model, they
have the resources to become direct competitors in the future, which further reinforces our capital
requirements for speed and first to market advantage.
Local/Minor/Rural Market City Guides
The local/minor/rural market City Guides are highly fragmented, non-standardized and include
smaller localities, townships, and counties. There are numerous sites of this type operated by
Non-Profit organizations, local government, web designers, and small entrepreneurs. These sites
usually lack the resources to develop the content and features necessary to attract and retain
users; consequently, their success is usually limited. ConnectLocal views the presence of these
sites as an opportunity rather than a threat. Their existence shows that local residents see the
need for a Local Portal, and thus should be willing to discuss partnership opportunities.
ConnectLocal has budgeted funds for potential acquisitions of these sites which can then be
standardized and incorporated into our national model.
Networks of Local/Minor/Rural Market City Guides
As further proof of our concept, networks of local City Guides have been created such as
RegionOnline, Area Guide Network, GetLocalUSA, Citiquest, and MyCity. Some of these
networks are competitive; however, most tend to be poorly organized and suffer from inadequate
resources from both a funding, marketing and technology perspective. None have developed a
comprehensive sales and marketing strategy designed to reach the necessary critical mass within
a particular community. For example, GetLocalUSA sites are individually owned and managed
and lack the financial resources necessary to facilitate national partnerships. The web sites tend
to be underdeveloped and lack comprehensive information and content. Other networks such as
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Citiquest relies on outsourced telemarketing to initiate web site participation. This approach
does not build relationships nor does it convey to each community that Citiquest has a genuine
interest in developing Local Portals that enhance the quality of life for local residents and
businesses.
MyCity is a beta-version site that produces electronic commerce enabled local community guides
and shares a similar mission to ConnectLocal. They are using a franchise model, which can lead
to enormous quality problems if they do not attract the proper caliber of franchisee. Also, they
do not appear to have a community education and human touch component to their process,
which is a major weakness when trying to develop critical mass within a non-urban community.
MyCity appears to be well capitalized and is targeting part of our “space,” so we will continue to
closely monitor their progress.
Local Media Sites
There are many community sites that are run by local media companies. Some of these sites are
of good quality and others are poor. Most suffer from a lack of resources and vision, as well as
the disadvantages of being independent, rather than a part of a nationwide network of similar
sites. To their advantage, they have access to local content, sales force teams, and promotional
power from their parent companies’ resources.
ConnectLocal combines the resources, products/services, and standardized technology available
to a national site, with the local flavor and grassroots marketing of a small independent site based
upon the creation of a standard methodology replicated in each community. We do not perceive
local media sites as competition, but as potential cross-content allies and acquisition candidates.
Where possible, ConnectLocal plans to create strategic alliances with these sites to access
additional content and combine strengths, thereby creating more comprehensive Local Portals.
ISP’s
As more Internet applications become commodity products, companies such as OneMain.com
and other ISP’s may be forced to offer free connectivity (http://www.netzero.com) and hosting
services. Based upon a substantial customer base of 600,000, OneMain.com may be required to
change their business model to replace lost revenues in order to maintain a competitive structure.
ConnectLocal recognizes the value of their current customer group and plans to pursue an
alliance that leverages their ability to offer quality connectivity and hosting while simultaneously
strengthening our market entry strategy and product assortment.
ISP’s could decide to become application providers or refocus their revenue model toward
building and marketing Local Portals or other products and services.
26
Positioning and Response
ConnectLocal has uncovered basic flaws in the business models of most of its competitors,
which provides us a distinct competitive advantage. By analyzing their models, it appears that
most do not understand the concepts of educational human touch, inertia and critical mass
and how it pertains to their business and targeted communities. ConnectLocal’s Marketing Plan,
Sales Strategy, and Standardized Methodology were designed specifically to overcome the initial
inertia of a community. Execution and implementation of the aforementioned further expedites
the ability of each team and community to reach critical mass and ConnectLocal to achieve
overall scale on a national basis within a reasonable time frame.
As an example, the metro-market City Guides are focusing on areas with millions of people
because of the large concentrated revenue potential. The problem is that to unlock that revenue,
they must reach a critical mass so that consumers and businesses will keep returning to the
guides. In a large city, the initial inertia that must be overcome to reach the point of critical mass
is huge, and will require huge resources and effort. In smaller towns, the initial inertia, handholding, and confidence building is more manageable, thus allowing critical mass to be
reached more quickly and inexpensively.
As another example, national portals create an infrastructure that allows them to capture
information from local communities all around the country. In theory this is good, but in practice
it results in limited information being scattered randomly across all local communities on their
site. This approach will never achieve critical mass because the portal never captures enough
useful information for a given community to be useful. The portals either fail to understand this
concept, or are too unfocused to fully comprehend the limitations from a content perspective.
ConnectLocal’s proprietary market entry methodology provides a huge competitive advantage.
Nearly six months in development and drawing on management’s first-hand experience in
dealing with the political, psychological and social hierarchy within local communities, the
Standardized Operations Methodology Manual (SOMM) will permit ConnectLocal to rapidly
scale into middle and minor market communities across the country. As ConnectLocal continues
beyond its Initial Stage (described in Rollout Strategy), our SOMM will continue to evolve and
become more valuable.
Competition’s Barriers to Entry
While ConnectLocal expects that its early success will force the competition to attempt to imitate
our model, its very nature lends itself to a first-mover advantage in each community we develop.
Once critical mass is achieved locally through intense marketing and promotion, ConnectLocal
will become a symbiotic and trusted part of the community and it will be very difficult for
competitors to convince the users to change to a new system. Switching to a new system will
require the users to re-enter all of their information, learn a new platform, and re-establish all of
their links.
27
The inertia that works against us when we first enter a community will work in our favor
once we gain critical mass. At that point, competitors will have a great challenge trying to
dislodge our market position.
The other barriers to entry for potential competitors are the exclusive strategic alliances
ConnectLocal develops. Strategic alliance partners will be chosen carefully to provide us a great
advantage over potential future competitors in the same “space.”
For example, if ConnectLocal is able to successfully penetrate and align with a County Chamber
of Commerce, it will be much more difficult for a competitor to succeed within the same county
due to the exposure, audience, and credibility the Chamber offers us within its community.
Market Entry Strategy
Finding ways to utilize a national network of Local Portals is easy; building out each portal oneby-one is the challenge. To meet this challenge, we have devised a scalable strategy that
combines the old with the new, educational human touch with technology.
ConnectLocal’s market entry strategy is designed to leverage our understanding of inertia and
critical mass within a community. Based on these concepts, the best way to build a successful
Local Portal is by using a team of local people powered by technology who can follow a
systematic process and methodology that can be repeated in every community. The scalability
of our strategy will drive ConnectLocal’s future success.
The process for building a Local Portal involves six stages: Planning, Scouting, Foundation,
Introduction, Building, and Grand Opening. The first five stages focus on building infrastructure,
support, and site content to the point where the portal is viable. The sixth stage is the official
“grand opening” of the portal for consumers. All six stages are explained in detail in exhibit B.
Ongoing Efforts
After the six growth stages are complete, we must continue to maintain and improve each Local
Portal as well as add new relationships and strengthen existing ones within the community. A
challenge ConnectLocal faces in accomplishing this goal is the “Technology Knowledge Gap”
and the resulting anxiety, fear and inertia it creates. After the early adopters and existing Internet
users become clients, we must be able to acquire the vast market segment whose knowledge
regarding technology is minuscule and whose fear of it is relatively high.
ConnectLocal will overcome this hurdle by “Taming Fear through Familiarity.” This
expression refers to the dissipation of fear among community constituents as ConnectLocal better
educates them about technology and its array of benefits. This process is achieved over time
utilizing ongoing seminars and distance learning, customer support, and targeted sales efforts
incorporating human touch, confidence building and hand-holding.
28
These targeted sales efforts will continue to build content and revenues. Once a portal is
operational, data can be assimilated that will expedite targeting of specific businesses within each
community, particularly with the assistance of our Digital Nervous System that identifies when
clients are ready for the next phase of their Internet Lifecycle. For example, identifying a large
number of hits on a business card home page established during our Chamber promotion allows
ConnectLocal to better target this client with potentially more sophisticated products/services and
advertising that will enable this business to further maximize its Internet potential.
ConnectLocal’s approach will involve sharing the above information with the business and
incorporating human touch until they are comfortable enough to make the correct business
[buying] decision, rather than letting their anxiety and fear of the Internet and technology
evolution drive them away.
Customer Support
Customer support must be excellent if we are going to build the type of loyal, trusting
relationships required for long-term success. ConnectLocal has devised a three-tier approach
toward customer support that will benefit clients, and remain economical. The first level will be
self-service support on the site. This will be a combination of answers to FAQ’s, message
boards, site wizards, and online videos and seminars. The second level of support will
encompass well-trained support personnel housed centrally who are accessible by voice, fax, email, or LivePerson Internet technology. The third level of support will come from local team
members. This could be the Local Team Leader, or other “experts” in the community who have
been recruited to help.
Sales Force Structure
ConnectLocal’s sales force strategy is a key to the success of our business model and differentiates
us from the competition. Employees, Regional Directors, State Team Leaders, Local Team leaders
and our network of partners will interface with our centralized digital nervous system to efficiently
conduct their business and communicate their results. Ideas, assignments, information requests,
orders, etc. will flow throughout the organization electronically, which will leverage the time and
knowledge of everyone.
The three Regional Sales Directors will be responsible for building their region in accordance with
the overall plan. This will include recruiting, hiring, training and managing State Team Leaders.
The State Team Leaders will be responsible for market entry into targeted counties and the
recruiting, hiring, training and managing of Local Team Leaders with overall guidance from the
Regional Sales Director. By the end of year three, human touch will be clearly illustrated with an
army of over 500 people in the field implementing and promoting the ConnectLocal vision. Some
people will view ConnectLocal’s investment in a physical sales force as a poor use of resources
based upon current Internet Models, considering there appears to be so many technologies
available to reach businesses, organizations, consumers and residents.
29
ConnectLocal’s mission and vision is to incorporate human-touch with technology; therefore,
allowing a Traditional Business Model and sales force the opportunity to reach out, educate, and
hand-hold live people creating long-term bonded relationships that are supported by technology
tools.
User Acquisition
The geographic proximity and tight lines of communication in a local non-urban community are
key to ConnectLocal’s user acquisition process. By focusing on a grassroots human touch effort
to encourage key members of a community to publish exclusive content to the system and
promote its use, we will build the user base quickly and keep user acquisition costs extremely
low. There are four central elements to ConnectLocal’s user acquisition model:
Publishers
ConnectLocal executes a strategy that brings the leaders of businesses and Non-Profit
organizations into constant contact with the system. The Local Portal helps the publishers save
time and effectively use the Internet as a communication tool. ConnectLocal has developed
systems to supply businesses and Non-Profits with unprecedented levels of customer support to
encourage them to publish through the system. As businesses make use of ConnectLocal to
publish information regarding sales, press releases, and special events, consumers and residents
will then follow online to read the published information. Likewise, as leaders of Non-Profits
use the system, consumers, residents and members will access the site to check events and news.
ConnectLocal is designing its system to facilitate this communication, thereby generating
increased user activity.
Sponsorships
The local County Chambers of Commerce and our major local sponsors will provide
ConnectLocal with valuable exposure through cross-promotional activities. As an example,
major local sponsors, such as banks for our “Money Channel,” will be able to promote their
relationship with ConnectLocal through traditional and inexpensive methods such as statement
stuffers, seminar hosting, client newsletters, and on-site posters.
Community Promotion
By targeting promotions directly to the local community, rather than launching regional or
national campaigns, ConnectLocal can effectively reach its users without vast traditional major
media advertising and promotional expenses. Making use of inexpensive media such as local
newspapers, billboards, radio stations, posters, giveaways, or contests, ConnectLocal not only
reduces its promotional costs, it also positions itself as a cutting edge player participating in the
global movement focused on converging the online and off-line world.
30
Viral Marketing
As a critical mass of consumers and businesses begin to use the system, word of mouth will
spread across each community. Businesses will encourage consumers and other businesses to
use the ConnectLocal system, and consumers will refer their friends and relatives to the system’s
many benefits. The tightly knit lines of communication among people in a small community are
well suited to this type of viral marketing.
Affinity Programs and Incentive Marketing
If consumers use ConnectLocal to find local resources, then bookmark that resource’s URL, we
potentially lose future e-commerce transactions, consumer data collection and advertising
opportunities. To mitigate this risk, affinity programs16 will be utilized to give users additional
reasons, incentives and motivation to always use ConnectLocal as their link to local resources.
These programs will drive repeat visitors to ConnectLocal because every time users register, use
the Local Portal, and actually make a purchase or visit a link, points are accrued. As users accrue
more points, they will be eligible for free or discounted products and services.
This strategy provides the psychological tools that are necessary to create an additional sense of
community awareness and participation for the overall development of brand loyalty, better
content and increased and on-going commerce.
ConnectLocal will develop and implement creative affinity programs to motivate consumer and
business clients which drive on-going loyalty, commerce, traffic and content. Programs with
credit card companies, telecommunication companies, PC manufacturers, airlines, hotels,
and rental car companies are being evaluated (also refer to Exhibit F).
Strategic Alliances and Affiliate Marketing
Developing and implementing a strategic alliance and affiliate marketing plan is instrumental for
ConnectLocal to achieve speed to market and first mover advantage in non-urban markets.
