Sample Business Plan ActiveIndexing

CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM ActiveIndexing.com Business Plan Version 3.3 April 2000 CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM Table of Contents ActiveIndexing.com Executive Overview...................................................................................................1 Solutions To Today’s Frustrations..........................................................................................................1 Continued Market Growth and Profitability............................................................................................1 Leadership to Succeed............................................................................................................................2 Second Round – Series B............................................................................................................................3 ActiveIndexing.com Stock Record..........................................................................................................3 Second Round -Series B Common Shares ..........................................................................................3 Introduction ..................................................................................................................................................4 The Current Internet Search Fiasco ........................................................................................................4 How Existing Search Engines Fail Users.................................................................................................4 The Market ....................................................................................................................................................6 A Flawed “Top-Down” Design.................................................................................................................6 Search Engine Profitability and Capitalization ......................................................................................7 Search Engines Sold or Valued By Investment.......................................................................................7 Potential Revenue...................................................................................................................................7 Disruptive Innovation...............................................................................................................................8 Market Position........................................................................................................................................8 First to Market..........................................................................................................................................8 The ActiveIndexing.com Solution...............................................................................................................9 A Bottom-Up Approach............................................................................................................................9 ActiveIndexing.com Push-IndexingTM.................................................................................................10 Inherent Design Advantages..................................................................................................................10 Push-Indexing TM in Action ...................................................................................................................10 “Agents” Index Sites..............................................................................................................................11 Host Agent.............................................................................................................................................11 Site Agent..............................................................................................................................................12 “Index Cards” Categorize Sites..............................................................................................................12 The Search Interface ...............................................................................................................................13 Stage 1 – “Conceptual Refining”............................................................................................................13 Stage 2 – “Graphical Refining”...............................................................................................................13 Stage 3 – “Common Sense Refining”....................................................................................................13 System Architecture...............................................................................................................................14 CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM Server Architecture ...............................................................................................................................15 Competition................................................................................................................................................16 Competitive Advantages ........................................................................................................................16 Competitive Response ...........................................................................................................................17 Technology Partnerships ..........................................................................................................................18 Cycorp -A “Common Sense” Partner .................................................................................................18 Patents Pending.........................................................................................................................................18 Type of Patent Filed ...............................................................................................................................19 Project Status and Tasks..........................................................................................................................19 Current Accomplishments .....................................................................................................................19 Development Phase ...............................................................................................................................19 Populating the ActiveIndexing.com “Master Index”...........................................................................20 Site Hosting.............................................................................................................................................20 Building a Development Team...............................................................................................................20 Business Model..........................................................................................................................................21 Business to Business Offering..............................................................................................................21 Revenue Opportunities..........................................................................................................................21 Management Team....................................................................................................................................22 Additional Team Members.....................................................................................................................23 Professional Team................................................................................................................................23 Marketing....................................................................................................................................................24 Branding and Education........................................................................................................................24 Attracting Participating Web Sites and Hosts .....................................................................................24 Web Hosts (Internet Service Providers) ................................................................................................24 Public Portals ........................................................................................................................................26 Web Site Owners..................................................................................................................................28 Corporate Portals..................................................................................................................................28 Meta-Search Engines ............................................................................................................................28 Search Engine Users............................................................................................................................29 Achieving Widespread Adoption...........................................................................................................29 Freely Distribute Indexing Agents..........................................................................................................29 Dispel Security Concerns.......................................................................................................................30 