Sample Business Plan newsletters

.... David Hart 09/02/99 01:26 PM To: CC: Rose Starkowicz/Lycos@ Lycos Subject: Re: Newsletters.com's new bplan _ please print and put into queue d. Ari Jacoby on 09/02/99 01:10:08 PM Ari Jacoby on 09/02/99 01:10:08 PM Pleaserespondto "ari@newsletters.com" < ari@newsletters.com > To: cc: Subject David Hart/Lycos@Lycos Newsletters.corn's new bplan David, As promised, here's our plan. Thanks Ari Jacoby - ari@newsletters.com CEO - Newsletters.corn Direct: (301) 277-4098 x204 - Fax: (301) 277-3876 http://www.newsletters.com http://finance.newsletters.com I_ I_ - masterbusinessplan.doc - PROJEC-5.xIs newsletters.corn Business Plan August 31, 1999 Version 1.0 Business Plan Page I newsletters.com 1. Executive Summary The CompanyNalue Propositions Newsletters.corn, Inc. was established in 1998 to be the dominant provider in the $10 billion Expert Information Marketplace 1. The current fragmented information market presents Newsletters.corn with a lucrative opportunity to consolidate online available Expert Information in targeted vertical markets. Newsletters.com will utilize today's Intemet technology to create user value and then replicate its success to reach millions of potential customers. Newsletters.corn will provide convenient access to the best Expert Information Products available and deliver it to customers via the Web. Newsletters.corn is in the business of selling Expert Information Products to both consumers and business people to help them improve their lives and better their careers. Newsletters.corn makes its money whenever an Expert Information Product like a newsletter, special report or loose-leaf service is purchased through one of our Web sites or through one of our co-branded partner Web sites. In this high-margin e-commerce business, Newsletters.corn takes an average of 48% of the gross on all sales. The Company's first online information store -- Newsletters.corn: Finance -- is today the largest collection of consumer financial expert information on the Web. Co-branded stores are located on hundreds of Web sites and the Company has contracted with over 90 industry experts. Newsletters.corn has spent the past 18 months building proprietary technology and developing back-end systems that will allow it to handle anticipated demand. At the same time, the Company has formed many partnerships with leading publishers and key Web sites -- the cornerstone for the success of its business model Newsletters.com is directing its symbiotic marketing efforts towards an aggressive, costeffective strategy to place its co-branded stores in high traffic areas. The Company will open co-branded information Web sites in excess of 3,000 new locations within the next 15 months. Scalable technology will allow Newsletters.com to quickly and costeffectively reproduce our first effort in a "cookie-cutter-like" fashion. Value Propositions. Publishers (Experts) want to partner with Newsletters.com because we give them instant Internet presence and showcase their products. Publishers make money on every sale through the Newsletters.corn network as opposed to their traditional method of marketing via direct mail, where they usually only break even. 1Ben De la Cruz,Editor,BusinessInformationMarkets2002:The StrategicOutlook.1998. Business Plan Page 2 newsletters.corn Web partners want to work with Newsletters.com because we provide targeted, actionable content on their sites. Newsletter.corn aggregates, hosts and updates content for Web partners, freeing them to concentrate on their core products. While Web partners continue to attract and retain customers, they can now add a revenue stream. (See APPENDIX G.) Customers buy from Newsletters.com because we have what they need in one, easy-tosearch site. Industry fragmentation has made it very difficult for consumers to find a wide selection of the specialized information they are looking for -- Newsletters.corn solves this problem. Growth Strategy/Opportunity Newsletters.com will build 11 additional online information stores in the next year. Each site will provide expert information in each of these top vertical markets: Health (consumer and business-to-business), Women, Seniors, Collectibles, Pets, Communications, Legal, Human Resources, Small Business and Computers. Newsletters.com currently has strategic alliances with leading web sites like Planet Direct, National Discount Broker, Infospace, Canadian Broadcasting Corporation, Reuters Interactive, ISyndicate, Crosswalk.com, Screaming Media, and Prodigy. On the publishing side, Newsletters.com currently represents Zack's Advisor, Louis Rukeyser and IOMA Corporation (a division of BNA Publishing) as well as many top market analysts and experts. The Company is now pursuing co-branding relationships with every major Web site in each vertical market, and has already acquired the rights to market over 300 information products across these markets. (See APPENDIX G.) The Market/Trends The overall U.S. Expert Information Market is currently valued in excess of $10 billion and will grow to more than $12 billion within the next three years 2. Despite this size, the market is still primarily a cottage industry. There are more than 2,000 publishers in this fragmented industry which