ConnectLocal has identified numerous organizations that will help expedite its growth, market
entry strategy, and overall development of its technology and information flow.
One of ConnectLocal’s first challenges is to develop and test software and systems that will
support our strategy. This process could take over a year to complete if we use the build versus
buy approach. The solution to this situation is to align ourselves with firms that have the
experience and systems in place that will allow us to launch our sales and marketing program
within a few months.
16
THE VALUE OF LOYALTY, Reuters - MyPoints.com, a provider of Web-based incentive and loyalty products,
was rewarded a premium after its public debut, closing up 38% from its offering price. According to rating service
Media Metrix, the web site was ranked 45th with 3.6 million unique visitors in July 1999.
31
Chambers of Commerce
Many communities and Chambers around the country have attempted to develop their own web
sites to promote their local areas. Unfortunately, most County Chambers of Commerce lack the
financial resources and expertise to create a site that will cohesively knit together their
community for information and commerce exchange. ConnectLocal will provide Chambers a
sophisticated local community web portal, comprehensive community and technology education,
and generate incremental income revenues for the Chamber through a revenue sharing program.
Our Chamber of Commerce strategy is strictly a market entry plan that allows access to
communities as an insider versus outsider. Formulating relationships with the membership base
via human touch, seminars and distance learning will ultimately generate community awareness
and participation among the businesses through the various products and services being offered.
Creating content and commerce in conjunction with the local businesses will spur active
participation among the constituents of each community.
ConnectLocal is seeking to attain the endorsement of the U.S. Chamber of Commerce for both
credibility and support among its members, County Chambers, and other strategic alliances. In
exchange for the endorsement, the U.S. Chamber will receive a royalty (projected at 5% in this
plan) on revenues generated from our Basic Package (outlined in exhibit D) purchased by
various County Chamber members. In exchange, the U.S. Chamber would provide marketing
support and promotional exposure on a national basis such as advertising and editorial space in
Nation’s Business, the national Chamber magazine.
Other Key Alliances
There are additional strategic alliances that will strengthen ConnectLocal’s revenue model,
market entry strategy, national roll-out and sustained growth plan while simultaneously
enhancing and accelerating each community’s participation, awareness and overall critical mass.
The following are examples of the various types of relationships we will be forming.
ConnectLocal is mentioning companies by name only to illustrate the industry classification and
benefit of each alignment, not to imply they will actually become partners.
ConnectLocal has targeted potential alliances with companies such as Register.com, to help
promote and implement domain registration strategies, and E-Biz Factory, for vertical market
web site templates. Echarge.com or MBNA could become great strategic alliances to complete
the credit card revenue model. ISyndicate.com, JagNotes.com, About.com, Exp.com and
InfoSpace.com are firms that could strategically assist and offer enhanced site content for
ConnectLocal. Partnering with Fairmarket.com would give our auctions immediate size and
credibility. HearMe.com supplies proprietary technologies that allow for voice chat rooms, a
feature that might appeal to registered users. PC Manufacturers such as Dell or Gateway will be
utilized to provide PC’s and connectivity to clients who require them.
32
Affiliate Marketing
Affiliate programs with a company such as LinkShare allow Internet sites to market and solicit
products for popular online merchants, such as Amazon.com, from a link on their web site. In
return, they get paid a percentage of sales as commission, usually an average of 4-10% of the
sale. ConnectLocal will be positioned to offer many such programs and opportunities to its loyal
and unique user base. Affiliate marketing will be an extensive and ongoing objective of
ConnectLocal to continually provide our consumers innovative services, quality products, value and
convenience that enhance middle and minor market communities throughout the United States.
33
ROLLOUT STRATEGY
Initial Stage
T
he Initial Stage started in 1998 when the initial ideas for ConnectLocal were formulated.
Those ideas continued to evolve during the last year and are stated in their most recent form
in this plan. Once ConnectLocal’s capital formation is complete, we estimate a three to six
month period to complete the remainder of this stage, during which we will accomplish the
following goals:
•
•
•
•
•
•
•
Implement and refine our marketing and sales strategy in 3 to 5 local communities.
Develop a core series of at least ten educational seminars and all necessary marketing/sales
collateral materials.
Build and/or buy the basic technology necessary to set-up and support a beta version Local
Portal.
Recruit and hire the balance of the core management team.
Begin construction of 4 different Industry specific Vertical Market Template Web Sites.
Negotiate the key strategic alliances and affinity relationships necessary to position
ConnectLocal for expansive growth.
Prepare detailed plans for the Regional Rollout Stage.
Many of these efforts and initiatives are currently being implemented. For example, ConnectLocal’s
President has set an agenda for beta testing the model and methodology with key leaders in the
county of Indiana, PA. Most of the core management team has been recruited and are anxiously
waiting for funding to be finalized before joining ConnectLocal on a full-time basis.
Regional Rollout Stage
The Regional Rollout Stage will continue and further enhance the progress made in the prior stage.
It should require approximately 6 months to complete, and will consist of the following goals:
•
•
•
•
•
•
•
Identify and refine our marketing and sales entry strategy in 40 to 50 non-urban local
communities within the three major regions of the country - East Coast, Central, and West
Coast.
Develop and enhance additional educational seminars and distance learning programs.
Build and/or buy additional features for our Local Portals.
Recruit and hire additional members of the team.
Negotiate additional strategic alliances and affinity relationships.
Analyze future capital needs and prepare for the initial public offering.
Prepare detailed plans for the National Rollout Stage.
34
National Rollout Stage
Once the Regional Rollout Stage has proven to be a success, ConnectLocal will launch its sales and
marketing strategy on a national basis. This will be a continuation of the processes started in prior
stages, but will involve building scale among a greater number of communities nationwide and
expanding overall critical mass for both content and user base within each community.
35
MANAGEMENT OVERVIEW
Founding Members of Management
G
eoffrey F. Walsh, Chairman, Chief Executive Officer and Founder
Geoff is the consummate definition of an entrepreneur. He has built successful
consumer product companies as market leaders over the past 10 years ranging from
licensed character timepieces to infant baby-care products. Walsh structured and founded a
holding company, Venture Initiatives, LLC, for several subsidiaries such as Artwatch
International, Tender Care Products, LLC, Walsh Media Group, Inc., and Seasonal Sport
Products.
His reputation is centered around extensive marketing savvy in the media coupled with an innate
ability to formulate corporate visions and execute in the areas of product and management
development, design, sales, overseas production, international product marketing, licensing,
contracts and legal, negotiations, fulfillment, customer service, and financial and operations
management. Walsh offers a broad range of contacts in numerous industries ranging from the
financial community, retail sector, Non-Profit organizations, media companies, and the federal
political arena.
His mission and skill has always been attracting and leading talented management and partners
that recognize the benefit of offering the most innovative products and services which convey the
utmost quality and value to both the consumer and community. As a successful start-up
entrepreneur, Walsh brings strong leadership and energy to any deal. His endless personal
perseverance enables him to quickly penetrate markets. He consistently has been successful in
capital formation over the years by combining smart money with strategic alliances.
Geoff’s career began 11 years ago at the Wharton Business School with a class thesis for
ArtWatch International, Inc. which has grown to be one of the largest character timepiece
companies in the country featuring watches bearing famous licensed properties such as Dr.
Seuss, Marvel Comics, Simpsons, RugRats, and famous reproductions of Picasso, Monet,
Cezanne, Van Gogh, and Renoir. As a result of his winning personality and can-do attitude, he, at
the age of 23, was operating a multi-million dollar company with product placed around the
world. Later, Walsh founded Tender Care Products, LLC which quickly became a market leader
for fever measurement and patented baby-care products among the retail drug, mass
merchandise, specialty and supermarket sectors. Tender Care also established a presence in the
medical and hospital arena with the introduction of the Tender Temp pacifier thermometer.
During the past year, Venture Initiatives, LLC. has been divesting most of its consumer product
companies to pave the road for its debut and focus in the community markets with ConnectLocal.
Walsh has been embraced by most of the major media during the past 10 years. Having been on
the talk show circuit he has been featured by Donahue to CNBC. His exposure includes
Associated Press, Reuters, Wall Street Journal, USA Today, and the New York Times. His articles
have carried over to trade and consumer magazines ranging from Nations Business, Business
36
Week and Entrepreneur Magazine. He combines consistent enthusiasm and fervor on national
radio shows. He has been a featured host on QVC and has been developing magazine format
television productions through Walsh Media Group: American Heroes and Dreams, and
American Entrepreneur. Both shows offer potential education, entertainment and content value
to ConnectLocal. Walsh’s ability to work with the media creates on-going exposure that
ultimately enables his companies to implement push-pull strategies for long-term growth.
Walsh attended the United States Air Force Academy and graduated from the Wharton Business
School of the University of Pennsylvania. His companies have generated millions of dollars over
the years; however, Geoff has always recognized and conveyed the importance of the community
through his involvement with numerous Non-Profit organizations. He has served on the board of
directors for both civic and community organizations such as the Westchester County Chamber
of Commerce, Junior Achievement, the LightHouse, Rotary, Association of Corporate Growth,
United States Olympic Committee and the Arts Council. He has always been a strong advocate
of small business and has lectured about entrepreneurship at numerous Universities and
Corporations including the Wharton Business School and American Express. He has been a
successful political fund-raiser and was a candidate for United States Congress.
Geoff has received such notable awards as “Young Entrepreneur of the Year,” Entrepreneurs’
“The Top 40 Under 40,” Inc. Magazine’s “Entrepreneur of the Year” award finalist, and he was
ranked 11th for the Association of Collegiate Entrepreneurs Top 100 Award.
Andrew J. Kuzneski, III, President and Founder
Andrew is the visionary who developed the core concept and model behind ConnectLocal in
1998. The insight came from Andrew’s extensive experience working with small businesses and
consumers in rural communities throughout western and central Pennsylvania, coupled with his
strong technical and entrepreneurial background.
After sharing the ideas with Geoff Walsh in May of 1999, they decided to form ConnectLocal to
develop and implement the mission statement. Andrew will be instrumental in formulating the
marketing and sales strategies used to build Local Portals, the seminar systems used to provide
education, and the continuous vision and strategic planning necessary for ConnectLocal’s
success.
Andrew began his career 10 years ago as an associate at Reality Technologies/Online, a small
software company founded by Doug Alexander in Philadelphia, PA. At Reality, Andrew
developed software used in the WealthBuilder by Money Magazine program, as well as in a
proprietary asset allocation and client presentation application used by SEI Investments in
Wayne, PA. After working at Reality, Andrew co-founded ArtWatch International, Inc., the
market maker of ArtWatch, with Geoff Walsh.
After selling his shares in ArtWatch International, Inc., Andrew joined his family’s financial
services firm, Kuzneski Financial Group, one of the largest, private insurance agencies in the
state of Pennsylvania. Over the last 8 years, Andrew has been involved in all aspects of the
37
agency, including management, recruiting, insurance company relations, sales, technology and
strategic planning.
While at the agency, Andrew worked with hundreds of consumer and small business clients,
developing a greater personal understanding of how they think, plan and make decisions. He was
also responsible for developing and presenting seminars to clients on numerous topics including
Managed Healthcare, Long Term Care, and Estate and Financial Planning.
In 1997, Andrew helped negotiate a joint venture with First Commonwealth Financial
Corporation, a bank holding company with over $4 billion in assets, which resulted in the
formation of the Kuzneski Agency, Inc. and First Commonwealth Insurance Agency. Andrew’s
main responsibility has been to help First Commonwealth build their insurance operation. This
has involved strategic planning with top executives of First Commonwealth, training over 250
bank employees for the state licensing exam, building and training an agency sales team,
designing operational procedures, advising on computer systems, and many other aspects of a
start-up operation.
Andrew graduated Cum Laude from the University of Pennsylvania’s prestigious Management &
Technology Program, earning a finance degree from the Wharton Business School and a
computer science degree from the School of Engineering and Applied Science.
Andrew is currently a board member of the Indiana County Chamber of Commerce and the
Housing Authority of Indiana County. Previously, he served as a board member of the Planning
Commission of Indiana County, Indiana County Small Business Incubator, Big Brothers/Big
Sisters of Indiana County, Junior Achievement of Indiana County, and Life Underwriters of
Indiana County.
Andrew has managed his own Registered Investment Advisory firm, is Series 7, Property &
Casualty, and Life/Accident/Health licensed, and is currently working toward his Certified
Financial Planner designation.
Refer to exhibit C for in-depth biographies of additional management team members.
Advisors and Board of Directors
Outside company Advisors and an active and distinguished Board of Directors is a vital ingredient
in the ultimate success of an entrepreneurial Internet venture. ConnectLocal is in the process of
identifying and recruiting board members who share our vision and can contribute to the long-term
growth and success of the company.
Advisors
The company will retain the services of Ernst & Young for yearly audits and strategic
management consulting. From an executive recruitment standpoint, the company recognizes the
importance of finding top-rated and talented management for key positions such as Chief
38
Marketing Officer, Chief Technology Officer, Vice President of Business Development, and
Vice President of Information Services. These positions will be sought after by a leading Internet
recruiting company.
Investment Banking services will be provided by companies that specialize in Internet technology.
ConnectLocal recognizes the importance of a major market maker who can sufficiently support and
promote a successful initial public offering and other capital formation needs. Participation by
investment banking firms builds further credibility, identifies key alliances and helps solidify
acquisition candidates.