Demonstrate Adoption Benefits.............................................................................................................30 Entice Prominent Industry Players.........................................................................................................30 Announce and “Brand” our Push-IndexingTM Solution.........................................................................31 Advertise Directly to Web Hosts, Site Administrators, and Web Users................................................31 Attract Top Web Hosts with One-on-One Sales ...................................................................................31 CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM Financial Projections.................................................................................................................................32 Revenue Assumptions:..........................................................................................................................33 Other Revenue Sources.........................................................................................................................33 Exit Strategy ...............................................................................................................................................37 Exhibit A – The ActiveIndexing.com Index Card.....................................................................................38 Creating Index Cards ..............................................................................................................................38 Initial Information Collected in the Index Card ....................................................................................39 Exhibit B – Industry News..........................................................................................................................40 CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -1 -ActiveIndexing.com Executive Overview ActiveIndexing.com has developed patent-pending technology that will radically change the way Internet sites are indexed and provide search results that are far more relevant and targeted than those obtained today. By putting the indexing control in the hands of site owners – Webmasters and Web hosts – each site owner can use our Push-Indexing™ technology to automatically index their Web site and transmit this information to our master index daily. Solutions To Today’s Frustrations Internet search engines fail users by providing search results that contain duplicate site listings or links to dead information. It is not uncommon for Web site owners to wait several months to register their sites with the top search engines. Moreover, the two prevalent methods of Internet searching fail to produce timely, accurate or thorough results. The most common method uses Web spiders (programs that visit Web sites and determine keyword lists based on site content) that have limited bandwidth due to their centralized nature, and stretch the resources of the Web servers themselves. Conversely, directory services (people who volunteer to index sites) manually index sites based on their own best guess or unqualified judgment. Neither method effectively indexes the two million Web pages being added to the Internet each day. ActiveIndexing.com flips the spider/directory paradigm on its head and approaches a cluttered market in a radically new manner. Our technology makes use of agents, which can either be downloaded by Web hosts or individual Web site administrators. Once downloaded, these agents automatically index each site and send the index data to our central repository. This means that for any site that every word on every page can be indexed every day. Continued Market Growth and Profitability Founded in August 1999, ActiveIndexing.com is a Seattle-based Internet company in a market that is experiencing explosive growth and delivering impressive financial results: top-line revenue growth and bottom-line profitability. Consider two recent investments: Ask Jeeves, Inc. acquired Direct Hit (which ranks sites based on “click-throughs”) for $507 million. Lycos invested $32 million in Fast.com for a 5% interest in the company (December 1999). As individuals perform more and more Internet searches, the top engines combined are processing nearly 100 million queries daily. Even a product being beta tested, Google, receives 3.5 million search requests daily. Processing 14 billion queries annually generates revenue of $56 million for Inktomi. Bottom line: every user search translates into revenue, and both queries and revenue are growing at 100% annually. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -2 -Leadership to Succeed An impressive group of industry professionals forms the foundation of ActiveIndexing.com. Combining the notable experience of developing leading-edge Internet applications of the engineering and quality assurance teams with the background of proven business leaders, the Company’s senior management is well poised to design, build, and successfully deploy an award-winning Internet service. With a staff over 40 (and growing daily), the Company is committed to becoming the brand leader in its market space. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -3 -Second Round – Series B ActiveIndexing.com Stock Record Common Shares – authorized 50,000,000 Founders 15,000,000 Series A Common Shares – outside investors 3,890,690 Common Shares --outstanding 18,865,690 Incentive Stock Options Plan 4,000,000 Total of Outstanding & options 22,865,690 Second Round -Series B Common Shares Pre-money valuation $57,226,725 Second Round $ 5,000,000 Per Share Price $ 2.50 Minimum Investment $ 100,000 CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -4 -Introduction The Current Internet Search Fiasco Historically, Internet search engines have failed both users looking for information and those wanting to promote their Web sites. They have strayed from their initial purpose – searching, and instead, they now disguise themselves as information “portals” to mask their search inadequacies. Although the portal “makeover” is attractive, the façade does nothing to improve the quality of the search experience. “Manipulated by the wealthy and technologically adept, search engines may be presenting an increasingly distorted and limited view of the Web.” (Source: IEEE Magazine (1/2000): “Defining the Web: The Politics of Search Engines”) How Existing Search Engines Fail Users Search results lack relevance (e.g., non-specific user queries on inefficient search engine databases yield excessive or outdated data for users to manually sort through). Search results often contain duplicate site listings and links to “dead” (i.e., unavailable) information. Search results often contain unwanted adult content. Web site owners experience exceptional delays when “registering” their sites. It can take up to 2+ months to be “found” by prominent search engines or listed in recognized directories. Keywords are sold (e.g., the top 10 search results on the word “apartment” link to the highest bidder) which destroys the original “level playing field” ideal of the Internet. Existing search engines have only indexed approximately 25% of the URLs (Web site addresses) on the Internet. Of that 25%, less than 5% of the content is indexed (i.e., sites with relevant, yet inconspicuously placed material, may not display in search results). The Web is growing at a rate too fast for current search engine indexing technology to effectively index. As a result, only approximately 25% of the Internet is being indexed, and new or revised content is not accounted for in a timely manner. The current search engine indexing techniques (e.g., spiders) consume scarce Web server bandwidth and CPU resources of the hosting sites. These disappointments all stem from poorly conceived search engine technology. Either a “Web spider” program visits known Web sites and creates “best guess” keyword lists from site content, or humans create directories of known sites related to a subject. Both approaches inherently skew search results and misrepresent the true scope of the information available on the Internet. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -5 -The very technology behind current spider or human generated indexes/directories severely limits their timeliness, accuracy, or coverage. And as the Web continues to grow exponentially, these limitations will become even more apparent. “The problem with Internet search engines is a conceptual problem not a technical one.” CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -6 -The Market The current search engine market is cluttered with players who all approach the task in the same inefficient “top-down” manner. Since the Internet has already grown beyond the reach of current technology, the market is ripe for a new and effective search standard. A Flawed “Top-Down” Design “Imagine a single spider trying to ‘service’ a web that’s growing exponentially faster than it can move.” Top Down Indexing by Web Spiders & Manually Created Directories by Humans Current Search Engines 1.5 Billion Web Pages and growing CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -7 -Search Engine Profitability and Capitalization Within the Internet, few areas have proven to be profitable --Search engine technology companies are one of these areas. For example, as of Q1 2000 Inktomi (www.inktomi.com) is a profitable company. Inktomi’s Portal Service Business contributed $14.0 million in revenue in Q1 2000, a 166 percent increase over the same period in the prior year and a 30 percent increase over the previous quarter. In addition, the market capitalization of Inktomi and the other search engines suggests the potential market for a company that can accurately and thoroughly index the Internet. Company Symbol Market Capitalization (As of 4/11/00) Inktomi INKT $19,660,000,000 Excite@Home merged with @Home $11,420,000,000 Lycos LCOS $6,580,000,000 Look Smart LOOK $3,210,000,000 Fast Norwegian market $2,771,000,000 Alta Vista merged with CMGI $2,550,000,000 ASK Jeeves ASKJ $1,970,000,000 About.com BOUT $930,000,000 Source: WallStreet.com (www.wallstreet.com) Search Engines Sold or Valued By Investment Currently several of the search engine technology companies have reached a critical point in their growth and technology development requiring them look to acquire new up and coming technologies to sustain and increase their market share. Recent acquisitions and investments include: Direct Hit-Ask Jeeves, Inc. purchased Direct Hit for $507 million. Direct Hit technology uses “click-through” popularity to rank Web sites. Fast (www.fast.no) Lycos invested $32 million in Fast.com for a 5% interest of the company at the time of investment (December 17 1999). Potential Revenue The market capitalization of the Internet search engines suggest that searching is driving the Internet’s explosive growth and commerce. Consider the current search volume for several existing search engines: Excite processes 20 million queries each day, and Inktomi processes 38 million each day. Even a startup engine like Google (while still in Beta testing) receives 3.5 million search requests daily. Annually, Inktomi processes 14 billion queries and generates about $56 million in search revenue. Remember, every user search translates into revenue, and both queries and revenue are growing at 100% annually. In three (3) years it is estimated that, e-commerce will comprise 10% of the U.S. economy, and obviously, you have to be able to find something before you can buy it online. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -8 -With such prodigious growth, it seems clear that a search engine that can accurately and thoroughly index this expansive network is a necessity. ActiveIndexing.com is building the search engine that will do just that and capture a significant slice of this burgeoning market. In addition, the technology offers an innovation and accurate method to index other data in the industry aside from the Internet. Disruptive Innovation For the past eight years, spider and crawler engines have built all of the existing Internet search indexes. Unfortunately, as the Internet grows, their efforts yield increasingly irrelevant and inadequate information. ActiveIndexing.com’s Push-IndexingTM technology is the “disruptive innovation” that radically alters conventional searches and indexing approaches. ActiveIndexing.com promises to provide a relevant and reliable way to index and use this ever-expanding Web of information, which is now an integral part or our lives. Market Position ActiveIndexing.com will position itself as “fair and open Internet Index with free indexing for all sites.” Since other search engines sell keywords and priority listings to the highest bidders, and hand-filter their directories to influence search results, a tremendous market opportunity exists for a thorough and impartial Internet index. First to Market ActiveIndexing.com will be the first to market with this type of indexing solution in order to: Preempt other new or existing search engines from encroaching on our patent pending technology and market space. Attract Web Hosts and Site Owners to populate our “Master Index”. Attract partners and financing to help fund the commercial operation. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -9 -The ActiveIndexing.com Solution A Bottom-Up Approach ActiveIndexing.com solves the current search inadequacies by flipping the “top-down” crawler/spider paradigm on its head. Instead of relying on a single spider/crawler program to seek site information, ActiveIndexing.com’s “Push-Indexing TM” technology uses “Distributed Agents” that automatically index Web sites, “pushing” this information to the ActiveIndexing.com “Master Index”, and make it immediately available to searchers. Consequently, Web Hosts and Site Administrators have relevant, timely, and accurate Index entries for their site(s), and searchers receive relevant, timely, and accurate search results. ActiveIndexing.com’s “Push-Indexing TM” solution can effectively index the Web because it approaches the task from the bottom up, which is exactly how the Web was conceived. The “Push-Indexing TM” solution relies on widely distributed “Agents” to index Web sites. Host and Site Administrators can also use “Index Cards” to augment the Agent-created index and increase the amount of contextual information about their sites. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -10 -ActiveIndexing.com Push-IndexingTM Inherent Design Advantages Can index up to 100% of the participating Internet with widely distributed Agent programs. Indexes every relevant word on every page (not just META info. and keywords). Automatically scales to keep pace with growth of Internet. Distributed Agents re-index updated/changed pages everyday. Allows Web Hosts to promote their sites with specific categorical information. Push-Indexing TM in Action Web Hosts or Site Administrators install our free software Agent on their Web server. All software Agents automatically “scan” associated Web sites and thoroughly index each page. NOTE: Web Hosts and Site Administrators can create “Index Cards” to complement the auto-generated Agent index. Index Cards are simple forms that they can fill-out to explicitly describe their site’s Categorical, Demographic, and Geographic information. Push-Indexing TM Bottom-Up Indexing Host Agent Site Agent XML Index Card 1.5 Billion Web Pages and growing ActiveIndexing.com CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -11 -Agent software automatically submits the indexed site information to the ActiveIndexing.com “Master Index” on a user-defined schedule. The ActiveIndexing.com “Master Index” instantly (within 24 hours) reflects newly indexed and updated sites (compare this to the 2+ month wait for traditional “crawler” type search engines). “The ideal Web would extend the possibilities for association, facilitate access to obscure information sources, and give voice to many of the typically unheard.” (Source: IEEE Magazine (1/2000): “Defining the Web: The Politics of Search Engines”) “Agents” Index Sites Agents are the “work-horses” of the ActiveIndexing.com solution. They reside on many Web servers, gather information about the sites they represent, and periodically report the information back to the ActiveIndexing.com “Master Index”. It’s easy to see how this distributed approach could accommodate the Internet’s exponential growth and provide a timely and accurate representation of the Web’s content. The ActiveIndexing.com incorporates three components to index sites: the “Host Agent”, the “Site Agent”, and the “Index Cards”. Host Agent The Host Agent is a small free Java software program that Web Hosts1 download from the ActiveIndexing.com Web site. When installing, Web Hosts define what site(s) the Host Agent should index and what time of day it should run. The Host Agent “scans” the selected Web sites for new or modified content (HTML and non-HTML files) on the user-defined schedule. The Host Agent automatically indexes new or changed content and “pushes” it to ActiveIndexing.com’s “Master Index”. The “Master Index” then reflects these updates immediately and makes the new information available to searchers. Note: Host Agents will also index the “Index Cards” if they are present. Index Cards are simple forms that Site Owners and Web Hosts can complete and edit to provide categorical context (i.e., Bio-Technology research firm in Seattle, WA) for their Agent-generated site index. 1 A commercial Web Host may host a number of Web sites. Verio is an example of a Web Host. A Web site owner may be a Web Host if they their own Web Server equipment. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -12 -Site Agent The Site Agent is a small CGI (Common Gateway Interface) script that Web site Administrators download from the ActiveIndexing.com Web site. Web Administrators notify ActiveIndexing.com what time of day they want their site(s) updated. ActiveIndexing.com “polls” the Site Agent and causes it to automatically “scan” the selected Web site(s) for new or modified content (HTML and non-HTML files) on the user-defined schedule. ActiveIndexing.com then accepts the updated index from the site. The ActiveIndexing.com “Master Index” then reflects these updates immediately and makes the new information available to searchers. Note: If a Site Agent detects an Index Card, it will index the Index Card contents as well. “Index Cards” Categorize Sites As already mentioned, an Index Card is a short form that Web Hosts and Web site owners can fill-out which contains information about their site, its content, and intended market audience. The information they provide explicitly categorizes their site in the ActiveIndexing.com “Master Index”, and improves the relevance of search results. For instance, a toy site owner might create an Index Card that categorizes their site as a commercial business, located in Maine, e-commerce enabled, appropriate for all ages, and so on. Site owners can edit their Index Card(s) any time, which will automatically update their listing in the “Master Index” the next time the Site or Host Agent runs. Their new site information will then appear when users perform a categorical search. Compare this process to the two or more months traditional engines might require to find and re-categorize updated sites. Index Cards offer site owners a convenient way to provide relevant information about their site. In addition, implementing an Index Card is a quick and easy process for site owners (as compared with the complicated and redundant processes associated with submitting a site to current search engines). To implement, site owners simply: Create Index Cards by filling-out a simple form at the ActiveIndexing.com Web site. ActiveIndexing.com automatically e-mails completed Index Cards to the site owners. The site owners copy the Index Card into their Web directory. When a Host/Site Agent discovers the Index Card, it “scans” the form, providing “contextual” information about the site, such as: DBA for the site or corporation Product and Service Names CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -13 -Categories Target Markets Languages Note: Web Hosts and Site Owners can create as many Index Cards as they wish. Each Index Card can represent a single Web page or an entire Web directory (many Web pages). The Search Interface The search interface is the critical piece of the ActiveIndexing.com search solution that will enable users to effectively search our extensive “Master Index”. We plan to implement the interface in three distinct stages, each of which will increase functionality and convenience for searchers. Stage 1 – “Conceptual Refining” “Conceptual Refining” is the fundamental concept that all ActiveIndexing.com search interfaces will use. The basic idea is to use prompts, categories, and keywords to systematically “guide” searchers to the information they need. Since searchers typically do not understand how to enter intelligent “Boolean” search strings, we will generate them automatically based on the keywords and categories users select. Stage 2 – “Graphical Refining” This stage simply places a graphical front-end on the Stage 1 concept to make the search procedure easier for users. They will be able to enter keywords, select categories, and sort the search results based on various criteria (e.g., date, popularity) to progressively refine their search. A unique feature of this interface will be the ability to refine searches at any point in the process. Unlike other search interfaces, you will not have to start over if the search results do not display what you need; you can simply search within those results to better focus your search. Stage 3 – “Common Sense Refining” Although the above stages do not depend on “Common Sense Refining,” we plan to implement it because it will greatly enhance the user’s search experience. The idea is to let users enter “naturallangguage queries (e.g., What pizza joint is within 2 miles of zip code 98001?) and return intelligent responses that will help them effectively refine their search. Once our “common-sense” engine categorizes the Web sites in our ”Master Index”, it will be able to guide searchers to the information they want. For instance, it might help refine the above pizza query with the following: “Are you looking for a particular neighborhood in zip code 98001?” “Do you want take-out, dine-in, or both?” CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -14 -System Architecture ActiveIndexing.com has designed a fast and simple, fault-tolerant system architecture from off-the-shelf hardware components to satisfy the indexing needs and exponential growth of the Internet. (See figure on following page) Most existing search engines employ monolithic database structures to store and update their index as well as retrieve user queries. As the size of the Internet continues to grow and the number of queries increases, the limitations of this approach will become even more apparent. ActiveIndexing.com, on the other hand, has separated the update process and the query/answer process so that one will not interfere with the other. The “Master Index” is a central database distributed over a number of computers that is continually updated by the widely distributed Host/Site Agent programs mentioned earlier. On daily schedule, Host/Site Agents automatically index their particular Web sites and deliver the updates to the ActiveIndexing.com “Master Index”. The “Master Index” is segmented and distributed among a number of read-only “Index Servers” which service queries. Each “Index Server” manages only a small portion of the total database (e.g., Index Server “A” would store and retrieve only those index entries beginning with “A”). A query containing the words “White Dog” would be divided between Index Server “W” and Index Server “D”. The separate Index Servers would then merge and deliver the appropriate responses (i.e., those index entries that match “White Dog”) to the searcher. NOTE: Since you can divide the alphabet in unlimited ways (e.g., AA-AN, AM-AZ, BA-BN, BMBZZ) ActiveIndexing.com can scale “Index Servers” to meet the “Master Index” and the query growth. ActiveIndexing.com’s “Master Index" utilizes “read-only index segments” which allows for the reading of text and serving the result without the complication of a “write” response. This configuration has four advantages: Very low-level hardware Avoids bottlenecks Very fast response time Scales easily with query demands CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -15 -Server Architecture Host Agent Listener Host Agent Listener Site Agent Poller Site Agent Poller Site Agent Poller Host Agent Listener Persistent Queue Server Master Index Dispatcher Master Index Dispatcher Master Index Segment Master Index Segment Master Index Segment Master Index Segment Master Index Segment Master Index Segment Index Segment Index Segment Index Segment Index Segment Index Segment Index Segment Index Segment Index Segment Index Segment Index Segment Index Segment Index Segment Query Dispatcher Query Dispatcher Web Server Web Server Web Server Web Server Web Server Web Server Web Server Host Agent Site Agent Site Agent Site Agent Host Agent Host Agent Site Agent Site Agent Host Agent Host Agent CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -16 -Competition ActiveIndexing.com will compete for Portal licensing agreements with the search engines list below. Of these competitors, Inktomi’s and Open Directory’s business model most closely matches ActiveIndexing.com’s. Both charge per-search fees to public portals, and neither act as their own portal site or compete for advertising revenue. Both Inktomi’s and Open Directory’s search engine divisions are profitable. All the other competitors are both portals and search engines. Competitor URL Customer ABOUT http://www.about.com/(Previously The Mining Company) Ask Jeeves http://www.askjeeves.com/(Purchased Direct Hit) Ask AltaVista Direct Hit http://www.directhit.com HotBot Lycos MSN Excite http://www.excite.com (Purchased WebCrawler) AOL NetFind Netscape Search Infoseek http://www.infoseek.com (Owned by Go) Search.com Go Inktomi http://www.inktomi.com (Provides backroom search service for 80 portals) HotBot MSN Search GoTo Snap Lycos Yahoo Open Directory http://dmoz.org (Owned by Netscape /AOL) Lycos AltaVista HotBot Netscape Competitive Advantages ActiveIndexing.com’s broadly conceived patent pending technology provides extensive competitive advantages. The solution developed by ActiveIndexing.com will: CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -17 -Level the Internet “playing field” by making it easy for all Web sites to get indexed immediately and updated frequently. Other engines are known for selling key words, effectively relegating the “little guys” to the bottom of search results. Guarantee participating Web sites will be listed in our “Master Index” immediately. Other search engines can make no guarantee, and most have extended wait times to list new sites. Update the entire “Master Index” within 24 hours, accounting for new and modified information as it becomes available (typical spider and directory listing wait times can exceed 2+ months). Return relevant search results. ActiveIndexing.com lets searchers “narrow” their results with relevant conceptual, categorical, demographical, and geographical variables. Other search engines make you start your search all over. Not return links to “dead” (unavailable) sites. Intelligent Agent software automatically recognizes unavailable sites and eliminates them from the ActiveIndexing.com “Master Index” (Search Engine indexes today have approximately 5% dead links). Eliminate all duplicate links (i.e., multiple links to the same site). Other engines index the same site repeatedly, which generates redundant search results for users (i.e., Search Results 1 thru 10 link to the same place). Not display links to unwanted adult content. Searchers must “opt-in” for search results to contain links to adult content. Index up to 100% of the participating Internet. Index every relevant word on a page including Post Script and PDF, not just HTML or META information. Crawlers and spiders only “scan” META tags and first paragraphs, ignoring other pertinent information throughout a page. Collect up to 200 HTML and off-page searchable variables (other search engines have 