makes it difficult for customers to find the products they need. Expert Information Products include fee-based newsletters, subscription loose-leaf services, research reports, market studies, special reports, high-priced conference and seminar transcripts, and on-demand single article/issue sales. These products range in price from $5 (for a single article) to $25,000 (for a market study). No aggregator currently compiles all of these product types. Newsletters.com will solve this problem by bringing together products from all relevant publishers into one easy-to-search store, allowing the Company to take advantage of cross-selling opportunities. Expert Information Sales are rapidly growing online due to three trends: 2 ibid Business Plan Page 3 newsletters.corn • • • The rise of the Internet "infojunkie" (people who are addicted to searching for information online). Double-digit growth in the market research profession. Marketplace pressure for traditionally print, tape or videotape products to be fulfilled electronically. Many companies have already been successful selling and fulfilling Expert Information Products via the Web (from publications like the Wall Street Journal to sites like espn.com). As printing and fulfillment costs continue to rise for traditional print delivery, a shift to online delivery is inevitable. In the Expert Information Industry, electronic fulfillment will become the norm and not the exception. Newsletters.com is already positioned to take advantage of the tectonic shift in consumer behavior and buying patterns that is beginning to take shape. Additionally, online fulfillment provides instant access for consumers -- and instant gratification. Combined with technology that allows for instant delivery (via HTML, wireless handheld devices, TV set-tops, etc.), it is now possible for Newsletters.com to become the central conduit between traditional print expert information suppliers and online information consumers. Technology also allows Newsletters.com to personalize the delivery thus building consumer loyalty. Newsletters.com will succeed by offering a depth and breadth of expert information products unparalleled on the Web today. The Product Each online information store will appeal to customers by offering a wide variety of expert information content in each specific marketplace. Each site will be designed with customers' needs in mind, including a complete suite of easy-to-use product selection tools and "around the clock" customer service. Returning customers will come back to their own personalized "My Newsletters.com" page complete with searchable archives of their past purchases, an events calendar and a personalized news service detailing new products in their particular areas of interest. The Company markets its expert information as essential, "need to know" information versus daily news feeds that offer "nice to know" information. The content on each site and co-branded sites will be targeted to the one vertical market and will not offer content across all topics. One general site will be developed that will allow for cross-searching. Competitive Advantages Newsletters.com has two major competitive advantages that will enable it to succeed over other Web-based information providers and retailers. We offer superior selection and scalability for our partners. Newsletters.corn is a company that is easy to partner with because we build relationships, lock-in channel partners and quickly create barriers to Business Plan Page 4 newsletters.corn entry. No site will have two distinct suppliers of expert information products, and Newsletters.corn is being positioned to dominate our competition. Sales & Marketing Web marketing metrics show that campaigns placed in contextually relevant sites generate significantly higher sales. Therefore, we have created Newsletters.com's online information stores and headlines to be located (via our many co-brand alliances and headline syndication) on content specific Web sites. For example, the Newsletters.com finance store appears on hundreds of highly trafficked personal finance Web sites such as National Discount Broker. This follows the Company's marketing slogan: "We Are Where You Are." (See APPENDIX G.) Financial Strategy The Company's first store -- Newsletters.com: Finance -- has begun to see light sales. Revenues are projected to reach $1.2 million for the year 2000 and will climb to over $14 million by 2004. Thus far, the company has been financed by private individual investors and is now seeking $5-6 million to employ its technology to roll-out I I additional online stores. Business Plan Page 5 newsletters.com 2. Mission Statement Newsletters.corn is an online retailer offering expert information products for consumers and business people. 