Due to the vast number of strategic alliances required for successful execution of the ConnectLocal
plan, retaining the services of a respected and multi-faceted law firm is critical. The company has
retained the services of Dallas-based law firm Jenkens & Gilchrist which has a national presence
and expertise in areas of securities law, trademark, intellectual property, litigation and corporate
contract law.
Outside consultants will also be hired for the implementation of promotions, technology
development, market research, advertising, public relations, and data management.
Board of Directors
The Board of Directors are key individuals that each bring a fresh and unbiased perspective to the
organization providing guidance, potential alliances, contacts, insight and strategic skills. Picking
prestigious and useful leaders for the board is critical in our plan for accessing the public
marketplace, but more importantly, offering intelligent input to the overall long-term viability and
success of ConnectLocal.
We envision a Board comprised of Geoffrey Walsh, Andrew Kuzneski, III, and three key leaders in
the Internet industry (one from an Internet Service Provider, one from a Domain Registration
company and one from a major Portal). Also, representation from the legal field, banking arena,
national non-profit organizations (such as a prominent foundation and the Vice-Chancellor of a
major University), a previous cabinet post appointment, and three senior management individuals
from major marketing and sales enterprises. Major financial investors will have representation on
the Board of Directors.
39
FINANCIAL OVERVIEW
T
he window of opportunity to grab a foothold in the middle and minor non-urban markets
exists only for a short period of time. By incorporating human touch with technology,
we can attain the first-mover advantage, and with it the ability to effectively lockout the
competition. Recognizing this, we are implementing an aggressive strategy for market
penetration that will position us to win the race for local markets and ultimately stake our claim.
The financial model is reflective of our plans to become the leader in this category.
Revenue Generators
Revenue opportunities are virtually limitless as we educate the local constituents, build-out our
Local Portals, and establish ourselves as the foremost local e-commerce hub. Major revenue
generators are:
•
•
•
•
•
•
•
•
•
•
•
•
Local Market Support - monthly payment by a local business owner to become a
ConnectLocal member and to purchase the Basic Package.
Vertical Web Site Informational - monthly payment by enlisted local business as a license
fee for ConnectLocal's industry specific web site template for information dissemination.
Vertical Web Site Transactional - monthly payment by enlisted local business as a license
fee for ConnectLocal's industry specific web site for information dissemination and ecommerce transaction processing.
Banner Advertising - cost per thousand banner ad impressions paid by local and national
advertisers and placed throughout ConnectLocal's various Local Portals.
Sponsorship - monthly cost paid by local major and national sponsors for the Sponsorship
Package.
Couponing - monthly cost paid by local and national merchants for electronic coupon
dissemination throughout ConnectLocal's various Local Portals.
Classified Advertising - monthly cost paid by advertiser for classified advertising throughout
ConnectLocal's various Local Portals.
Business Domain Registration & Search - cost paid by member businesses for registration
of their World Wide Web domain name and site registration with the major search engines.
Application Revenue Share - amounts paid to ConnectLocal by credit card strategic alliance
for credit card applications originating on ConnectLocal's or affiliated members' web sites.
Approved Application Revenue Share - amounts paid to ConnectLocal by credit card
company for approved credit card applications originating on ConnectLocal's or affiliated
members' web sites.
E-Commerce Sharing Revenues / Affiliate Marketing Revenues - ConnectLocal's
percentage share of every click-through, lead generation, or sale transaction originating on or
by way of ConnectLocal's or its affiliated members' web sites.
Affinity Programs - amounts paid to ConnectLocal by major program affiliate (i.e. airline or
restaurant chain) to develop an affinity offering to our membership base.
40
To gain perspective with respect to the potential size of ConnectLocal (refer to Size of Market
section), revenues are projected to increase from a projected $1.0 million in year 1, to more than
$180 million by year 4.
Incentive for Commerce Enabling
One aspect of our market entry strategy is to use the local County Chambers of Commerce as a
conduit to penetrate and acquire local business membership through seminar hosting. We will
create an incentive for the chambers by sharing 25% of our local market support revenues in
exchange for them hosting and promoting the seminars to their respective memberships. In this
way, the local chambers become vested in ConnectLocal, thus improving our potential for
success.
Investment / Cost of Entry Single Market
By aggregating ConnectLocal direct and indirect costs, and then dividing those costs by the
number of markets we expect to penetrate, we determined the average cost of entry into a single
market to be approximately $200,000 as follows:
Direct and indirect costs:
Cost of sales (52%) ................................................................................................ $104,000
Marketing and selling (38%)...................................................................................... 72,000
General and administrative (5%)................................................................................ 10,000
Research and development (3%).................................................................................. 6,000
Software and fixed assets amortization and depreciation (2%) ................................... 4,000
Total ................................................................................................................................... $200,000
Investment / Software & Web Development
Expenditures for information system technology and members' vertical information systems are
anticipated to approach $6 million over the next 4 years. We expect to recoup these costs by
charging a local market support fee to member businesses and add-on fees for subscription and
licensing of our vertical market software / web site templates.
Investments and Acquisitions
ConnectLocal has allotted $5 million for acquisitions of existing local portals and investment in
potential strategic affiliates over the next 4 years.
Profitability, Cash Flow & Internal Rate of Return
ConnectLocal expects to incur net losses of ~$17 million before becoming profitable by year 3.
Operating cash flow is projected to mirror losses for years 1 and 2 with net cash flow projected at
$24 million and $51 million for years 3 and 4 respectively. Based on a $50 million equity
investment in ConnectLocal, the internal rate of return has been calculated at ~224%.
41
42
ConnectLocal.com, Inc.
Forecasted Balance Sheets at Years 1, 2, 3 and 4
(In Thousands)
ASSETS
Year 1
Year 2
Year 3
Year 4
$ 16,645
135
16,780
$ 27,406
689
28,095
$ 50,959
2,584
53,543
$ 101,550
5,039
106,589
190
(32)
158
2,097
(451)
1,646
2,800
(1,012)
1,788
3,200
(1,652)
1,548
35
500
2,600
3,135
50
1,500
3,350
(670)
4,230
100
2,500
4,350
(1,540)
5,410
150
5,000
5,850
(2,710)
8,290
$ 20,073
$ 33,970
$ 60,741
$ 116,427
$ 452
452
$ 1,305
1,305
$ 2,665
126
907
3,698
$ 4,359
857
6,180
11,396
STOCKHOLDERS' EQUITY
Stock and paid in capital
(Accumulated deficit) retained earnings
Total equity
30,000
(10,379)
19,621
50,000
(17,335)
32,665
50,000
7,043
57,043
50,000
55,032
105,032
Total liabilities and equity
$ 20,073
$ 33,970
$ 60,741
$ 116,427
CURRENT ASSETS
Cash
Accounts receivable
Total current assets
FIXED ASSETS
Furniture, fixtures and equipment
Accumulated depreciation
Total fixed assets
OTHER ASSETS
Deposits and prepaids
Investments in affiliates and acquisitions
Software
Accumulated amortization
Total other assets
Total assets
LIABILITIES
CURRENT LIABILITIES
Accounts payable
State taxes payable
Federal income taxes payable
Total liabilities
See summary of significant forecast assumptions and accounting policies and accountant's report.
43
ConnectLocal.com, Inc.
Forecasted Statements of Operations and Retained Earnings for Each Year in the 4 Years Ending Year 4
(In Thousands)
Sales
Cost of sales
Gross Profit
Operating expenses:
Research and development
Marketing and selling expenses
General and administrative expenses
Net operating income (loss)
Other expense:
Depreciation
Financing costs
Net income (loss) before state taxes
Provision for state franchise taxes
Net income (loss) before federal taxes
Provision for federal income taxes
Net income (loss)
Beginning retained earnings
Ending retained earnings
Year 1
Year 2
Year 3
Year 4
$ 1,075
687
388
$ 24,787
10,725
14,061
$ 93,027
28,824
64,203
$ 181,388
55,752
125,635
1,289
3,968
2,477
7,734
2,494
14,586
3,518
20,598
3,051
27,646
4,437
35,134
3,638
40,061
5,161
48,860
(7,347)
(6,537)
29,070
76,775
32
3,000
3,032
420
420
560
560
640
640
(10,379)
(6,956)
28,510
76,135
-
-
503
3,426
(10,379)
(6,956)
28,007
72,709
-
-
3,628
24,721
(10,379)
(6,956)
24,378
47,988
-
(10,379)
(17,335)
7,043
$ (10,379)
$ (17,335)
$ 7,043
$ 55,032
See summary of significant forecast assumptions and accounting policies and accountant's report.
44
ConnectLocal.com, Inc.
Forecasted Statements of Cash Flows for Each Year in the 4 Years Ending Year 4
(In Thousands)
Year 1
Year 2
Year 3
Year 4
$ (10,379)
$ (6,956)
$ 24,378
$ 47,988
32
670
419
870
560
1,170
640
(136)
452
-
(553)
853
-
(1,896)
1,360
126
907
(2,454)
1,694
731
5,273
(10,030)
(5,566)
26,305
55,041
Financing activities:
Proceeds from equity
30,000
20,000
-
-
Net cash provided by financing activities
30,000
20,000
-
-
Investing activities:
Payment of deposits and prepaids
Payments for software
Purchases of furniture, fixtures and equipment
Purchases computer equipment
Investments in affiliates and acquisitions
(35)
(2,600)
(150)
(40)
(500)
(15)
(750)
(200)
(1,707)
(1,000)
(50)
(1,000)
(250)
(452)
(1,000)
(50)
(1,500)
(300)
(100)
(2,500)
Net cash (used) by investing activities
(3,325)
(3,672)
(2,752)
(4,450)
16,645
10,761
23,553
50,591
-
16,645
27,406
50,959
$ 16,645
$ 27,406
$ 50,959
$ 101,550
Operating activities:
Net income (loss)
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization
Depreciation
Change in operating assets and liabilities, net:
Increase in accounts receivable
Increase in accounts payable
Increase in state taxes payable
Increase in federal taxes payable
Net cash provided (used) by operating activities
Net cash flow
Cash at beginning of year
Cash at end of year
See summary of significant forecast assumptions and accounting policies and accountant's report.
45
CONNECTLOCAL, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
NOTE A - NATURE OF THE FORECASTS
This financial forecast presents, to the best of management's knowledge and belief, the
company's expected financial position, results of operations and cash flows for the forecast
period. Accordingly, the forecast reflects its judgment as of October 15, 1999, the date of this
forecast, of the expected conditions and its expected course of action. The assumptions disclosed
herein are those that management believes are significant to the forecast. There will usually be
differences between the forecasted and actual results, because events and circumstances
frequently do not occur as expected, and those differences may be material.
NOTE B - NATURE OF OPERATIONS
ConnectLocal, Inc. ("the company," a Texas C corporation) is a development stage entity
that will develop and market local-based informational and e-commerce Web portals targeted to
non-urban middle and minor market communities.
NOTE C - METHOD OF ACCOUNTING & FORECAST PERIOD
The accompanying forecasts were prepared using the accrual basis of accounting. The
prospective financial statement period is four years from the initial date of funding (refer to Note J).
NOTE D - ACCOUNTS RECEIVABLE
The accompanying forecast assumes that 100% of revenues will be on account via credit
card receivables and that the average collection period will be 10 days.
NOTE E - FIXED ASSETS & DEPRECIATION
Fixed assets will comprise of furniture, fixtures and equipment ($2,500 per state and
assistant state coordinator for a portable computer). The forecast assumes that expenditures for
fixed assets will be as follows:
Year 1 ................................................................................................................................. $190,000
Year 2 ................................................................................................................................ 1,910,000
Year 3 ................................................................................................................................... 700,000
Year 4 ................................................................................................................................... 400,000
Total ................................................................................................................................ $3,200,000
46
CONNECTLOCAL, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
NOTE E - FIXED ASSETS & DEPRECIATION (continued)
Furniture, fixtures and equipment will be depreciated using the straight-line method of
depreciation over 5 years.
NOTE F – INVESTMENTS & ACQUISITIONS
The company anticipates that it will make acquisitions of and/or equity investments in
strategic affiliates as follows (e.g. pay an average of $50,000 to $100,000 for 50 to 100 local
portals):
Year 1 ................................................................................................................................. $500,000
Year 2 ................................................................................................................................ 1,000,000
Year 3 ................................................................................................................................ 1,000,000
Year 4 ................................................................................................................................ 2,500,000
Total ................................................................................................................................ $5,000,000
These investments will be accounted for using the cost method for forecasting purposes.
NOTE G - SOFTWARE, WEB SITE DEVELOPMENT COSTS & AMORTIZATION
The forecast assumes that expenditures for software and vertical market web site
development will be as follows:
Year 1 .............................................................................................................................. $2,600,000
Year 2 ................................................................................................................................... 750,000
Year 3 ................................................................................................................................ 1,000,000
Year 4 ................................................................................................................................ 1,500,000
Total ................................................................................................................................ $5,850,000
These assets are anticipated to be placed in service during year 2 and will be amortized to
expense using the straight-line method over 5 years.
NOTE H - DEPOSITS & PREPAIDS
Items in other assets comprise security deposits on anticipated leased facilities and other
prepaid items required in the ordinary course of business.