10 to 20 variables at most). Utilize an inexpensive, fast, and fault tolerant system architecture using off-the-shelf low-level hardware. Offer a simple and fault-tolerant system architecture that can scale as fast as the Internet grows. Current Search Engines are not able to scale at a speed which keeps pace with the growth of the Internet. Create a site mapping for all of its indexes. Competitive Response ActiveIndexing.com believes that the first company to market with a functional Push-Indexing™ search solution will gain the upper hand. However, we still expect established industry competitors to respond to our entry in several predictable ways: CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -18 -Attempt to buy or license our patent-pending technology. Use our “Master Index” as their back-room search engine. Attempt to duplicate our patent-pending technology. The first two competitive responses will further validate ActiveIndexing.com’s approach and provide additional revenue opportunities. Technology Partnerships Cycorp -A “Common Sense” Partner We have signed a letter of intent with Cycorp, Inc. who will develop this natural-language front-end to our “Master Index”. Based in Austin, Texas, Cycorp (www.cyc.com) is “the leading supplier of formalized common sense” and our first customer. Artificial Intelligence pioneer Doug Lenat and other Cycorp Ph.D.s’ have spent the past 17 years “teaching” their Cyc® software over 1,000,000 common sense assertions (or "rules") about our world. For example, Cyc knows trees are usually outdoors, once people die they stop buying things, and glasses of liquid should be carried right side-up. The Cyc-engine will use its existing concepts to both learn more about Web sites in our “Master Index” and intelligently focus user searches. For instance, if someone searches on “Ford,” the Cyc-engine will ask the searcher if they mean, “Ford the car” or “Ford the president.” Combine our current and thorough Internet index with Cyc’s natural language/artificial intelligence interface and searchers get an indispensable tool that will intelligently collect and serve them content from our extensive “Master Index”. Patents Pending ActiveIndexing.com filed its main patent application on 10/14/99. The patent covers the new Push-IndexingTM technology for indexing the Internet and consists of 21 primary claims and 127 subordinated claims. Our patent claims apply to Internet and intranet searching, indexing, and data management. Additionally, there are general patent pending claims incorporated that apply to all databases, data management, and system architecture. Three (3) additional patents are currently being drafted and will be filed shortly. The patent application addresses such a wide variety of new data management and indexing concepts that our patent attorney, Jeff Haley of GrayBeal Jackson Haley suggested we divide the application into four (4) separate applications. Mr. Haley concluded, from his seventeen (17) years of experience, that the patent examiner would eventually force us to divide such extensive claims. This approach not only saves time, it also places a manageable number of claims and a single concept in each patent allowing those reading the patent claims to focus on a single broad concept. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -19 -Type of Patent Filed ActiveIndexing.com filed a “regular utility patent application” in the U.S. (not provisional or design patent). Our rights are protected in all commercial countries provided we file internationally within one year of our U.S. filing. The international filings is estimated to cost an estimated $75,000-$100,000. Project Status and Tasks Current Accomplishments As of April 2000, ActiveIndexing.com has: Completed its Seed and First Round of funding ($2,733,620) Filed its first patent application (4 more patents are being drafted). Leased 10,000 sq. ft. of office space. Assembled a team of 45 professionals. Started product development. In discussions with a significant Portal for a Long-Term Agreement. Projected initial Alpha testing to begin in June 2000. Projected initial Beta testing to begin in July 2000. Projected a commercial launch and first revenue by Q1, 2001. Development Phase ActiveIndexing.com’s “Development Phase” will entail the following tasks: Complete software and system architecture design. Assure that the software is built according to design specifications and industry standards. Create thorough documentation for all audiences. Build and test the system architecture. Design and build a Web site for Web Host and Portal support and the ActiveIndexing.com search engine. Begin Alpha testing to populate the index and test the search engine. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -20 -Design a marketing plan that strategically introduces the ActiveIndexing.com Push-IndexingTM solution and “Master Index”. Construct the commercial Index and commercial Web site. Test… Test… Test… Publicly announce our new search engine technology and Web site. Promote Agent adoption and thoroughly populate our “Master Index”. Raise Venture Capital funding for “Commercialization Phase”. NOTE: ActiveIndexing.com estimates the “Development Phase” to last 180 days, including testing (April 15, 2000 marks the halfway point to completion). Populating the ActiveIndexing.com “Master Index” Until a substantial number of Agents are deployed, our “Master Index” will not reflect the true breadth of the Web. While indexing well-known sites and major Web Hosts, we will consider licensing a metaseaarc engine to augment the information in our “Master Index”. “ActiveIndexing.com-indexed” search results will receive priority ranking for searchers during this startup phase. Site Hosting ActiveIndexing.com will use a professional third party to host its Web servers, database servers, and provide its Internet connection. Preliminary choices include either Exodus Communications (http://www.exodus.com) or Level 3 (http://www.level3.com). Building a Development Team ActiveIndexing.com has already assembled an experienced development team. This team has worked together on previous successful Internet ventures, shipping multiple products to market. The composition of the team includes both Web Software Developers and Quality Assurance Engineers. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -21 -Business Model Business to Business Offering High-traffic Web sites use their popularity to generate revenue. Companies place “banner” and other types of ads on these high-traffic sites, and pay a small fee each time someone new visits the site. Obviously, the more visitors to a site, the more valuable the “cyber real-estate” will be for both the site and advertiser. Similarly, since most existing portal sites (i.e., AOL, MSN, and Yahoo) do not have their own search engine, they pay a small fee to a third-party search engine provider (i.e., Inktomi) each time a user conducts a search. Portal sites can generally cover their search-engine fees with the ad revenue they gain from the number of visits to their site. Revenue Opportunities Providing access to its “Master Index” to Public (Internet) Portals (i.e., ActiveIndexing.com is their ‘back-room’ search engine). Providing customized access to its “Master Index” to Corporate (intranet) Portals. Providing access to its “Master Index” to those search sites that have specialty interfaces or sites that create directories from search results. Licensing its “Push-Indexing TM” technology for other data management applications. Licensing its system architecture to companies for use on Web servers and intranets. NOTE: ActiveIndexing.com currently does not plan to build a branded portal but that may be a side effect of having an index of the Internet. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -22 -Management Team The experienced ActiveIndexing.com management team has previously worked together to design, build, and successfully deploy the award winning Internet Backup Service, Driveway.com (formerly Atrieva) (see http://www.driveway.com). Gary Tripp, Founder and CEO Gary has over 10 years of experience creating and leading award-winning Internet engineering teams. Prior to Activeindexing.com, Tripp invented the Internet data storage model and formed Atrieva Corporation (now Driveway.com). His diverse financial, real estate, and management background continues to be instrumental to raising the capital and bringing on the people required for these dynamic Internet ventures. MBA, CPA Mike Meadway, Founder and Chief Scientist Mike comes to ActiveIndexing.com with over 20 years of experience in the software industry. As an expert application and systems architect, he has designed, built and successfully deployed three Internet applications including multi-user document imaging and remote online backup systems. With a skill-set that reads like a bowl of alphabet soup, Meadway will help ensure the ActiveIndexing.com search engine architecture works as promised. Dell Keehn, Executive Vice President Dell brings over thirty years of proven success in investment banking, finance, and management. Prior to joining the ActiveIndexing.com team, Dell was the Chief Executive Officer of Master Meter Integrated Submetering Technologies (MMIST), a national submetering company with offices in twelve regions. Prior to 1996, Dell was the CEO of the Weatherly Company and is a director of numerous companies including The Women’s Capital Corporation and Larchmont Corporation. MPA Claude