2.1 GENERAL Contact Information Ari Jacoby, CEO Newsletters.com 7100 Baltimore Avenue Suite 403 College Park MD 20740 301.277.4098 ext. 204 ari@newsletters.com http://www.newsletters.com 2.2 NATURE OF BUSINESS Newsletters.corn is poised to become the leading online retailer in the $10 billion Expert Information Industry. People traditionally purchase information to improve their lives and grow their careers. No one wakes up in the morning thinking, "I should buy a newsletter on the Internet today." But every day, many people will purchase information to learn how to beat their competitors, invest safely in high growth stocks or use natural remedies to stay healthy. Today, it's still very time-consuming and difficult to find targeted expert information on the Web. The Expert Information Industry is very fragmented offering products from more than 2,000 publishers and thousands of individual experts who self-publish. Newsletters.com's numerous co-branding arrangements will allow information stores to be located on popular Web sites that people already visit -- reaching millions of potential customers. (See APPENDIX G.) At the same time, our Web partners will benefit by gaining a revenue stream. Newsletters.com spent the first 18 months building proprietary technology, developing back-end systems, establishing publisher and Web site relationships, and building a strong management team. Newsletters.corn's will revolutionize this industry by bringing the thousands of products and millions of customers seeking that information together in a personalized e-commerce environment for the first time. 2.3 COMPANY HISTORY January 1998 Newsletters.corn founded, Ari Jacoby and Elie Ashery; Newby Company CFO Andy Gold joins as first board member. Newsletters.com launches first virtual newsstand: Newsletters.com. Former UUNet VP Sales Jeff Osborn joins Board. Doug Humphrey, Founder of Digex, joins Board. August 1998 Business Plan Page 6 newsletters.com November1998 Newsletters.com receives minority investment founder of Trusted Information Systems. Newsletters.com company. from Steve Walker, March 1, 1999 acquires Datafront Inc., a Web application development June 10, 1999 Newsletters.com CEO Ari Jacoby chosen to appear on PBS's "Money Hunt" TV show. Newsletters.com receives minority investment from industry leader Warren Publishing. Newsletters.com receives minority investment from Ralph Terkowitz, CIO Washington Post Company. Newsletters.com receives minority investment from Bill Southworth, Founder of Harvardnet (NASDAQ; HVNT) Newsletters.com signs 275th Web site partnership contract, bringing total potential newsstand traffic to 250 million visitors per month. Newsletters.com titles to 304. signs 94th publisher partnership contract, bringing total July 1, 1999 July 7, 1999 July 14, 1999 2.4 BUSINESS OF THE FUTURE Sponsorship/Soft Dollar Sales There is both offline and online precedent for expert information sponsorship sales. One-to-one marketing gurus Don Peppers and Martha Rogers regularly tour America giving free marketing seminars sponsored by Broadvision. Merrill Lynch, Salomon Smith Barney, Gruntal and others sponsor Multex's "free" research reports online. Newsletters.com expects to take advantage of soft dollar sales opportunities in each of its marketplaces. For example, a children's clothing retailer such as Lands' End might wish to sponsor parenting reports on Newsletters.com: Women. Newsletters.com plans to start business development in this area with appropriate products soon after funding. List Rentals All Newsletters.com customers will be asked if they wish to receive information about other products and services targeted to their interests. These "opt in" names will then be rented out for marketing campaigns from other companies. Newsletters.com will have a large enough database of names to successfully enter the list rental marketplace and quickly grow into a revenue opportunity. Broadband Audio & Video Products Newsletters.com plans to begin offering audio-streamed streamed products by the end of the year 2000. products and to test offering video- Companies are already reporting success selling audio content online. Audible.com reports "tens of thousands" of customers spending an average of $15-$18 per month for audio news products. Video industry insiders have said that the short-term securities trader marketplace (i.e., Business Plan Page 7 newsletters.com daytraders) is a natural market for both audio and video-streamed content sales. Newsletters.com: Finance is already positioned to offer these services. Newsletters.com also believes that such products will be a natural fit for high-level conference products. Self-Publish Program As a Washington Post columnist noted in February, "The Net might deliver create a global platform for individual creativity. A piano player in Phoenix sell melodies to thousands of people at $1 each. The same might be true for programmers, homework tutors or even - could this spell freedom? - Internet current market valuation of MP3.com (NASDAQ: MPPP) is approximately partially based on this Web-enabled, self-publishing movement. on its promise to might record and novelists, software columnists. " The $2 billion and is Newsletters.com plans to offer individuals the ability to easily create, stock and place expert information stores on their Web sites. Individuals will also be able to self-publish and sell their own information products via these stores for a minimal processing fee. (Pornography and explicitly violent content will be prohibited. Information products will be clearly labeled as to whether they have received the "Newsletters.corn quality seal of approval" or not.) Newsletters.com will offer a semi-automated editorial submission process making it easy for individuals to submit information products for inclusion on its network of Web information stores. This automated "approval" process will also allow Newsletters.com to automatically filter out low-quality editorial content to maintain its level of high-quality, expert information products. 