47
CONNECTLOCAL, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
NOTE I - ACCOUNTS PAYABLE
The accompanying forecast assumes that 50% of cost of sales and operating expenses will
be on account and the average time of payment will be 30 days.
NOTE J - STOCKHOLDERS' EQUITY
The forecast assumes an outside equity cash infusion of $10 million during month 1 of the
forecast period and an additional equity cash infusion of $20 million during month 6 of the forecast
period. A standby commitment for an additional equity infusion of $20 million is forecasted for
year 2.
NOTE K - REVENUES
Local Market Support Revenues - initially forecasted at $20 per month per local small
business for both chamber of commerce and non-chamber members. In the 2nd year, it is assumed
that 30% of enlisted local businesses will be non-chamber members at $35 per month, and in the
3rd and 4th year, 60% of enlisted local businesses will be non-chamber members also at $35 per
month.
Standard Industrial Code Website Revenues - the forecast assumes that 17.5%, 20% and
20% of enlisted local businesses in years 2, 3 and 4 respectively will license the company's
vertical market industry specific templates. It is further assumed that 2/3 of these licensees will
license the informational package and 1/3 will license the transactional, e-commerce package
initially at $30 and $50 per month respectively.
Banner Advertising Revenues - forecasted based on an initial average cost per 1,000
impressions (unique page views) of $10 and $25 respectively for local and national advertisers.
Sponsorship Revenues - forecasted based on an initial average cost per month of $200
and $250 respectively for local and national sponsors.
Coupon Revenues - forecasted based on an initial average cost per month of $25 and
$500 respectively for local and national coupon sponsors.
Classified Advertising Revenues - forecasted based on an initial average cost per month
of $200 and $400 respectively for local and national advertisers.
48
CONNECTLOCAL, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
NOTE K - REVENUES (continued)
Local Business Domain Registration Revenues - forecasted based on an initial average
cost of $75 for registration of a domain name, and submission of the corresponding web site with
the major search portals.
Affiliate Marketing Application Revenues - forecasted based on an initial average fee of
$2 for each credit card application originating at the company's or a member's web site.
Affiliate Marketing Approved Application Revenues - forecasted based on an initial
average fee of $20 for each credit card application approved and originating at the company's or a
member's web site.
E-Commerce (Business) Revenue Sharing Revenues - the forecast assumes that 65% of
the company's local member businesses will conduct e-commerce and that the company will
initially collect 5% of all members' transactional revenues initially assumed to be $600 per
month.
E-Commerce (Resident) Revenue Sharing Revenues - the forecast assumes an average of
5,000 residents per county will make purchases online, and on a per capita basis, will spend an
average of $150 per annum. The forecast assumes the company will collect 4% of all resident
transactional revenues.
Affinity Program Revenues - forecasted at $1.5, $3.0, and $6.0 million in years 2, 3 and 4
respectively.
Sales Allowances & Bad Debts - forecasted at 5% of total gross revenues.
Refer to the forecasted financial statements in exhibits H and I for supplemental revenue
assumptions. All revenue assumptions are particularly sensitive and the non-attainment of these
assumptions can materially and adversely impact forecasted sales and cash inflows.
NOTE L - COST OF SALES
Content Subscription Costs - the forecast assumes the company will pay content affiliates
an average of $3,000 per month per county for content procurement and management.
Content Royalty Costs - the forecast assumes the company will pay strategic affiliates a
royalty of 5% of eligible net revenues for content procurement and management.
49
CONNECTLOCAL, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
NOTE L - COST OF SALES (continued)
National Content Subscription Costs - forecasted at $100 per month per local community.
Local Market Support Revenue Split with Local Chamber - forecasted at 25% of local
market support revenues.
Local Market Support Revenue Split with US Chamber - forecasted at 5% of local market
support revenues.
Coupon Licensing Costs - forecasted at 20% of coupon revenues.
Local Business Web Hosting Costs - forecasted at $1.50 per month per enlisted local
business.
Local Business Domain Registration Costs - forecasted at $40, $40, $35 and $25 in years
1, 2, 3 and 4 respectively per enlisted local business.
Incentives and Rebates - forecasted at 5% of member businesses e-commerce revenues
starting in year 2.
E-Commerce (Resident) Program Costs - forecasted at 5% of e-commerce (resident)
revenues.
Affinity Program Costs - forecasted at 50% of affinity revenues.
Technical Support Costs - forecasted at $150 per annum per enlisted local business.
Customer Service Costs - forecasted at $2 per month per enlisted local business.
Credit Card, Bank Sweep and EFT Fees - forecasted at 4%, 3%, 1.5% and 1.5% in years
1, 2, 3 and 4 respectively of local market support, SIC code, local coupon, and domain
registration revenues.
Allowance For Contingency - forecasted initially at $2 per month per enlisted local
business.
Refer to the detailed forecasted financial statements in exhibits H and I for supplemental
cost of sales assumptions.
50
CONNECTLOCAL, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
NOTE M - RESEARCH AND DEVELOPMENT
Consulting and Professional Fees - forecasted at $120,000 for the 1st year, increasing to
$180,000 in the 2nd year, $240,000 in the 3rd year and $300,000 in the 4th year for outside
consultants related to ongoing research and development activities.
Recruiting Fees - forecasted at $50,000 for the 1st and 2nd year, decreasing to $25,000 in
the 3rd and 4th year.
Salaries - includes provisions for a VP of R&D, Director of R&D, Advance Product
Managers and Software Managers.
Seminar Development Costs - forecasted at $300,000 for the 1st year, increasing to
$1,200,000 in the 2nd year, $1,600,000 in the 3rd year and $2,000,000 in the 4th year.
Supplies - forecasted at $24,000 in the 1st year, increasing to $30,000 in the 2nd year, and
$35,000 in the 3rd year and $40,000 in the 4th year.
Telecommunications - forecasted at $10,500 in the 1st year, increasing to $24,000 in the
2 year, $30,000 in the 3rd year and $36,000 in the 4th year.
nd
Employee Benefits and Payroll Taxes - forecasted at 14% of wages per employee per
month for group health insurance and the employer portion of payroll taxes.
Allowance for Contingency - forecasted at $60,000 in year 1, increasing to $120,000 in
year 2, $180,000 in year 3 and $240,000 in the 4th year for unforeseen contingent expenses.
Refer to the detailed forecasted financial statements exhibits H and I for supplemental
research and development assumptions.
NOTE N - MARKETING AND SELLING EXPENSES
Advertising & Promotion - forecasted at $450,000 for the 1st year, increasing to
$5,000,000 in the 2nd year, $10,000,000 in the 3rd year and $15,000,000 in the 4th year.
Ad Agency & Public Relations - forecasted at $240,000 for the1st year, increasing to
$260,000 in the 2nd year, $280,000 in the 3rd year and $300,000 in the 4th year.
51
CONNECTLOCAL, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
NOTE N - MARKETING AND SELLING EXPENSES (continued)
Collateral Development - forecasted at $100,000 for the first year, increasing to $125,000
in the 2nd, 3rd and 4th year.
Commissions (In-house) - forecasted at 5% of national banner, national major sponsorship,
national coupon and national classified advertising revenues.
Commissions (Independent Reps) - forecasted at 30% of local banner, 30% of local
sponsorship, 20% of local coupon (net of cost), 30% of local classified advertising and 10% of local
domain registration revenues (net of cost).
Consulting & Professional Fees - forecasted at $120,000 for each year in the forecast
period.
Education Expense - forecasted at $25,000 for the first year, increasing to $30,000 in the
2 year, $35,000 in the 3rd year and $40,000 in the 4th year.
nd
Meals & Entertainment - forecasted at $60,000 for the first year, increasing to $70,000 in
the 2 year, $80,000 in the 3rd year and $100,000 in the 4th year.
nd
Printing & Duplication - forecasted at $100,000 for the first year, increasing to $150,000
in the 2nd, 3rd and 4th year.
Postage & Delivery - forecasted at $35,000 for the first year, increasing to $55,000 in the
2 year, and $75,000 in the 3rd and 4th years.
nd
Recruiting Fees - forecasted at $100,000 for the 1st and 2nd year, decreasing to $50,000 in
the 3 and 4th year.
rd
Salaries - includes provisions for a VP Marketing, VP Affinity Programs, Director Of
Marketing, Director Of Public Relations, Director Of Affinity Programs, Director Of Regional
Sales, 2 Regional Sales Managers, 2 Product Managers, E-Mail & Newsletter Coordinator, 40
State Sales Coordinators, and 40 Assistant State Coordinators. Remuneration will also include inhouse commissions as noted on the previous page.
Employee Benefits and Payroll Taxes - forecasted at 14% of wages per employee per
month for group health insurance and the employer portion of payroll taxes.
52
CONNECTLOCAL, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
NOTE N - MARKETING AND SELLING EXPENSES (continued)
Telecommunications - forecasted at $40,000 for year 1, increasing to $80,000 in year 2,
$90,000 in year 3 and $100,000 in the 4th year.
Trade Shows & Conventions - forecasted at $120,000 for year 1, increasing to $130,000 in
year 2, $140,000 in year 3 and $150,000 in year 4.
Travel & Lodging - forecasted at $120,000 for year 1, increasing to $150,000 in year 2,
$180,000 in year 3 and $190,000 in the 4th year.
Allowance for Contingency - forecasted at $300,000 in year 1, increasing to $500,000 in
year 2, and $1,000,000 in years 3 and 4 for unforeseen contingent expenses.
Refer to the detailed forecasted financial statements in exhibits H and I for supplemental
marketing and selling expense assumptions.
NOTE O - GENERAL AND ADMINISTRATIVE EXPENSES
Audit & Accounting - forecasted at $30,000 for the 1st year, increasing to $150,000 in the
2nd year, and $300,000 in years 3 and 4.
Charitable Contributions - forecasted at 1/4 of 1% of net revenues starting in year 2.
Consulting & Professional Fees - forecasted at $60,000 for year 1, increasing to $120,000
in year 2, $150,000 in year 3 and $200,000 in year 4.
Dues & Subscriptions - forecasted at $3,000 in year 1, increasing to $12,000 in year 2,
$14,000 in year 3 and $16,000 in year 4.
Employee Benefits and Payroll Taxes - forecasted at 14% of wages per employee per
month for group health insurance and the employer portion of payroll taxes.
Equipment Rental - forecasted at $36,000 for year 1, increasing to $50,000 in year 2,
$75,000 in year 3 and $100,000 in year 4.
Insurance (Content & Liability) - forecasted at $36,000 in year 1, increasing to $48,000 in
year 2, $55,000 in year 3 and $60,000 in year 4.
53
CONNECTLOCAL, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
NOTE O - GENERAL AND ADMINISTRATIVE EXPENSES (continued)
Insurance (Product Liability) - forecasted at $60,000 in year 1, increasing to $65,000 in
year 2, $70,000 in year 3 and $75,000 in year 4.
Legal - forecasted at $145,000 in the first year, increasing to $200,000 in year 2, $250,000
in year 3 and $300,000 in year 4.
Meals & Entertainment - forecasted at $30,000 in the first year, increasing to $34,000 in
year 2, $38,000 in year 3 and $42,000 in year 4.
Office Supplies - forecasted at $24,000 in the first year, increasing to $30,000 in year 2,
$36,000 in year 3 and $42,000 in year 4.
Postage, Delivery & Shipping - forecasted at $12,000 in the first year, increasing to
$16,000 in year 2, $18,000 in year 3 and $22,000 in year 4.
Printing - forecasted at $24,000 in the first year, increasing to $36,000 in year 2, $48,000
in year 3 and $60,000 in year 4.
Recruiting Fees - forecasted at $50,000 for the 1st and 2nd year, decreasing to $30,000 in
the 3 and 4th year.
rd
Repairs & Maintenance - forecasted at $24,000 in the first year, increasing to $36,000 in
year 2, $48,000 in year 3 and $60,000 in year 4.
Rent - forecasted at $120,000 in the first year, increasing to $180,000 in year 2, $240,000
in year 3 and $300,000 in year 4 for office and warehouse space.
Salaries - the forecast includes provisions for a Chairman & CEO, President, Executive
Vice President, Chief Operating Officer, Chief Financial Officer, Chief Information Officer,
Business Development, Controller, Treasurer & Cash Manager, Human Resources, Accounting
Manager, Accounting Clerks, Purchasing & Procurement, and Secretarial & Administrative
personnel.
Taxes (Property) - forecasted at an annual rate of 2.5% on the net book value of fixed
assets.
Telecommunications - forecasted at $25,000 in year 1, increasing to $30,000 in year 2,
$35,000 in year 3 and $40,000 in year 4.
54
CONNECTLOCAL, INC.
SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS
AND ACCOUNTING POLICIES
NOTE O - GENERAL AND ADMINISTRATIVE EXPENSES (continued)
Travel and Lodging - forecasted at $30,000 in year 1, increasing to $40,000 in year 2,
$50,000 in year 3 and $60,000 in year 4.
Utilities - forecasted at $30,000 in year 1, increasing to $40,000 in year 2, $50,000 in year
3 and $60,000 in year 4.
Allowance for Contingency - forecasted at $250,000 in year 1, increasing to $450,000 in
year 2, and $600,000 in years 3 and 4 for unforeseen contingent expenses.
Refer to the detailed forecasted financial statements in exhibits H and I for supplemental
general and administrative expense assumptions.