Duguay, Vice President of Engineering Another industry veteran, Claude brings 20 years of engineering management and software design experience to ActiveIndexing.com. As a pioneering Java expert, he designed the award-winning Atrieva Online Backup solution, plus several widely used Java development tools. Claude's multifaceted technical, design, and managerial skills drive the team that will deliver the Web's first complete and relevant search engine. Contributing Editor of Manning Publications Co. Patrick Sokolan, Vice President of Operations Patrick brings over nineteen years of Information Technology and software programming experience to ActiveIndexing.com. His extensive background includes fifteen years of IT infrastructure design and management experience with EpicEdge, Spiegel Group /Eddie Bauer, Motorola Cellular Division, and Valley First Group of Companies. Patrick’s experience and knowledge in large data center deployment and management will ensure the success of ActiveIndexing.com’s backroom operations. Allan Sjogren, Director of Quality Assurance Al has logged 25 years in the industry, building and managing Quality Assurance teams that deliver bestoofbreed software products. He joins ActiveIndexing.com from Atrieva Corporation, where his Quality Assurance team helped their Internet backup tool win several distinguished industry awards. Al also lectures and teaches extensively on “High Performance and High Availability Systems Management”; this expertise will clearly help ActiveIndexing.com implement reliable search systems across various computing platforms. MS Software Engineering CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -23 -Jim VanderMeer, Director of Business Development Jim brings eight years of combined experience in business development, sales, information systems, financial management, and supply chain management. He joins ActiveIndexing.com from PictureIQ Corporation and Atrieva Corporation. His past experience includes initiating and managing over thirty-five new partner opportunities including Ameritech.net, AT&T GNS, BellSouth.net, Cybergold, HP, IBM, Linkshare, Lycos, McAfee.com, Microsoft, Netscape, Prodigy, USA.net, and Corbis. In addition, he has extensive Internet product management and partnership marketing experience. BS Computer Science Additional Team Members Other experienced ActiveIndexing.com team members include: Java Development – 9 Java programmers Web Production – 3 Web experts Quality Assurance – 7 Quality engineers Operations – 10 System Administrators Business Development – 5 Administration – 4 Professional Team Because time to market is crucial, ActiveIndexing.com will outsource auxiliary responsibilities, such as usability testing, to established firms with existing resources and expertise. We believe our “pre-fab” development team, combined with outsourced third party expertise, creates the ideal foundation for a quick and focused commercial launch. Corporate Counsel – Foster Pepper -Lawrence J. Steele CPA – Clark & Associates -Roger Clark Patent Attorney – Graybeal Jackson & Haley -Jeff Haley Corporate Name and Image Firm – Garrigan Lyman Group Data Architecture – Chase BobKo, Inc. -Professor Stewart Sutton, University of Washington School of Library and Information Sciences CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -24 -Marketing Initial marketing efforts will focus on product branding, user education, and technology adoption. All ActiveIndexing.com prospects will easily recognize our search solution, why it is an ideal alternative, and why they should employ it for themselves. Branding and Education ActiveIndexing.com is currently working with a professional third party marketing firm to help brand our search technology and test user reaction to it. We will also widely disseminate general educational information about existing search engine limitations and how we solve them. We plan to do this by: Educating “Key Influencers” so they can report our breakthrough search technology. Participating in search engine News Groups. Hosting press and analyst tours. Staging tradeshow presentations and demonstrations. Writing targeted articles for both the computer and general press. Employing other various creative marketing efforts. Attracting Participating Web Sites and Hosts ActiveIndexing.com will drive adoption by Web sites and hosting providers to quickly and efficiently populate the “Master Index”. Web Hosts (Internet Service Providers) ActiveIndexing.com’s distributed “Push-IndexingTM” approach relies on cooperation from the Internet’s major Web Hosts. Since 1000 Web Hosts serve roughly 90% of the URLs and 70% of the Internet’s content, ActiveIndexing.com will focus its initial marketing efforts here. The goal of this campaign is to convince them to download and install our free Agent software. Once installed, these widely distributed Host Agents will automatically “scan” and index all of the Host’s Web sites, helping ActiveIndexing.com accumulate the critical mass required to populate its “Master Index”. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -25 -The Web Host Challenge Obviously, Web Hosts need a compelling reason to install the ActiveIndexing.com Host Agent. The only way Web Hosts can distinguish themselves from the competition is with the services they offer. Thus, they are always open to ways to enhance their services and retain subscribers. ActiveIndexing.com presents a compelling reason for the Web Host to adopt its technology. The ActiveIndexing.com Host Agent assures: All the Host’s Web sites will be indexed. The indexed sites are updated daily. New sites will be indexed within 24 hours. That Web Host itself will be properly indexed. All Web Hosts are showcased in the ActiveIndexing.com Web Host Directory. Following are some of the primary Web Hosts /ISPs that ActiveIndexing.com will attract initially: Above Net www.abovenet.com AT&T Business Internet Services www.att.net Bell Atlantic www.bellatlantic.com Cable and Wireless www.cw.net Digex www.digex.com Earthlink www.earthlink.com Exodus www.exodus.com Frontier Global Center www.globalcenter.com Globix www.globix.com GTE Interactive www.gtei.net CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -26 -MCIWorld Com (Includes UUNet) www.mci.com PSI Net www.psi.net Prodigy.net www.prodigybiz.net SiteHosting.net www.sitehosting.net Verio www.verio.com Public Portals As already mentioned, because public Portals generate advertising revenue with each unique site “hit,” they rely heavily on an effective search utility to attract and retain site visitors. ActiveIndexing.com plans to offer Portals a thorough and relevant search alternative that will motivate repeat visitors. Portals will be able to privately-brand the ActiveIndexing.com search engine and transparently link to our “Master Index” from their existing search interface. From this “powered by ActiveIndexing.com” search interface, searchers will experience similar functionality, only more relevant and accurate search results. For a small per-search fee, Portals will be able to offer a superior search using the ActiveIndeing.com “Master Index”. And searchers will continue to generate ad revenue for the Portals they associate with quick and reliable content. ActiveIndexing.com will focus its initial marketing efforts on the following public Portals: AltaVista www.altavista.com AOL www.aol.com Go www.go.com GoTo www.goto.com Go2Net www.go2net.com HotBot www.hotbot.com (Owned by Lycos) InfoSpace www.infospace.com LookSmart www.looksmart.com Lycos Network www.lycos.com MSN www.msn.com CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -27 -Netscape www.netscape.com Search.com www.search.com Snap www.snap.com Yahoo www.yahoo.com Note: Inktomi is purportedly selling search services to 80 portals, all of which we will include in our Marketing efforts. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -28 -Web Site Owners Independent site owners create the Web’s foundation, yet ironically, they seem the least visible. Imagine spending hours each week just making sure your phone number is still in the phone book. Site owners experience similar frustrations every time they promote their sites with existing Internet search engines and directories. ActiveIndexing.com offers a solution to this tedious and time-consuming task. Because we guarantee sites will be indexed immediately (within 24 hours) and automatically re-indexed each time they update their site, our “Master Index” will be an immensely more attractive alternative to existing engines and directories. Our site owner “grass-roots” campaign will help them: Appreciate the ease of automatically and instantly indexed sites. Download and install the free Site Agent. Provide site owners with a convenient and easy way to fill-out an Index Card to explicitly categorize their site(s) in the ActiveIndexing.com “Master Index”. As our site owner base grows, Web Host (ISPs) will be motivated to install the free Host Agent software to service their “ActiveIndexing.com-indexed” customers. Corporate Portals The Internet is a double-edge sword for most corporations. They need employees to utilize Web resources, but do not want them distracted by the “extra-curricular” content on Public Portals. By linking to the ActiveIndexing.com search-utility, corporations will effectively create their own advertising-free search portal, and corporate employees will be able to access the same useful resources, minus the public Portal and “Adult Content” distractions. Initially, ActiveIndexing.com