2.5 VALUE PROPOSITIONS Customer Consumers and business people will be able to find the expert information they need to improve their lives and grow their careers. Newsletters.corn will bring customers easy access to more than 6,000 expert information products from hundreds of publishers that would otherwise be difficult to find. Unlike other Web-based information services, Newsletters.com plans to offer a complete set of personal selection tools and 24-hour customer service. Key Publisher Newsletters.com is revolutionizing the Expert Information Publishing business by offering many publishers their first opportunity to gain Web-wide visibility for their products. For many publishers, Newsletters.corn's co-branded web sites will be the only way their products could be featured on contextually-related Web sites. Newsletters.corn's specialized e-commerce marketing staff will create sophisticated, profitable campaigns for publishers who would otherwise find it difficult to create. Key Co-Brands Newsletters.com's co-brands and headline syndication program will help Web partners solve two of their greatest problems: finding new revenue streams and locating a constant source of highquality content. Investors By investing in Newsletters.com, investors are helping revolutionize the publishing industry by combining technology with efficient marketing and distribution practices. Newsletters.com is Business Plan Page 8 newsletters.com poised to become an industry leader with the hopes of providing healthy returns and maximizing its shareholder wealth. The overall U.S. Expert Information Market is in excess of $10 billion and is estimated to grow to a total of $12 billion in the next 3 years 3. It is clear that publishers in the traditionally print marketplace are moving rapidly to a Web-based sales and fulfillment environment as a result of customer demand and economics. In addition, Web-based expert information sales are expanding beyond the traditional customer base due to the increase of the "infojunkie". Newsletters.com's aggressive, cost-effective strategy will seek to place its co-branded information stores in high traffic areas. The Company will open more than 3,000 co-branded information web sites within the next 15 months. The Company will combine its aggressive "We Are Where You Are" customers with highly personalized features. strategy to attract new 2.6 PRODUCTS & SERVICES Development Plan & Roll Out Upon financing, Newsletters.com plans to hire a professional Web design firm to redesign and upgrade its current Newsletters.corn: Finance site. Once this upgrade has been completed and tested, Newsletters.com will relaunch the Consumer Finance information store. Next, using "cookie-cutter" design developed by Newsletters.com, the Company will move rapidly to establish the next 11 vertical market information stores. Launch dates below assume funding received October 1999. Terminology Guide: Foot traffic Total monthly visitor traffic on sites carrying our store. (The number is a percentage of the visitors who view our buttons and banners of the total number of visitors to that site.) Co-Brand Web sites with more than 250,000 page views per month that carry a co-branded version of a Newsletters.com store within their site. Lower-traffic Web sites that carry banners and/or fresh headline boxes that are hotlinked to a Newsletters.corn store. Subscription-based products such as newsletters. One-time published products like special reports. Affiliate Subs One-Times 3ibid Business Plan Page 9 newsletters.com Consumer Finance est. relaunch 12/99 Millions of consumers are catching online trading fever. At the end of 1998 there were approximately 6.4 million online trading accounts. Newsletters.com's upgraded and redesigned consumer finance site will bring expert advice on every facet of investing. Content will also feature products on other areas of personal finance, including choosing a mortgage lender, applying for student loans, setting up trust funds, etc 4. Total sites 85,000 Sites we'll contract 1088 co-brand/3645 affiliate Foot traffic 202.9 million Sub products 433 average price $78 One-time products 1,300 average price $19.95 Consumer Health est. launch 1/00 Today, over 22 million adults in the U.S. search for health information on the Internet and this number is expected to reach 30 million by the year 2000. These health-conscious consumers are wealthier, more educated and have more Internet experience than the average online user. Although there is a great deal of syndicated health content available online, almost every site producer at this Spring's eHealthcare World trade show voiced a strong interest in carrying information from industry experts. Newsletters.com is not aware of any other company planning to provide such a service at this time 5. Total sites 45,000 Sites we'll contract 602 co-brand/2,019 affiliate Foot traffic 102.5 Million Sub products 37 average