NOTE P - FINANCING COSTS
The forecast assumes that a $3.0 million finders fee will be paid in connection with the
equity capital infusion as discussed in Note J. For forecast purposes, this fee will be charged to
expense in month 6.
NOTE Q - STATE AND FEDERAL INCOME TAXES
The company will be a Texas resident corporation. Texas imposes a state franchise tax
equal to the greater of .25% of stockholders' equity or 4.5% of taxable net income. The forecast
assumes for federal income tax purposes a tax rate of 34%. Any net operating loss carry-forwards
generated will be utilized against future taxable income.
55
EXHIBIT A – PROPOSED SEMINARS
Chamber of Commerce Seminars
Why Your Community Must Get on the Internet!
Internet Basics!
What Makes a Good Community Web Site?!
Gain Exposure and Fulfill Your Mission!
The Future of the Community and the Internet!
Consumer Seminars
Why You should use the Internet!
Quick and Simple Steps to Getting on the Internet!
Using the Internet to Save Money and Time while having Fun!
Fun and Games on the Internet!
Get Free Stuff on the Internet!
Online Banking and the Internet!
Buying Things on the Internet!
Communicating over the Internet!
Customizing your Internet Experience!
E-mail: Functions & Advantages!
Business Seminars
Why Your Business Should Use the Internet!
Quick and Simple Steps to Getting on the Internet!
Set-up and Design Your Home Page!
Save Money on the Internet!
Save Time on the Internet!
Promote and Build Your Business on the Internet!
Online Banking and the Internet!
Buying Things on the Internet!
Communicating over the Internet!
Customizing your Internet Experience!
Being Left Behind?
Non-Profit Seminars
Using the Internet to Fund-raise, Save Money, and Save Time!
Using the Internet to Fund-raise while you Sleep!
Promote Community Event Participation!
56
EXHIBIT B - MARKET ENTRY PLAN
Planning Stage
In the Planning Stage, our State Team Leader will identify local counties that have the best
potential to reach critical mass in a reasonable time-frame. Once a county is ultimately
identified, our State Team Leader will develop a profile of the community and an initial plan of
attack. Although there are many factors that will be considered before choosing a county, the
two most important are the size of the county and its proximity to a college or university.
ConnectLocal will initially target non-urban, minor (30,000 to 100,000 population) and middle
(100,001 to 300,000 population) market communities. The idea is to avoid the counties that
contain a major metropolitan city, and those that are too sparsely populated to be worth the
marketing effort and implementation costs. Eventually, we will evaluate the possibility, cost and
market entry barriers of entering counties with populations under 30,000 and over 300,000.
College or university counties are also preferred community targets for three reasons. First, these
communities usually have a higher level of knowledge and technical infrastructure due to the
presence of a university or college. Second, we can leverage our relationship with egenda.net by
developing a community market while they are building a university or college online. Both
building processes are similar in nature and share a similar methodology targeted toward
different vertical markets - community versus collegiate. Finally, most colleges have a large,
inexpensive talent pool of motivated students that can be utilized in our sales and marketing
programs.
Scouting Stage
During the Scouting Stage, our State Team Leader will meet with the local County Chamber of
Commerce. At the initial meeting, he will try to accomplish three goals: explain the mission, ask
for assistance, and gather as much information about the local business environment as possible.
After the meeting with the Chamber, he will introduce himself and our concept to other potential
partners within the community such as the local media, government, and key Non-Profits.
Foundation Stage
At the start of the Foundation stage, understanding of the local environment should be such that
we can start aggressively pursuing mutually beneficial relationships with the key entities
identified during the prior stages. These relationships will give us access to content providers and
also help promote ConnectLocal to the local businesses (a business with a local presence – could
be a small independent retailer or a local Wal-Mart store) and Non-Profits in the community.
During this stage, we will also recruit an individual recommended by community leaders to be
the commission based Local Team Leader.
57
Introduction Stage
During the Introduction Stage, we will introduce our concept and seminars to local businesses
and Non-Profits with the support of local partners such as the County Chamber of Commerce.
For Chamber members, we will offer two service packages (refer to Exhibit D), one commodity
(free) and the other fee-based. These packages are designed to get businesses on the Internet, and
contain enough incentives and economic feasibility that enable the team to up-sell them later to
more comprehensive packages. The packages will be promoted through Chamber sponsored
direct mailings, phone calls, and educational seminars. These seminars (refer to Exhibit A –
Proposed Seminars) are an important part of both the mission and market entry strategy to
educate the local communities with respect to technology and the Internet. By providing
education and human touch to the community on these issues, we will also build loyalty and trust
that will pay dividends for many years.
Building Stage
The Building Stage is a continuation of the process put in motion during the Introduction Stage
and will focus on building content and generating revenues. During the Building Stage, we will
visit local businesses in person to strengthen the relationships started previously through
mailings, calls, and seminars. During these visits, the Local Team Leader will reiterate the
importance of ConnectLocal to the community in general, and to each business specifically.
Explaining and demonstrating the service packages offered gives the business owner the
opportunity to choose and customize one that best meets their needs. This will be done on a
laptop computer, and later uploaded to the Local Portal site. The Building Stage will also involve
additional meetings with local Non-Profits and other community partners to continue
strengthening our ties and community acceptance.
Grand Opening Stage
The Grand Opening Stage will occur once critical mass of content, businesses, and Non-Profits is
achieved. The Local Portal will be accessible prior to this stage; however, it will not be
promoted until it reaches this point. During this stage the business model and promotional efforts
will shift to the consumer and our model moves from business-to-business (B2B), to business-toconsumer (B2C). ConnectLocal will utilize a combination of traditional major media, Internet
based media, and educational seminars to further promote the businesses and Non-Profits on the
site. Contests, giveaways, and coupons will be some of the other methods used to drive initial
traffic in conjunction with the affinity programs.
58
Foreseen and Unforeseen Events
Although it is easy to clearly define the stages of growth on paper, in the real world the stages
will probably overlap and will be subject to disruption by foreseen and unforeseen events and
situations.
One possible situation that could potentially prove beneficial to us is the existence of a Local
Portal-like site before ConnectLocal enters that market region. Most of these sites lack the
resources to make them viable in the long-run and should be receptive to joining efforts.
Equipped with systems, online software, marketing tools, and financial resources, ConnectLocal
should be able to acquire or partner with many of these sites which will jump-start efforts in
these locations.
Another situation ConnectLocal will encounter which creates some uncertainty is the existence of
local media players. It is our intention to create non-threatening mutually beneficial alliances
with them that will probably involve cross-promotion, revenue sharing, and content licensing.
59
Exhibit C - Additional Members of Key Management Team
Robert Prosen, Executive Vice President, Affinity Division and Strategic Alliances
Bob has 21 years of proven management experience in Sales, Marketing, Operations,
Management and Information Systems, Financial Management, Human Resources,
Administration, Customer Service and Consulting. Bob joined Sabre Technology Systems as a
Senior Vice President in 1997 to lead the Americas Region. His responsibilities include sales,
delivery, and ongoing support for clients in North, Central and South America.
Before joining Sabre Group, Bob was Vice President of Professional Services for Hitachi Data
Systems. There he created an Executive Consulting Practice where he planned and directed
business operations and technology planning, as well as network and year 2000 consulting.
Under his leadership, Professional Services expanded the company’s share of customers by
providing value-added solutions to solve customer business problems. He was recognized for his
outstanding teamwork by the firm’s product sales force.
Prior to Hitachi, Bob was Managing Partner of Professional Services for AT&T Global
Information Solutions (currently NCR). He built a nationally recognized management and
technology consulting practice. Bob had the highest billable percentage in the United States for
AT&T. He also improved Associate Satisfaction from 58% to 71%.
At AT&T, he was known for his ability to build capable management teams from the ground up
that did not have any prior experience in Information Systems. He reduced service interruptions
67% to the lowest rate within the division through the use of statistical process control.
Prior to AT&T, Bob spent six years at U.S. Sprint as Vice President of Information Systems and
Senior Director of Access Financial Management where he reduced access unit cost 31%. By
1990, Access represented 43% of revenue compared to 56% in 1987. He reduced the cost of
leased facilities more than $400 million (89%). These results directly contributed to the firm’s
low cost producer objective. Also, he reorganized the department and grew the organization in
the midst of several corporate right sizing programs.
Bob has a M.B.A. from Georgia State University and a B.S. Engineering from Texas Tech
University in addition to Executive Education at Wharton, Duke and MIT. Bob offers
ConnectLocal tremendous management experience and contacts required to quickly and
effectively build smart and long-term strategic alliances in addition to comprehensive affinity and
incentive programs for both the business-to-business (B2B) and business-to-consumer (B2C)
model.
60
Kenneth T. Logsdon, Executive Vice President and Central Regional Sales Director
Ken has been responsible for the overall management of several companies with a strong
emphasis on their sales and marketing programs. His management and sales experience
encompasses developing sales forces and marketing programs for companies ranging from startup, small to medium size companies to the corporate level. He has traveled nationally hiring and
working with sales forces in small and major markets along with developing a large trade show
presence. His responsibilities included developing systems for reporting sales, marketing and
accounting information for District Managers and home office departments. He maintained
personal sales responsibility for several of the nations largest retailers.
Ken was the Assistant Brand Manager of the Folgers Coffee Company, a Proctor and Gamble
subsidiary. While involved in the Brand program, he developed with their New York advertising
agency the first spokesperson for coffee television commercials, Mrs. Olson. As Assistant Brand
Manager, he supervised the spending of $12 million in promotional activity for the Folgers
Coffee Company.
As Vice President and General Manager of Gerson-Mayfair and President of Mayfair, Inc., Ken
was responsible for developing sales programs, hiring sales forces and sales management,
coupled with increasing the size of product lines for manufacturing, distributing and direct
selling.
Since 1996, he has held the position as Executive Vice President at Venture Initiatives, LLC. in
Dallas, Texas. In addition to his sales and marketing responsibilities, he was instrumental in the
development of the new improved 90-second pacifier thermometer and other baby-care products.
Also, Ken managed the sales rollout of the Dr. Seuss and Rugrats analog watch line and other
licensed items.
Ken is a graduate of Culver Stockton College, Canton, MO with a B.S. Degree in Business
Administration and Economics. He is the recipient of numerous sales and motivational
organization awards such as Dale Carnegie and Toastmasters.
Russell A. Meade, East Coast Regional Sales Director
As President of the LANCO division of Swatch Group, Russ was responsible for developing,
marketing and distributing the Swatch Group’s initial entry into the U.S. mass market. He has
built relationships and long-term merchandise programs with all major national retailers and
participated, coordinated and executed endless promotions and trade shows.
Russ has extensive experience in the business-to-business (B2B) sector through his years as both
National and District Sales Manager with Timex Corporation. He is talented at building and
maintaining rapport and long-term relationships with customers and peers. Combining these
skills with his strategic and promotional planning and implementation talents makes Russ a
potentially excellent Regional Director with an in-depth understanding of both the business-tobusiness (B2B) and business-to-consumer (B2B) mission of ConnectLocal.
Russ has a B.A. Business Administration from Otterbein College, Westerville OH.
61
Scott Trowbridge, West Coast Regional Sales Director
Scott’s extensive and proven sales and distribution expertise on the West Coast with both Timex
Corporation, Toshiba and the Gerson-Mayfair company makes him an ideal Regional Director
for this territory. His intimate knowledge of the region combined with his existing relationships
provides for quicker market entry and long-term strategy planning. As Account Executive and
District Sales Manager with Timex, Scott has ascertained tremendous experience for business-tobusiness (B2B) marketing. He has consistently built growth and profitability in his region by
building and managing effective customer relationships, on-going promotions, strategic programs
and talented sales execution.
Scott’s pleasant demeanor and hard-driving goal orientation has made him a tremendous
manager and sales executive. He offers ConnectLocal years of sales, execution and planning
skills with management experience. His relationship-oriented personality is ideal for execution
of both the seminar strategy and the coordination of a highly effective sales team to penetrate
West Coast communities. He has worked under Mr. Logsdon in the past at the Gerson-Mayfair
Company and they have proven to be a highly efficient and profitable team. Scott has
comprehensive knowledge of market entry strategies combined with an understanding of
advertising and promotional programs to launch new products and services.
The Gerson-Mayfair Company and Timex provided plenty of opportunity for Scott to become
proficient in both business-to-business (B2B) and business-to-consumer (B2C) models from both
a sales and management standpoint. He was instrumental in building the Disney, Pooh, Joe
Boxer, Nautica, Zippo, Casio, and Liz Claiborne brands among various consumer products
throughout the Western seaboard. His business acumen includes creative advertising
implementation, distribution and sales management, budget controls and strategic growth
planning.
Scott is a graduate of the University of Kansas with a degree in advertising.
Bill Hart, Chief Financial Officer
Bill’s background includes over 20 years of experience in finance and accounting. As a seasoned
financial professional, his expertise also includes heavy involvement in operations, information
systems and corporate administration.
He has served as the Assistant Controller for Sears’ largest Merchandise Distribution Centers.
Excellent performance within Sears’ Controller development program was recognized by Club
Corp. and he was asked to join them as Group Controller. He was responsible for budgeting and
financial planning at Club Corp.
Later, Bill became the Corporate Controller of a chain of Western Wear retail stores. When that
chain was bought out by a much larger competitor, Bill was the only member of the previous
management team retained to assist in the transition of corporate functions, as well as provide
advice and consultation to the new owners with regard to operational and information system
changes required.
