Business
Plan
Executive
Summary
_
Presented_By:
The
NetT, .nk
914-788-1555 www.thenettank.com Proprietary and Confidential
Purpose
of this
document
and confidentiality
The enclosed document is the Strategic Business Plan for Freeproductsamples.com, Inc. (FPS). The purpose of this document is to provide information to potential investors, vendors, manufacturers, employees and others who require a detailed understanding of the FPS business. The information contained herein is proprietary and confidential and is intended solely for the purposes of informing the above users relative to their potential or actual cooperation with the Company. Any disclosure of this information for purposes other than those specified herein is strictly prohibited. Holders of this document are required to sign a non-disclosure agreement (NDA). If you have possession of this document and have not been provided an NDA for your signature, please use the contact information on the front of this document to obtain one from an FPS representative. FPS reserves all rights with respect to the information contained herein.
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Executive
summary
Market opportunity_ U.S. product manufacturers compete fiercely over customers in the world's largest consumer product market. Historically, one of the most effective customer acquisition techniques is free product sampling on which manufacturers spent $1 billion in 1999, and which has been demonstrated to result in customer conversion at rates of up to 67%. However, the process of getting prospects to sample a product has historically been enormously inefficient as demonstrated by direct mail response rates which are typically only as high as 3%. FreeProductSamples.com (FPS) is building the premiere Internet-based sampling business which focuses on eliminating the waste inherent in traditional mail-based/special event product sampling resulting in up to 97% relative efficiency and enormous profit potential. How are acquisition costs reduced? Traditional direct mail is normally sent to a semi-random population obtained from lists purchased from list companies. This results in the very low response rates (3% on the high side) experienced in traditional sampling. FPS is a friendly and fun website which invites visitors to sample product based on their answers to a pre-qualifying questionnaire. Therefore, the 97% waste experienced in traditional sampling is reduced to 0%. See Exhibit C. What is FreeProductSamples.com? FreeProductSamples.com is an e-marketing, consumer information and sampling technology company which focuses on creating enormous efficiencies in the product sampling industry. The founder of FPS, Ransel Potter, has over 30 years of experience in the marketing business including an exceptional understanding of the direct marketing and sampling industries. FPS launched its development phase in March 2000 and plans to launch its consumer website in November 2000. FPS is headquartered in New York City, the center of US marketing activity and one of the most important and innovative Internet markets in the world. FPS business model
The Company is pursuing a broad business strategy positioning itself as an application service provider (B2B) and an Internet destination (B2C). The services it will render to product manufacturers include: sampler referrals; collection and reporting of consumer data; fuli'fllment services; banner advertising; slot (shelf space) sales; and, web graphics services. As an ASP, FPS will license technology and syndicate content to portals. Finally, FPS will develop a proprietary registration database which it will package and sell. See Exhibit A for a graphical representation of the business model. Competitive environment Based on extensive research of the competition, FPS has identified a minimum of 21 web-based businesses offering free product samples to consumers in the U.S. Of those, 17 utilize the simple approach of providing links directly to the product sampling pages on the websites of product manufacturers. Since these sites provide a much more limited service than FPS, we do not consider these sites significant competitors. The other 4 sites provide, as does FPS, an _integrated shopping cart" allowing the sampler to choose samples from different manufacturers and check out in one transaction. FPS believes that it will quickly become the leading website amongst the major players due to the following competitive advantages. See Exhibit B. • FPS focuses a significant on reduction of customer savings value up to 97%, acquisition depending costs providing manufacturers on the actual product sampled
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• • • • •
FPS allows the manufacturer as often as needed
to customize
product/data
mining
questionnaires
FPS provides superior data collection and reporting services to the manufacturer FPS has superior sample content due to deep relationships with manufacturers FPS has a superior business model as both a consumer site and a business ASP FPS reduces the cost of fulfillment mailing through "bundling" of non competitive products niche
A validated
Distributing free product samples over the Internet is a validated model based on the positive results generated by the leader of one of the first movers in the space. In a relatively short time frame, StartSampling.com. has had particularly good results. This past June, it was named the sixth fastest growing site by PC Data, with 10,000 new members each day and members returning to the site an average of 8.8 times and staying an average of 15 minutes each. Finally, 50-70% of members give feedback regularly. By comparison, FPS has an extremely conservative scenario for financial projections, which show positive cash flow within 12 months and revenues that grow to $100 million in 5 years. These financial projections are produced easily by lower metrics than those already being demonstrated by StartSampling which had 2.5mm unique visitors in July 2000 - a level not required under the FPS projections until 2003. FPS believes that the niche has room for 3-5 significant players and is encouraged by the success of this competitor. Management team FPS has gathered an extremely experienced management team with the ability to execute this plan and build and operate the FPS business profitably, positioning it ultimately for a strategic sale or an IPO. The FPS team features: Ransel Potter, CEO & founder, 30 years of Madison Avenue experience David Carroll, CO0 & CFO, 12 years of financial and internet experience Carl Roa, CTO, over 5 years of experience in software development for the Web Jack Decker., VP BD/Marketing, over 40 years of marketing experience Jim Minor, VP Manufacturer Relations, 30 years of product management Rick Sneed, VP Advertising Sales, 25 years of advertising sales experience Dehan Basnayake, VP Fulfillment, 8 years of experience in direct marketing Business risks of the FPS business are listed below along with mitigating factors:
The key risks
Risk Will consumers sample on Internet? Will FPS generate adequate traffic? Fulfillment problems Can FPS maintain pricing levels? Will FPS run out of inventory?
Mitigating factor Competitors have validated Competitor volume already Expertise, back-up vendor Margin opportunity huge Back-up program including coupons/product tips
higher
Closed deals and deal pipeline Further validating the model, FPS has signed contracts with four major manufacturers, namely: Best Foods, Mead Johnson, Johnson& Johnson & Revlon. FPS has five major deals in the pipeline which are near closing including: Bayer, Lever Brothers, Time Warner, CBS and WWF.
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Financial projection FPS has developed a financial model that demonstrates a business which will be cash flow positive within 12 months with revenues that will grow to between $100 and $500 million by year 5. See Exhibits D & E for assumptions and cash flow summary.
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