will partner with a well-known corporation that will help demonstrate and promote this new “private portal” search approach. Meta-Search Engines Meta-Search sites enable users to search with several search engines simultaneously, independently returning search results for each search engine. ActiveIndexing.com will make its search engine available to Meta-Search sites that want to feature it. We will promote our search alternative to Meta-Search sites once our “Master Index” is substantially populated (5% content of the Web). CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -29 -Search Engine Users A thorough and updated index of the Internet without searchers is like a wildflower meadow without bumblebees. To attract searchers to our new search “nectar,” ActiveIndexing.com will sponsor an industry-wide campaign that positions us as the search engine alternative that offers: No more dead (unavailable) links. No more irrelevant search results. No more duplicate site listings. A simple and intuitive way to “narrow-down” (refine) search results. As with most Internet successes, word spreads from the bottom up. As Internet searchers are able to quickly and reliably find what they are looking for in the ActiveIndexing.com “Master Index”, they will encourage others (searchers, ISPs, and Portals) to adopt the ActiveIndexing.com search standard. Achieving Widespread Adoption Our “Push-IndexingTM” search solution is the only one that can create and maintain an index for up to 100% of the participating Internet. To support this claim, we must educate prospects about our distributed solution and motivate them to adopt it. ActiveIndexing.com’s adoption strategy will: Freely Distribute Indexing Agents ActiveIndexing.com’s “Push-IndexingTM” solution relies on widely distributed Agents to build and maintain its “Master Index”. The Agent program that automatically indexes and reports Web site updates, is freely available to anyone from the ActiveIndexing.com Web site. We plan to: Attract Web Hosts (ISPs) that need a free value-added service to attract and retain subscribers. Attract Web Site Administrators who need a guaranteed way to index and promote their site(s). Encourage HTML, e-commerce, and Web Server software publishers to integrate our Agent program into their products so their customers have an automatic and guaranteed way to index and promote their Web site(s). Request Web Host Administrators and Web software companies to link their Web pages to the ActiveIndexing.com Web site to ensure their customers thoroughly understand our search solution and have ample support. Request Web Server OEMs to distribute the Web Host Agent to all its registered users and to include it with all new hardware and software shipments. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -30 -Dispel Security Concerns Since our Agent software will reside on Web Host servers, we have to dispel security concerns for all Hosts that will be using our solution. We will address their concerns by: Building solid references – ActiveIndexing.com will initially partner with well-know Hosts and use them as site references for future prospects. Allowing them to examine Agent output – Web Hosts can configure the Agent to send a copy of all output to themselves. If Hosts can examine program output, they will be confident about its security. Allowing them to examine the Java code – If required, Hosts will be able to examine our Agent source code to ensure it will not conflict with existing processes on their Web servers. Demonstrate Adoption Benefits Web Hosts must obviously perceive value in our solution before implementing it. Since they rely on subscribers, any service that will attract and retain customers is valuable. Web Hosts that use ActiveIndexing.com will derive the following benefits from our “Push-IndexingTM” solution: All Web sites will be indexed thoroughly, daily, fairly, and for free (an important value-added service for existing and potential customers). Our Agent does not consume valuable Web Server bandwidth (like spiders and crawler engines). Adult sites will be indexed properly. Special interest groups can easily create filters to focus their search in specific categories. Entice Prominent Industry Players During our Beta testing period, we will encourage well-known Web Hosts and content rich sites to adopt and help bolster our “Push-IndexingTM” technology. ActiveIndexing.com will work with Web Hosts and content rich sites in the following areas to drive early adoption during our Beta test: Web Hosting Providers Corporate Web Sites Online Media and Entertainment Providers Telecom University Web Sites Governmental Web Sites CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -31 -Announce and “Brand” our Push-IndexingTM Solution Our promise to unravel the indexing knot of the Internet is big news. ActiveIndexing.com will contract a well-known Public Relations firm to generate industry interest and arrange interviews with analysts, press and general media. We will also submit stories to major publications discussing problems with existing search technology and how “Push-IndexingTM” solves them. We are already working with a corporate image firm to design our brand and conduct usability testing. Advertise Directly to Web Hosts, Site Administrators, and Web Users ActiveIndexing.com plans to use specific advertising media for each of our prospects. We will target: Web Hosts through specialty publications and Web sites. Web Site Administrators with specialty publications and Web sites. We believe this broad approach will attract the best adoption prospects in each customer group. Attract Top Web Hosts with One-on-One Sales To ensure our solution is indeed “distributed,” we will use a direct sales force to motivate the top Web Hosts to adopt our Agent technology. Our sales team will communicate person to person, using either the phone or e-mail. This one-on-one approach will help Web Hosts fully realize the benefits of the technology and make them confident that they will have the support necessary to successfully implement it. We have already initiated contact with Web Host companies across the country. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -32 -Financial Projections Funding Requirements: ActiveIndexing.com Seed Round Funding Startup Period June 1999 to Jan 2000 Total Software Development 415,000 $ Legal Fees COMPLETED 40,000 $ Equipment Purchases 45,000 $ Total 500,000 $ First Round Funding Development, Alpha & Beta test Period Feb to June 2000 Total Software development 1,500,000 $ Equipment Purchased COMPLETED 500,000 $ Contingency Fund 200,000 $ Total 2,200,000 $ Second Round Funding Beta -Population of the Index Period May to Oct 2000 Total Projected Operations Expenditures 3,000,000 $ Equipment Purchased 1,500,000 $ Contingency Fund 500,000 $ Total 5,000,000 $ Third Round Funding Beta Population to First Revenue Period Oct 2000 to Jan 2001 Total Projected Operations Expenditures 3,500,000 $ Equipment Purchased 1,000,000 $ Contingency Fund 500,000 $ Total 5,000,000 $ Fourth Round Funding Period Feb to Aug 2001 Total Projected Operations Expenditures 3,000,000 $ Equipment Purchased 1,000,000 $ Contingency Fund 1,000,000 $ Total 5,000,000 $ Note: Assumes no debt or equipment financing. First Revenue to BreakevenCONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -33 -Revenue Assumptions: 1) There are 600 commercial search engines (A). 2) Inktomi represents 10% of total commercial Internet search industry. 3) Inktomi has 37 million searches a day (B). 4) Inktomi's revenue per search is $0.00412 (B). 5) Cost for Portals to provide their own search engine is greater than $0.00412 per search. 6) Therefore the total Internet search market is $500 Million. 7) The Internet search market will increase by 200% by 2002 to $1.5 Billion. 8) The Internet search usage will increase additional as relevance increases. 9) ActiveIndexing.com, with superior technology, will capture 10% the market by 2002. 10) Other revenue from corporate portals, licensing of revenue, and advertising will be 30% of Public Portal revenue. Inktomi 1st Quarter 2000 Revenues Network products $22,100,000 Portal Services (Searches) $14,000,000 (39%) Total revenues $36,100,000 Inktomi Revenue (per search) Portal Services (search revenue) $ 14,000,000 1st Quarter Search Queries 3,400,000,000 = $0.00412 per search (A) Submit to 600+Search Engines http://www.angelfire.com/nj/JTRsBusinessPage/index.html http://members.tripod.com/~ROD_2/index.html http://www.neumanholdings.com/index.html (B) Inktomi Reports First Fiscal Quarter 2000 Financial Results http://www.inktomi.com/new/press/investor/q1fy00.html Other Revenue Sources Providing cooperate portals access to our “Master Index”. Licensing fees for the ActiveIndexing.com technology. Advertising revenue. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -34 -1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Revenue: Public Portals Searches Other Revenue Total Revenue Expenses: Finance & Admin: 90,000 $ 90,000 $ Engineering 100,000 $ 100,000 $ Business Development -$ -$ Operations & IT 15,000 $ 15,000 $ Office Lease -$ Site Hosting 6,000 $ 6,000 $ Advertising/PR -$ -$ Depreciation 2,292 $ 2,292 $ Legal 40,000 $ 40,000 $ Consulting 10,000 $ 10,000 $ Overhead 5,000 $ 5,000 $ Misc. 7,000 $ 7,000 $ Total 275,292 $ 275,292 $ Net Income (275,292) $ (275,292) $ Cash Flow Beginning Balance -$ Proceeds from Sale of Stock 500,000 $ Proceeds from Operation (275,292) $ Depreciation 2,292 $ Equipment Purchases (50,000) $ Ending Balance 177,000 $ ActiveIndexing.com Development 1999CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -35 -1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Revenue: Public Portals Searches Other Revenue Total Revenue Expenses: Finance & Admin: 192,833 $ 289,250 $ 289,250 $ 289,250 $ 1,060,583 $ Engineering 431,167 $ 517,400 $ 517,400 $ 517,400 $ 1,983,367 $ Business Development 59,865 $ 199,550 $ 199,550 $ 199,550 $ 658,515 $ Operations & IT 112,938 $ 225,875 $ 225,875 $ 225,875 $ 790,563 $ Office Lease 18,000 $ 60,000 $ 60,000 $ 102,000 $ 240,000 $ Site Hosting -$ 152,968 $ 262,230 $ 442,230 $ 857,428 $ Advertising/PR -$ 40,000 $ 300,000 $ 1,500,000 $ 1,840,000 $ Depreciation 19,292 $ 81,208 $ 254,125 $ 337,458 $ 692,083 $ Legal 15,000 $ 15,000 $ 15,000 $ 15,000 $ 60,000 $ Consulting 75,000 $ 75,000 $ 30,000 $ 30,000 $ 210,000 $ Overhead 15,000 $ 15,000 $ 90,000 $ 90,000 $ 210,000 $ Misc. 15,000 $ 15,000 $ 15,000 $ 15,000 $ 60,000 $ Total 954,094 $ 1,686,251 $ 2,258,430 $ 3,763,763 $ 8,662,538 $ Net Income (954,094) $ (1,686,251) $ (2,258,430) $ (3,763,763) $ (8,662,538) $ Cash Flow Beginning Balance 177,000 $ 1,209,197 $ 3,854,155 $ 849,850 $ Proceeds from Sale of Stock 2,200,000 $ 5,000,000 $ -$ 5,000,000 $ Proceeds from Operation (954,094) $ (1,686,251) $ (2,258,430) $ (3,763,763) $ Depreciation 19,292 $ 81,208 $ 254,125 $ 337,458 $ Equipment Purchases (233,000) $ (750,000) $ (1,000,000) $ (1,000,000) $ Ending Balance 1,209,197 $ 3,854,155 $ 849,850 $ 1,423,545 $ ActiveIndexing.com Development & Beta Phase 2000CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -36 -1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Revenue: Public Portals Searches 70,000 $ 1,750,000 $ 4,765,625 $ 9,307,861 $ 15,893,486 $ Other Revenue 21,250 $ 531,250 $ 1,446,708 $ 2,825,601 $ 4,824,808 $ Total Revenue 91,250 $ 2,281,250 $ 6,212,333 $ 12,133,462 $ 20,718,295 $ Expenses: Finance & Admin: 289,250 $ 289,250 $ 289,250 $ 289,250 $ 1,157,000 $ Engineering 517,400 $ 517,400 $ 517,400 $ 517,400 $ 2,069,600 $ Business Development 199,550 $ 199,550 $ 199,550 $ 199,550 $ 798,200 $ Operations & IT 225,875 $ 225,875 $ 225,875 $ 225,875 $ 903,500 $ Office Lease 102,000 $ 102,000 $ 102,000 $ 102,000 $ Site Hosting 622,230 $ 802,230 $ 802,230 $ 802,230 $ 3,028,920 $ Advertising/PR 1,500,000 $ 1,500,000 $ 1,500,000 $ 1,500,000 $ 6,000,000 $ Depreciation 379,125 $ 379,125 $ 504,125 $ 504,125 $ 1,766,500 $ Legal 30,000 $ 30,000 $ 30,000 $ 30,000 $ 120,000 $ Consulting 30,000 $ 30,000 $ 30,000 $ 30,000 $ 120,000 $ Overhead 90,000 $ 90,000 $ 90,000 $ 90,000 $ 360,000 $ Misc. 15,000 $ 15,000 $ 15,000 $ 15,000 $ 60,000 $ Total 4,000,430 $ 4,180,430 $ 4,305,430 $ 4,305,430 $ 16,791,720 $ Net Income (3,909,180) $ (1,899,180) $ 1,906,903 $ 7,828,032 $ 3,926,575 $ Cash Flow Beginning Balance 1,423,545 $ 2,893,490 $ 1,373,435 $ 2,784,463 $ Proceeds from Sale of Stock 5,000,000 $ -$ -$ -$ Proceeds from Operation (3,909,180) $ (1,899,180) $ 1,906,903 $ 7,828,032 $ Depreciation 379,125 $ 379,125 $ 504,125 $ 504,125 $ Equipment Purchases -$ -$ (1,000,000) $ -$ Ending Balance 2,893,490 $ 1,373,435 $ 2,784,463 $ 11,116,620 $ ActiveIndexing.com Commercial Operations 2001CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -37 -Exit Strategy ActiveIndexing.com anticipates two potential scenarios for an exit strategy. Scenario 1: ActiveIndexing.com will likely be an attractive acquisition candidate for one of the larger search engines, portals, ISPs, or telephone companies within approximately twelve (12) months from service launch. Scenario 2: ActiveIndexing.com’s disruptive innovation makes this company an excellent IPO candidate in the field of Internet search engine technology. This scenario anticipates IPO would likely be within 12 months after 1st revenue (1st revenue projected Q1 2001). CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -38 -Exhibit A – The ActiveIndexing.com Index Card An Index Card is a short form that Web Hosts and Web site administrators can fill-out that provides specific non-HTML information about their site, its content, and intended market audience. The information they provide explicitly categorizes their site in the ActiveIndexing.com “Master Index”. The idea is to let Web site administrators, not mindless crawler engines, provide context to their site index and ultimately make it easier for searchers to find. For instance, a site administrator could create an Index Card that categorizes their Web site as: A ski apparel and equipment Business In Vancouver, Canada E-commerce enabled Specializing in high-end equipment This Web site now has a distinct “face” (i.e., context that clearly categorizes the site and makes it easier for searchers to find). Once a Web site has an Index Card associated with it, users can intelligently refine their search to find exactly the site they need, not 25,000 irrelevant ones. For the Index Card example above, a user might search as follows: Enter keywords “ski apparel” Select specific Geographic information Canada + Vancouver Select specific Categories Business Select specific Sub Category e-commerce A search as such would only return sites that have an Index Card and match the search criteria listed, and the ActiveIndexing.com Search Interface indeed gives users the ability to “fine-tune” their search in this manner. Creating Index Cards Web Server and Site Administrators can create an Index Card to represent an entire Web site or an individual page. For instance, in the example above, the site administrator might create one Index Card that categorizes the entire site as a Ski Apparel and Equipment business (plus the other Geographic criteria). And then they might also create an Index Card for each equipment type page (e.g., one for skis, one for boots, one for bindings, etc.). Site Administrators create Index Cards within a password-protected area of the ActiveIndexing.com Web site. Once completed, ActiveIndexing.com will download an XML version of the Index Card(s) to their Web site. This XML version will be used to add context to the more generic Agent-generated site index. CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -39 -Not only is the entire site indexed everyday with the Agent, it also is specifically categorized in the “Master Index” based on the existing Index Card(s). Site Administrators can update/edit existing Index Cards within the password-protected area of the ActiveIndexing.com Web site at anytime. Note: The main advantage of Index Cards, over other categorical indexing methods, rests upon the basic assumption that Web site administrators know exactly how they want their site categorized and should be given the opportunity to do so. Initial Information Collected in the Index Card When filling out Index Cards, Web site administrators can provide the following information to make sure their Web site(s) and page(s) are categorized exactly how they want: Information about the site owner Names and DBA’s for the site and company Rating – site rating (G, PG, R, X) Rating Descriptors Language Categories General Categories, (e.g., Sports) Specific Categories, (e.g., Baseball) Special Interest Categories (e.g., Professional Team) Target Market Geographics Target market – Country Target market – State or province Target market -City Target market – county Target market – district or section Location restrictions (Y or N) Target Market Demographics Sex Sexual preference Age group Special Demographics -(race, ethnic or handicapped) Demographics restrictions (Y or N) Adult content -Restricted below 18 or 21 years Violent content -Restricted below 13,18 or 21 years Non-HTML information that should be indexed. (e.g., certain fields in a product database.) CONFIDENTIAL MATERIAL -DO NOT COPY OR DISTRIBUTE ACTIVEINDEXING.COM, INC. 190 QUEEN ANNE AVE, SUITE 300 SEATTLE, WA 98109 (206) 691-1234 FAX (206) 691-1111 INVEST@ACTIVEINDEXING.COM -40 -Exhibit B – Industry News 2/25/00 “Ask Jeeves to Acquire Direct Hit for $506 million” In an attempt to give customers broader and more relevant search results, Ask Jeeves Inc. bought the search technology company Direct Hit Technologies, Inc. for $506 million in stock. Comment: Direct Hit’s search engine uses a traditional crawler-based solution that tracks the sites that searchers click on most frequently (i.e., the most “popular” sites). Users are then able to refine their search results with these criteria. We believe this “popularity” approach merely indexes the most visible Web sites and ignores less visited sites that may contain the information users need (i.e., it cannot find new sites if no one links to them). Not only does this limited approach fail, but also inevitably promotes only the most visible sites. This approach, it can never hope to keep up with the Internet’s exponential growth. Alternatively, the ActiveIndexing.com “Push-Indexing” technology can find and index every participating site, in its entirety, everyday. This approach more accurately represents the entire Internet, not just the slice that appears most popular. In addition, our category-based search will let users refine their search and improve the likelihood they will find the relevant and timely information they are looking for. A frequently visited site or page does not always contain the most relevant information users need. ActiveIndexing.com’s technology will support and index all of the growing Internet community, not just those that managed to stake their claim early on.