62
From 1996-1999, Bill has been Chief Financial Officer for Venture Initiatives, LLC, a world
leader in innovative consumer products. His responsibility encompassed the management of all
finances, financial reporting, information systems, bank relations, legal team interface, and
operations and strategic planning for the organization and its four operating companies.
His experience with large and small product/service companies is essential for the execution and
growth of ConnectLocal. Once the company is prepared to enter the public capital markets, a
seasoned Chief Financial Officer with investment banking and SEC experience will assume Bill's
role, and Bill will become the Vice President of Finance with oversight for financial operations
of the organization.
Bill has a Bachelor of Science Degree in Business Finance and Accounting from the University
of Texas at Dallas. He is also a Certified Public Accountant and is a member of the American
Institute of Certified Public Accountants.
Stephanie S. Gradwell, Vice President, Seminar and Distance Learning
Stephanie is a Senior Project Manager and an Instructional Designer in Strategic Management
Group's Client Engagement Group, in Philadelphia, PA. As a Sr. Project Manager, Stephanie
manages all aspects of a client project from the design phase to development and delivery at the
client site. She works in partnership with clients to determine their business needs while
developing learning objectives for the project to address those needs. Throughout a project,
Stephanie is in daily communication with her client contact, making them an integral part of the
project team. Stephanie has managed projects for clients such as Chevron Petroleum Co., and
Mervyn's.
Her experience also extends to an Instructional Design role. Her knowledge and expertise has
enabled her to serve as the lead instructional designer for a variety of projects, including the
SMG Financial Learning System Study-guide. The Study-guide is an application that can be
used as a stand-alone reinforcement tool for intermediate or advanced business seminars that
support pre- existing training materials and a simulation program. Stephanie has also
participated as lead instructional designer for several other multimedia Computer-Based Training
(CBT) projects such as Pfizer’s Employee Orientation Program. Pfizer's EOP provides
information on Pfizer as a company, division specific and departmental specific information, and
general company tasks and information that educates employees on all levels.
Another project called The Strategic Selling Guide, designed for Dendrite International, was a
prototype CBT program to supplement the Dendrite Electronic Territory Management System
(DETMS) software. The CBT will help sales representatives complete their jobs faster and better
by providing them with ‘hands-on’ experience with the tools DETMS offers in a risk free setting.
Additionally, the CBT will teach advanced methods and directions for using the DETMS to
maximize sales productivity.
Stephanie worked on additional projects for CibaGeneva, Knoll Pharmaceuticals, Oxford Health
Plans, Coopers & Lybrand Consulting, Federated Department Stores, and Union Camp and is
currently the Project Manager on the Dow Corning Online Learning Environment Project.
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Ms. Gradwell earned her Master of Science degree in Instructional Technology from the Institute
for Interactive Technologies at Bloomsburg University, Bloomsburg Pennsylvania. She received
her BS in Communications Media - Training and Development Track from Indiana University of
Pennsylvania. Stephanie is currently enrolled at Drexel University as a Ph.D. student focusing on
Educational Leadership Development and Learning Technologies. Stephanie also serves as an
Adjunct Professor for the School of Education department at Drexel University. She is proficient
in the principles of Instructional Design and uses theories, practices, and innovations to improve
training needs.
Recruiting Firm, Chief Marketing Officer and Chief Technology Officer
ConnectLocal recognizes the vital importance of recruiting talented and successful Internet
veterans to manage and implement our marketing programs/strategy and also our technology
platform/strategy. ConnectLocal will form a relationship with a major search firm to recruit for
these important management positions. It is imperative that the candidates bring experience,
expertise and a shared vision to the team to best effectuate long-term growth and speed to market
capabilities.
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EXHIBIT D - PRODUCTS & SERVICES ADDENDUM
Consumer Products and Services
Auctions
The types of items that can be auctioned on a local basis will differ from that of a national
auction. Local businesses can actually sell, by auction, localized packages they put together. As
an example, a local restaurant could auction a limited number of special dinner packages for
Valentine’s day. If they set a minimum bid, and the demand is great, they should be able to
enhance their profit on the transaction.
Chat Rooms / Local forums
Local chat rooms, message boards, etc. are a great way to get people and groups communicating
on issues that are important locally. Discussions regarding County government, current events,
parental concerns, school issues, or even local sports teams will be possible on the Local Portal.
Local Non-Profits will be encouraged to set-up forums where their members can interact.
The competitive advantage ConnectLocal has over national sites is that it will be able to achieve
critical mass on local issues that normally would get diluted across numerous national sites.
Calendars
ConnectLocal will offer both individual and community based calendars on the Local Portal. For
data filtering, the consumers will have to answer questions regarding the types of events and
issues that interest them, which helps build a user profile.
When a consumer finds an event of interest, he can find out more about it, possibly even linking
to a web site with more comprehensive information. If there is continued interest for an event or
issue, he can move it to his personal calendar. If the event requires a ticket to be purchased, or
reservations to be made, ConnectLocal will offer it online. Eventually, suggestions will be
offered for other purchases that are related to the event, such as baby-sitter services for couples
with children, or airline tickets and rental cars if travel is involved.
The calendar system will also integrate with the e-mail system. We will give users the
opportunity to request e-mail notification when certain types of events are announced. This will
keep them informed without having to check the community calendar every day.
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Business Products and Services
Coupons
Electronic couponing will be an important part of the Local Portal. There are two different
aspects of couponing that must be addressed. The first is the ability for consumers to get
coupons online from individual business sites. These coupons must be attained and/or redeemed
online in an e-commerce transaction to capture the event for ConnectLocal, the business and the
consumer.
The second part of ConnectLocal’s coupon program is a central coupon manager that each of the
registered unique users will access. This electronic manager will allow them to search for
coupons of interest, suggest and offer coupons based on occurring promotions and the
consumer’s buying patterns, and provide a place to store the user’s coupons electronically.
One approach that will keep consumers coming back is to have a master list of available coupons
that changes by the minute. If a business decides they want to offer 200 coupons for 10% off a
product, then the first 200 consumers who “take” the coupons from the list will be successful.
The fear of missing out on a new coupon with limited availability creates a reason to go back to
the Local Portal frequently.
E-Commerce
A fully functional e-commerce site should be a priority goal for all local business owners. After
all, who wouldn’t like to conduct business while they sleep?
ConnectLocal’s e-commerce application will provide all the normal functionality such as
shopping carts and secure payment processing, and will be standardized across all of our client’s
sites.
Since some businesses will purchase an e-commerce web site before actually purchasing
computers and connectivity, we are prepared to send them orders by traditional means such as
fax and mail. Eventually, we expect that all phases of the e-commerce transaction will be
conducted electronically.
A future enhancement to the e-commerce program will provide a business, such as a day-care
center, the ability to sell additional products related to their normal business, such as educational
games, child wellness literature, toys, etc. The revenues generated from these sales will be
shared with ConnectLocal.
Content cross-publishing and cross-publishing software
Cross-publishing is the process of entering information once, and disseminating it to multiple
locations automatically. The information might be an educational article, press release, dates for
upcoming events, or the specifics of a new sale being promoted. Clients must be able to cross-
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publish information to their own site as well as to ConnectLocal, which further enables us to
build extensive content and databases.
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Facilitating a strategic alliance with a firm that has developed cross-publishing software, which
utilizes MS Word for consistent data entry, can be given to clients for free to further expand
content development.
Once clients are trained to use the online software, they will have a self-service environment that
lets them easily and constantly update information on their site and ConnectLocal
simultaneously. After they spend the time and money to master this process, the resulting
inertia will offer a great advantage and market foothold against competition.
Online Business Promotion
Once a client has developed a presence on the Internet, it is imperative to keep them from
becoming another undiscovered island in the vast Internet Sea. Online business promotion
services are designed to give the business clients many affordable methods of gaining exposure.
After ConnectLocal’s network of Local Portals start to gain critical mass and scale, it will be
able to offer all the various promotional services to national companies in addition to the local
market.
Below is a brief description of the types of promotional services being developed. Following the
descriptions, numerous alternatives are addressed to effectively package these services and
market them to the client as their Internet Lifecycle evolves along the up-grade path.
•
•
•
•
•
Effectively utilize knowledge of registered users to provide targeted banner and button
advertisements.
If a client has adequate traffic to their site, give them the ability to exchange ads on their site
for ads on other sites (2 for 1).
Offer many types of text links from ConnectLocal to the client’s sites. As an example, a
bank might have a link from our main business directory, the “Money Channel,” and also
from the body of an article on mortgages.
ConnectLocal’s online newsletter service will allow clients to request electronic newsletters
on topics of interest. Business clients will either write these newsletters themselves, or, for an
additional fee, utilize ones written and marketed by us.
Two types of sponsorships, national and major local, will be offered on the Local Portals. A
national sponsor will have a presence in highly viewed pages throughout all Local Portals.
The major local sponsors will be local organizations who sponsor a specific part of the site
related to their industry, as well as our educational programs related to that channel. For
example, a local bank might sponsor the “Money Channel” on their Local Portal.
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Product/Service Packages
A key part of the growth strategy is the product/service packages developed for businesses. The
Starter Package is provided at no cost to registered business users, is designed to create an
initial relationship, and includes:
1. Free SimpleLink from the Local Portal to their web site, or a directory listing if they do not
have a site - yet.
2. Free graphical button to place on their site to link to our Local Portal.
3. Free E-mail.
4. Free customer hand-outs that can be printed off ConnectLocal and given to customers to
promote both locations. Free cross-publishing software, training, and the ability to crosspublish to a ConnectLocal Local Portal.
For Chamber members, we have developed a service package that includes everything contained
in the free Starter Package, but also some additional benefits. We want the local Chamber of
Commerce to be able to promote the fact that the free and discounted services represent savings
that will cover the typical Chamber member’s annual dues. The Chamber Service Package will
include:
1. The set-up and hosting of a simple home page (business card information). Set-up and
hosting fees will be waived.
2. An IntelliLink to ConnectLocal that will make available basic statistics about the consumers
who click on the Chamber member’s site using the link.
3. A minimal number of free banner ads to announce their Internet presence.
4. A discount on large site hosting fees, our electronic newsletter services, additional banner
ads, and the ConnectLocal Basic Package.
The Basic Package will cost $30 per month and is available to both Chamber and non-Chamber
members. This plan includes everything from the free Starter Package, plus:
1. Set-up and hosting of an Internet site using a basic template that offers up to 5 pages, displays
cross-published information, and allows user maintenance. Set-up fees are negotiable and
hosting fees will be waived.
2. Free admission to the Internet seminars and distance learning.
3. An IntelliLink to ConnectLocal that will make available detailed statistics about the
consumers who click on the client’s site using the link.
4. A discount on large site hosting fees, classified ads, and on additional banner ads.
5. A minimal number of free banner ads, but more than in the Chamber Service Package.
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The Major Local Sponsor Package will provide a unique level of exposure for those businesses
willing to make the appropriate commitment in terms of time and money. At a minimum, we will
have local sponsors on each Local Portal for every channel, and for each community home page.
The Major Local Sponsor Package will cost $250 per month plus a co-marketing commitment,
and is available to both Chamber and non-Chamber members. This plan includes everything
from the Basic Package, plus:
1. A larger number of free banner ads than our Basic Package.
2. A discount on additional banner ads and classified ads.
3. Prominent recognition of their sponsorship in the appropriate location on the Local Portal,
with links to their site.
4. Opportunity to provide feature articles on the appropriate channel on ConnectLocal.
5. Co-sponsorship of any local seminars related to their site sponsorship channel. They will be
recognized in any advertisements promoting the seminar, seminar handouts, and the seminar
slides.
Although many of these promotional concepts appear similar to traditional media in some ways,
there are major differences. First, there is the dynamic nature of the information on
ConnectLocal, compared to the static nature of traditional advertising. Second, we can track the
behavior of consumers by demographic variables and use the results to refine our client’s
promotional programs. Finally, businesses can test-market ideas inexpensively before making
large investments. As an example, a business could set-up a virtual store on the Local Portal of
another nearby county to test whether they have market potential in that region.
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EXHIBIT E - SALES STRUCTURE
ConnectLocal’s Marketing Plan, Sales Strategy, and Standardized Methodology were designed
specifically to overcome the initial inertia of a community. Execution and implementation of
the aforementioned further expedites the ability of each team and community to reach critical
mass and ConnectLocal to achieve overall scale on a national basis within a reasonable timeframe.
Initially, ConnectLocal will segment the country into an East Coast, Central, and West Coast
region. Each region will have a Regional Sales Director, with the director of the Central region
also serving as the Executive Vice President for the entire sales structure. As ConnectLocal
grows, additional segmentation may occur and the Executive Vice President of sales position may
be isolated as a separate function.
Initially, the State Team Leaders will be responsible for carrying out the Market Entry Strategy
detailed in this plan. Their skills will include the ability to promote, sell and implement the vision
and concept, as well as the ability to motivate people, execute, manage and initiate action.
Controlling the implementation of market entry and sales is key. During year one, eight State Team
Leaders and their respective marketing assistants will be hired to achieve year one penetration of 46
counties in conjunction with an equal number of Local Team Leaders. During year two,
ConnectLocal will have recruited a total of thirty-two State Team Leaders with thirty-two assistants
nationally to better execute scalability and national market penetration of over 200 counties. By the
end of year three, ConnectLocal will have forty State Team Leaders with forty assistants in place to
recognize vast market development and critical mass of 400 different counties.
Each Regional Director will coordinate and manage implementation strategy with State Team
leaders in their region and be responsible for the timely delivery of all marketing and sales goals
required by ConnectLocal. As an incentive, all sales executives within the organizational structure
will have a generous bonus and commission structure to motivate themselves, and the commission
based Local Team Leaders.
At the community level, we will utilize many different types of individuals and organizations
recruited by the State and Local Team Leaders to effectuate a grass-roots and hand-holding effort,
comprised of local major sponsors, community volunteers, local web designers, student interns,
local media and their sales people, and the Chamber of Commerce Internet Committee members.
ConnectLocal is designing sales programs, to recruit, motivate, and compensate the above parties.
During the development of each county, the State Team Leaders are responsible for the recruitment
of a commission based Local Team Leader who will be trained to execute, grow and build-out
their respective county while simultaneously recruiting content volunteers to interface within the
community and its various organizations.
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EXHIBIT F – AFFINITY PROGRAMS
ConnectLocal’s affinity programs will provide an array of products and services that both
consumers and businesses will appreciate from an incentive, value, and motivational standpoint.
Recognizing that many large telecommunications companies, airlines, hotel chains, rental car
companies, cataloguers, and cruise lines are targeting the same audience makes them potentially
ideal affinity partners. Combining their products within our affinity strategy offers a distinct
benefit to these partners because it creates advertising and promotional exposure for their
products in the form of giveaways, incentives, and contest offerings. Simultaneously, the
consumers, residents, and businesses become enthralled with the opportunity to capture the
aforementioned products as potential freebies based upon loyalty and consistent usage of
ConnectLocal. A promotional technology company such as SCA Promotions will be contracted
to build the promotional affinity programs and integrate them within the ConnectLocal
technology platform for efficient delivery and exposure to all users.
Initially, newly enrolled consumers will receive gift certificates for e-commerce, and an
application for a ConnectLocal credit card. The credit card is the venue to earn airline mileage
points, purchasing points, lower telecommunications rates, and the opportunity to participate in
contest giveaways.
To enhance the affinity strategy, a unique variable has been factored into the financial statements.
A rebate (projected at 5%) of ConnectLocal’s e-commerce revenue fees realized will be used for
further development of additional contests and giveaways which enhance user motivation and
public relations exposure. This is in addition to the planned budgets allocated to purchasing and
implementing annual affinity programs.
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EXHIBIT G – ARTICLES OF INTEREST
IBM, U.S. Chamber of Commerce Announce Results of New
Study on U.S. Small Business and Technology
U.S. Chamber of Commerce News Release - June 1, 1998
IBM-U.S. Chamber-U.S. Small Business Administration Launch Related Help Initiative to
Serve Small Business Tech Needs
NEW YORK, NY ... Small business owners appreciate the value of
technology, but when it comes to what technology to buy, where to
purchase it and whom to turn to for help and advice, most express
uncertainty and are reluctant to take risks. This is one of the findings of a
major new study of U.S. small business and technology unveiled today by
IBM and the U.S. Chamber of Commerce.
Commissioned by IBM and the U.S. Chamber, the survey of more than
1,000 companies was conducted by Yankelovich Partners, Inc., and is
one of the most comprehensive small business studies to date.
In addition to looking at perceptions and use of technology, the survey
examined the make-up of small business, its regional differences, its most
active industries and more.
In response to the survey findings, IBM, the U.S. Chamber and the United
States Small Business Administration also announced today that the three
organizations have joined to launch a comprehensive public - private
sector initiative to promote new opportunities for small business through
information technology. Called the “Small Office Solutions” (“SOS”)
Initiative, the program involves a sweeping five-part national assistance
effort to educate small businesses on the benefits of technology.
“It’s no coincidence that this year’s Small Business Week theme is ‘Small
Business: Success Through Technology,’” said SBA Administrator Aida
Alvarez.
“We live in an increasingly technology-driven economy and small
businesses must take advantage of technology to compete across the
country and around the globe.”
“Small business owners sent up an ‘SOS’ when they told us they are often
confused by technology,” said John W. Thompson, general manager, IBM
North America.
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“We want them to know we heard their message loud and clear. As a
result, IBM, the U.S. Chamber of Commerce and the Small Business
Administration are putting in place a number of ways for them to get
technology advice and direction from experts at no cost.”
U.S. Chamber of Commerce President and CEO Thomas J. Donohue
added, “America’s future prosperity depends on both smaller companies
and technology. We must link these two vital sectors in a strategic and
productive partnership. That’s what our joint initiative with SBA and IBM is
all about.”
Study Reveals Small Business’ Profile, Need For Technology
Education
Among the survey’s significant findings are:
•
As a community, small business knows technology, believes in it
and use it for at least some of their functional needs. A full 90%
reported using technology for accounting, finance, billing and more
than 50% use technology for 10 core business functions. Additionally,
96% report owning a PC and 83% report having a modem and a CDROM drive.
•
Of those surveyed, two thirds (67%) have Internet access and a
quarter (24%) have a Web site. Of those with Internet access, one
third (30%) use it to promote their services, one half (49%) use it to
find out about potential customers, 63% use it for answers to specific
questions and nearly all (85%) use it for e-mail. While only 25% of all
small businesses report being familiar with “e-commerce,” some are
already practicing it. Slightly more than one third (37%) of those on the
Net use it to place orders, 29% use it to receive orders and 9% use it
to pay suppliers. The majority of firms using the Internet -- 70% -- have
been on it for fewer than two years. Attitudes on the value of Web sites
are mixed; 46% believe they are worth the time and effort, 37% are
uncertain and 17% either did not answer or felt they were not worth the
time and effort.
•
Most small businesses are cautious about technology. Sixty-one
percent buy after technology is proven, 31% wait for price to come
down and 54% wait to hear of others’ experiences before buying.
Although 83% want to grow, only 47% consider themselves protechnology; 47% are neutral and 5% express concerns about
technology. Fifty-five percent consider technology to be “more of a
cost than an investment” and 60% express some degree of confusion
when purchasing technology.
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•
As a group, however, most small businesses also exercise a
short-term approach to buying technology and a large
number...46% buy it only as individual pieces and when needed.
When the time comes to deciding which technologies are best for their
businesses, most are in need of help, advice and guidance. Three out
of four say they would benefit from assistance with technology. In spite
of this, only 13% rely on consultants for purchasing advice and
information while 76% rely on friends for keeping up to date on
technology.
• Most spend relatively little on technology, averaging $7,000 per
year, or 8% of total expenditures. Specifically, minority owned firms
spend 12% of annual expenditures; female owned 9%; and male
owned 7%.
IBM-U.S. Chamber-SBA “Small Office Solutions” Help Initiative
The five-part “Small Office Solutions” program is designed specifically to
address the information needs of small businesses.
“This new help program will be delivered through our Business Information
Centers, the U.S. Chamber of Commerce, local chambers and IBM,” said
Alvarez. “It will prove to be a valuable resource for assisting small
business owners with their knowledge and use of leading-edge
information technology.”
A comprehensive national program, it offers the small business owner
several routes to reliable expert guidance on technology issues. Free to
small businesses, the initiative includes:
“Small Business ThinkCenters,” a pilot program that will result in fullystaffed technology help centers at selected local chambers of commerce,
a free “Small Business Toolkit” of useful information and resources, a new
interactive Web site in which small business owners will be able to assess
their technology needs, toll-free help lines, informational videos, and
more.
Under the “SOS” Initiative, IBM will provide technology-related services,
solutions, product offerings and pertinent information for three of the
existing SBA’s BICs, or Business Information Centers in Albany, NY, El
Paso, TX and Spokane, WA, which are cosponsored by the SBA and the
local chambers of commerce.
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In addition, the Chicagoland Chamber of Commerce will be the first nonBIC to participate. At these walk-in “Small Business ThinkCenters,” small
business owners will get hands-on experience with the Internet and the
latest computing equipment, find answers to technical questions and get
referrals to technology specialists, consultants and vendors. More
ThinkCenters are expected to be added as the program continues its
national roll out.
U.S. Small Business Profile
Small businesses with fewer than 100 employees were surveyed. Of the
1,010 firms surveyed, 70% have 1 - 4 employees and 59% have annual
revenues of less than $500,000. The majority (40%) are services
companies, with retail (18%) and construction (11%) making up the next
largest bloc. Most (72%) are not home based.
Regionally, the largest number are located in the South (34%) followed by
the West (23%) North Central (22%) and Northeast (21%). The North
Central has more older businesses and the highest annual revenues.
Although 71% of small business technology decision makers are male,
the South and West tend to have more female technology decision
makers, and the firms are more likely to be minority or female owned.
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Popular hangout for locals
By Robert La Franco
(Forbes September 20, 1999)
Barry Diller's CitySearch is now winning the race for local Web
traffic. Someday Wall Street may notice.
AMERICA ONLINE'S local guide service, Digital City, has been overtaken.
In July its 5 million visits from different Internet users was trumped-according to Web tracker Media Metrix--by media honcho Barry Diller. His
Ticketmaster Online-CitySearch and its newly purchased Sidewalk service
logged 8 million.
Keep in mind that this is still a contest for eyeballs, not profits, and that
Diller grabbed the lead by acquisitions, not internal growth. In July he paid
Microsoft $240 million in stock for Sidewalk, a big competitor that was
$200 million in the red. A month before he paid $90 million for the nation's
two leading on-line dating services. Personals ads, the core of Digital
City's appeal, now give CitySearch more than 400,000 active users who
pay as much as $25 per month for the hope of romance.
Now, with a total of 77 guides to Digital City's 57, CitySearch has emerged
as the industry leader. To buttress that lead, after Diller failed to acquire
Internet portal Lycos in the spring, CitySearch secured distribution deals
with Lycos, MSN and ExciteAtHome, giving it access to 9% more overall
traffic than AOL.
All this at a time when local portals are likely to see traffic growing faster
than national portals do. Forrester Research guesstimates that the local
Web market for advertising alone will grow 12-fold by 2003, to $1.7 billion.
Those dollars are poised to flow into local on-line services like CitySearch,
Digital City and--where the old barons are quick enough and smart
enough--offshoots of traditional local media.
What do such services offer? Reviews, directions, lists. Because they are
interactive, there's the opportunity to arrange a rendezvous, a tee time or
a dinner table. "Whether you want sex or mountain biking, you have to do
it locally," says CitySearch's 38-year-old chief executive, Charles Conn.
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A big reason for CitySearch's traffic, even before the inroad into the
personals, has been another mainstay--entertainment ticketing. Two years
after he bought CitySearch in 1996 for some $200 million, Diller
consolidated his grip on Ticketmaster and merged the guides with its online business, then just 4% of the ticketing giant's sales. Today
Ticketmaster's on-line ticketing, in the second quarter up nearly fourfold
from a year earlier, is a profitable business that will bring CitySearch $44
million in revenue this year.
The costly process of stitching together a network of local guides means
that CitySearch's losses, which came to $41 million in the first six months
this year, will continue. But Ticketmaster--which Diller maneuvered to
obtain from former chief executive Fredric Rosen and investor Paul Allen-is a powerhouse entertainment brand and CitySearch's ace in the hole.
"If it is my play toy, why wouldn't I play nicely with it? I'm a believer."
Scott Spear, a partner in Phoenix-based New Times, which operates 10
free weekly newspapers across the country, thinks an opinionated local
press has an advantage over the bland content of on-line guides. But he
sees the strength in Diller's patchwork. "I think making reservations on-line
is just goofy," says Spear. "But because of Ticketmaster, I think
CitySearch is the one that will make it."
For Diller, ticketing carries the load as the city guides invest in content and
transactional services. One objective is Web sites that local merchants
pay CitySearch to create and maintain. Take a restaurant site: The theory
goes that once a critical mass of eateries is reached, most restaurants, for
competitive reasons, will have no choice but to advertise. That enables
CitySearch to jack up its ad rates as viewership rises.
Sounds ambitious, but CitySearch has also been measured in its growth
strategy. Where it's run up against formidable local papers, like in
Washington, D.C. or Toronto, it has chosen not to declare war as
Microsoft did when it owned Sidewalk.
Instead it's formed strategic, if potentially less profitable, partnerships. In
other cities, like Raleigh-Durham, N.C. and Salt Lake City, it leads or is
competitive with established local media and Digital City.
Promising as CitySearch's platform now appears, the company's stock is
a dud with investors. From a December peak of $80, CitySearch shares
are languishing at a recent $30, 10% below their first-day closing price on
Dec. 9. AOL, at $101, is up 45% since then.
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Many fans of Internet stocks fail to see the synergy between ticketing and
city guides and fear that CitySearch is merely a play toy that Diller will
some day discard. (Ripostes Diller, "If it is my play toy, why wouldn't I play
nicely with it? I am a believer in this business.")
Skeptics point to his failed run at Lycos, a tidy bit of financial engineering
that would have combined the portal and CitySearch with USA Networks
(a cable and broadcast television property Diller half-owns). In that deal,
USA was to get a 62% controlling interest in the company and CitySearch
just 9%.
But if local on-line platforms are the wave of the future, CitySearch-however Diller structures it--will be valuable to someone. AOL, maybe.
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Think Locally
Top city guides help people act on clued-in content
By Lisa Hamm-Greenawalt
Internet World News (August 15, 1999)
A NUMBER OF SCRAPPY COMPETITORS are duking it out for survival
in the Internet city guides market, with software giant Microsoft falling to
the mat most recently in a stunning blow from which TicketMaster OnlineCitySearch emerged as the site to beat.
AOL's Digital City, TicketMaster Online-CitySearch, and Sidewalk which Microsoft traded to TicketMaster Online-CitySearch for stock last
month - are the three city guide sites with national presence that are
drawing the most visitors. Then there's a variety of smaller portals, local
newspapers, and government sites grappling for smaller pieces of the pie.
Which ones will endure depends largely upon their business models, says
Forrester Research analyst Lisa Allen.
"Clearly, what we've seen is that it is not easy for anyone to launch a local
site or network of local sites and make money," Allen says. "Microsoft
tried but failed to pull it off, and acknowledged as much in its deal with
TicketMaster Online-CitySearch."
Entering an arena already saturated with entertainment listings from local
newspapers, magazines, and alternative and neighborhood papers, online
city guides are fighting for both reader attention and a share of limited
advertising dollars, says Anya Sacharow, an analyst at Jupiter
Communications.
Recent reports that TicketMaster Online-CitySearch was acquiring
Sidewalk were just part of an inevitable consolidation, Sacharow says,
adding that large metropolitan markets will only support two or three major
Web sites, just as they support only two or three major newspapers.
With the acquisition, TicketMaster Online-CitySearch ditches its biggest
competitor and more than doubles the number of city sites it runs, to 77
from 33 worldwide. It also moves to the top of the category's totem pole in
terms of its unique visitors. In May, Microsoft Sidewalk was leading,
followed by Digital City and TicketMaster Online-CitySearch, according to
Internet research firm Media Metrix.
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The "Ticketmaster" facet is CitySearch's key to success. Since it acquired
the leading distributor of event tickets last year, CitySearch has been
focusing on making it easy for customers not only to find what they need,
but also to make a related transaction. For example, visitors can look up
local concert information and then buy tickets. In New York City,
TicketMaster Online-CitySearch recently began selling MetroCards, which
are used for paying mass transit fares. And that's just the beginning,
promises president and CEO Charles Conn. Soon users will also be able
to make restaurant reservations, have groceries delivered, renew their
driver's licenses, and even pay parking tickets at the site, he says.
The strategy seems to be working. TicketMaster Online-CitySearch began
offering tickets on its Denver site, and after one month reported that 11
percent of the site's visitors had clicked for tickets. Other transaction
features of the CitySearch sites include CityAuction, a person-to-person
auction site, and Match.com, a matchmaking service.
CitySearch's other priority since its inception in 1995 has been original
local content. It has about 800 sales and editorial employees in its local
markets, where it works in cooperation with established local media
companies. In five of its current 33 markets, local newspapers actually
operate the CitySearch site.
Conn describes his company's strategy as having two key and
interdependent parts. "It's not just great locally produced information," he
says, "but it's actually tools that help you get things done in the city."
TicketMaster Online-CitySearch has several ways to make money: online
ticket sales, building Web sites for small and midsize businesses, and
selling banners and sponsorships.
But the ticket-related side of the business is what matters most, says
Forrester's Allen. "The reason TicketMaster Online-CitySearch is in a
leading position," she says, "is because it has been able to crack that
tough nut of blending content with commerce."
Jupiter's Sacharow agrees. "Local content ventures need as many
revenue streams as possible to move forward toward any kind of
profitability," she says.
AOL's Digital City sites, which launched a few months after CitySearch,
now serve up the company's chatty brand of city guides in 60 markets.
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"Digital City has always tried to view ourselves as a cross between the
best of what a city newspaper would offer, what a city magazine [would
offer], and then we add in a third element, this interactive element," which
makes it resemble a local talk-radio station, says Jim Riesenbach, vice
president of programming and marketing.
On AOL's welcome screen, subscribers in Digital City's markets find a
prompt and a promotion leading them to the local site. That's a major
advantage, given AOL's huge client base, says Jill Frankel, an analyst for
technology research firm IDC. MapQuest, CompuServe, and Netscape's
Netcenter also link directly to Digital City.
The sites serve up local news, lists of community resources,
entertainment, and commerce information through six regional hubs, each
one responsible for programming about 10 markets. Freelancers in those
cities provide local expertise, and AOL has content partnerships with
major newspapers and alternative weeklies, as well as national providers
at the local level, including The Weather Channel and AllApartments.
Long-term, "our mission is to be everything local. And that's basically
serving everyone in the United States and beyond with local content that's
relevant to them," Riesenbach says. He says interactivity is a priority,
because "when people start to put a personal stake into that site, that
creates the stickiness that will bring them back."
Riesenbach says Digital City became profitable this year, though he
declines to release numbers and says much of the money is being
reinvested in the sites.
Microsoft opened Sidewalk in April 1997. It aspired to be a national news
network competing with standard media outlets, and it spent millions on
advertising. But it ended up as a handful of money-losing entertainment
guides.
"Basically, the site is designed with one mission in mind: to help
consumers make great, informed decisions about what to do or what to
buy in their area," says Gayle Troberman, a spokeswoman. Sidewalk
recently increased its depth of coverage and added buyer's guides to help
consumers make decisions about a wide range of purchases and then
find e-tailers and retailers that sell the items.
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At the time of the deal with Ticketmaster Online-CitySearch, Sidewalk had
full editorial teams in 10 of its 73 markets, in addition to a stable of
freelancers. It forged agreements with content partners, such as Zagat for
restaurant reviews. Sidewalk's revenue came from advertising and ecommerce, Troberman says. It's passing a vast database on to
Ticketmaster Online-CitySearch, but the buying guides and other ecommerce support services will remain with Microsoft.
Several search engines and portals have city sites that function essentially
as lists that send readers elsewhere.
Lycos, like other portals, offers a personalized start page called "My
Lycos" with local news, sports, links to daily newspapers, lottery results,
weather, and a local directory, based on ZIP code. Lycos recently
launched its "Open Directory," built entirely from users' feedback.
"Hey, the Web's a huge place," says Chris Bondhus, product manager for
personalized start pages for the company. "And our users know the sites
they like." He believes that allowing people to structure the interface of
their start page and contribute to the site's directory will keep them coming
back.
"No other personalization service," he says, "offers the level of
customization that's found in My Lycos," which makes money through
advertising and e-commerce. "They invest the time in this page. They
personalize it to their liking. And they want to come back."
Road Runner, an online service delivered over the cable TV
infrastructure, offers its customers a welcome screen with a combination
of national and local information as the user's gateway to the Internet.
Cable affiliates of Road Runner - a joint venture of Time Warner Inc.,
MediaOne Group, Microsoft, Compaq Computer, and Advance/Newhouse
- generally control local programming, which primarily consists of sending
surfers elsewhere to the best resources for their needs.
"The Road Runner customer is always just one click away from
connection. No dialing up," says Meredith Flynn-Ripley, vice president of
product management at the company.
Excite@Home's city sites are primarily aimed at travelers. They are very
simple, providing an overview of the city and lists of resources that send
visitors to other sites.
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As the Internet population swells, city guide sites will surely draw more
traffic - and open new revenue opportunities.
The winners will show flexibility in how they make money. At least that's
the message from the new leader - TicketMaster Online-CitySearch says
it's already pulling 60 percent of its revenue from ticket sales, while
advertising accounts for less than 10 percent.
Oh, and one other thing: The winners will give readers content they can't
live without.
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Caring for Customers
Real-time text chat and telephony provide personalized customer
support and turn queries into sales leads
By Mary Wagner (Internet World Magazine, September 1, 1999)
Not long ago, some thought e-commerce would take people out of the
sales transaction - at least, at the receiving end of the order. Web-enabled
automation just might, it seemed, click customer service reps right out of
the picture. But today, some smart Internet sellers are putting people back
in the equation as competition increases the need to improve customer
service. New Web-based technologies and service offerings are allowing
online companies to add in what's always been the core of customer
service: the human touch.
Why all the effort? Industry research shows that perhaps only 30 percent
of shopping transactions started online are completed. Even fewer people
who visit a site even try to make a purchase. To thrive, Internet
companies that spent millions on developing content and marketing new
Web sites must now invest in turning browsers into buyers. "Excelling in
customer service is going to be even more important now, as there are
more customers shopping online who are less comfortable with making an
online purchase," says Melissa Shore, an analyst at Jupiter
Communications.
The new software, servers,
and outsourcing options also
are expanding the traditional
definition
of
customer
service, blurring the lines
between customer support,
sales, and even market
research.
Web-enabled
customer support is reducing
selling costs for some Web
vendors, for example, by
compressing
many
exchanges
along
the
shopping experience into a single, human-assisted transaction. And it's
boosting sales for other vendors by linking online customers with live
vendor reps who can cross-sell and upsell.
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Many Web sites offer shoppers automated help, such as self-guides and
e-mail, but an April survey by Jupiter found that many online shoppers
want some degree of human contact - especially when they're buying a
complex product or service. Some of the newest innovations in Webbased customer support give customers the closest thing to "face time" in
solutions that cluster around real-time interaction.
One trend is the use of Click Help buttons. These Web site icons, being
offered by several customer support providers, let customers click on
them to relay a request for assistance back to the company's service
center. There, a vendor service rep contacts the customer instantly to
initiate a text chat. The customer doesn't have to leave the site, as the
chat takes place in a freestanding window on the screen.
Robert LoCascio, president and CEO of LivePerson, a New York-based
supplier of real-time customer support solutions, says such live Internet
chat beats e-mail when it comes to approximating an in-store experience
for online shoppers. "Customers want to know when they're going to get a
response. Imagine how it would be if you walked into a store and had
questions, but there was no one there to respond. You'd walk out of
there," he says.
LivePerson's technology keeps Web shoppers from "walking out" with a
Click Help icon that lets them chat online with service reps about what
they're both seeing as they browse the site together. The cost? There's an
initial $500 setup charge and an additional charge of $250 per month for
each rep at the vendor's service center who accesses LivePerson's
server. So far, some 80 online merchants and service providers have
integrated LivePerson's technology into their Web sites. Three new
customers - Tickets.com, PC Flowers&Gifts.com, and NextCard - signed
up in July.
With labor costs estimated at about 70 percent of the cost of customer
service, staffing up to cover online queries could add up quickly,
especially since customer-contact centers already must handle phone
calls and e-mail. "The nature of communication at call centers has
changed dramatically with the Web," says Jeff Snyder, a consultant with
Dataquest. "If the e-commerce application has been built properly, it's
absolutely increasing volume."
New technology applications are making agents more effective with the
help of preformatted responses. "You can handle four times as much
volume with the same number of people, and you're reducing the number
of incoming 800 calls," says LoCascio.
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That's how PeopleSupport.com, a Los Angeles-based provider of
customer support and service, was able to cut selling costs for its client,
MGM Studios. "Before using our service, 80 percent of their orders came
through their 800 call center. People would see the Web site and then call
the 800 number," says Lance Rosenzweig, PeopleSupport.com's
president. "With our Live Help Now link through the Web site, they were
able to reduce the phone calls to zero."
So far, only a relative handful of Web sites offer live help buttons.
According to a July survey by Net Effect Systems, North Hollywood, Calif.,
another Internet customer support provider, only 3 percent of the 25
leading Internet sellers surveyed had such icons on their Web sites. But
Julie Schoenfeld, CEO of Net Effect Systems, says that's changing fast.
"We expect most sites to provide a live help button within six months. It'll
become a survival mechanism in building volume, market share, and
customer loyalty," she says.
Net Effect Systems, which counts Yahoo's GeoCities and SBC Internet
Services among its customers, enables commerce sites to create a
service delivery system that answers shoppers in real time and offers
suggestions to them. Pricing for a full implementation starts at $50,000.
Firdaus Bhathena, co-founder and vice president of products at
Burlington, Mass.-based WebLine Communications, a provider of
interactive e-commerce and customer service solutions, agrees that
effective customer service is not just good back-office management.
"Over time, in most industries the long-term differentiator is the quality of
care you provide. So, far from being a cost center, customer service is a
strategic weapon for business," he says.
On that rationale, WebLine offers more than integrated self-guides, email, and real-time text chat. WebLine's server lets vendor service reps
share information with customers on the Web while simultaneously talking
with them on the telephone.
This helped WebLine customer TeleSales Inc., a firm that creates custom
sales and marketing strategies for its clients, to turn more inbound queries
into qualified leads for GTE Internetworking. When Web surfers were
linked to specially trained vendor reps over the phone via a Click Help
callback icon, the number of top-level leads generated zoomed to 55
percent - more than the number of qualified leads generated from phone
calls and e-mail together.
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On the horizon, real-time customer service applications may integrate
telephone, computer, and even television communications with the help of
voice-over-IP (VoIP). This emerging technology, being developed by
Lucent Technology and Cisco, among others, sends voice data over the
Internet. VoIP has technology requirements that will likely limit its initial
usefulness to business-to-business applications, such as tech support.
For now, Internet sellers will want to carefully weigh cost vs. return on
investment in evaluating the new Web-based customer service options.
Analysts say that not every customer needs or justifies the use of all the
bells and whistles available. "There are all sorts of new technologies like
voice recognition, but we think companies shouldn't just jump to the
newest one," says Jupiter's Shore. "Customer service can be a very
expensive proposition. Ask the right questions first."
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