price $40 One-time products 100 average price $12.95 B-to-B Health est. launch 1/00 Newsletters.com plans to expand into this marketplace at the same time as consumer health to capitalize on the current contracts the Company already has with several key publishers. Key Web co-brands such as Medscape and Web MD serve both consumer and business-to-business markets. Additionally, online consumers have already proven their interest in heretofore medical professional-only publications making cross-over sales possible 6. Total sites 3,500 Sites we'll contract 125 co-brand/450 affiliate Foot traffic 23 million Sub products 80 average price $350 One-time products 240 average price $99.00 Women est. launch 2/00 With the runaway success of Women.com and iVillage, female-orientated content and communities are now part of the Web's mainstream. More than 50% of the Web's population is female and, similar to other purchasing trends, more dollars are spent by women than men on the Web. Information products for the women's market will include crossovers from the health and personal finance sites as well as parenting, small business and pet-related information 7. Total sites 3,300 Sites we'll contract 152 co-brand/432 affiliate 4Newsletters.comin-houseresearch, 1999. 5ibid 6ibid 7ibid Business Plan Page 10 newsletters.com Foot traffic 44.4 million * Sub products 149 average price $35 One-time products 435 average price $12.95 • Composite numbers including several categories. Seniors est. launch 3/00 Seniors (defined on the Web as consumers age 55+) are one of the fastest growing demographics on the Web. Seniors spent an average of $1,819 on virtual shopping during the December 1998 holiday season. This demographic will rise as more Baby Boomers enter the age group. The top interests for this population include personal finance, small business ownership and health; therefore, products carried on several other Newsletters.com information stores will certainly cross over to this marketplace 8. Total sites 2500 Sites we'll contract 135 co-brand/350 affiliate Foot traffic 25 million * Sub products 80 average price $41 One-time products 240 average price $12.95 • Composite numbers including several categories. B-to-B Human Resources est. launch 4/00 Human resources professionals online are demanding expert information and advice on hiring and compensation trends, benefits management, related legal issues and labor disputes. There are currently no premium content aggregators focused in this market although there are currently 58 publishers providing human relations-related content 9. Total sites 3,700 Sites we'll contract 69 co-brand/231 affiliate Foot traffic 20.4 million Sub products 63 average price $188 One-time products 180 average price $49.95 B-to-B Legal est. launch 4/00 The legal market is considered to be the most profitable in traditional, print publishing. Online content in this category is highly prized and is considered by CNBC to be a major "up and coming" category. Many of the legal products Newsletters.com will carry will also offer good cross-sales in the human resources and small business markets 1°. Total sites 6,200 Sites we'll contract 180 co-brand/825 affiliate Foot traffic 13.9 million Sub products 298 average price $377 One-time products 870 average price $99 Small Business est. launch 5/00 In 1998, 37% of all small businesses (defined as U.S. businesses with less than 100 employees) were online; equivalent to 2.6 million small businesses in a 7 million universe. Unlike large businesses whose information needs are attended to by aggregators such as Newsedge and Dow Jones Interactive, very few aggregators focus on the information purchasing power of small 8ibid 9ibid 1oibid Business Plan Page 11 newsletters.com businesses. This category contains a variety of products that will cross-sell into other markets, es including human resources, legal, women and seniors I1. Total sites 5,190 Sites we'll contract 254 co-brand/750 affiliate Foot traffic 42.8 million Sub products 187 average price $163 One-time products 550 average price $39 Pets est. launch 7/00 The pet industry enjoys one of the most loyal and intensely interested audiences on the Internet (second only to sports). Information products focus on dogs, cats, birds, endangered species, reptiles, wild backyard creatures and "exotic" pets. Many of the products on these topics have limited mass distribution offline and will find a much larger audiences via the Web 12. Total sites 5,226 Sites we'll contract 218 co-brand/792 affiliate Foot traffic 37.6 million Sub products 32 average price $30 One-time products 90 average price $9.95 Colleetibles est. launch 7/00 The success of Web sites like eBay has revealed an enormous public interest in collectibles. Hobby Markets Online, which sells collectible items from rare stamps to fine wines, was one of the first consumer sites to turn a profit in 1997 -- after just two years in business. Newsletters.corn's collectibles store will feature expert information on the products consumers feverishly bid on. For example, the Stangl Pottery Society's bimonthly newsletter is a product you'll find on the collectibles site 13. Total sites 29,800 Sites we'll contract 167 co-brand/559 affiliate Foot traffic 33.9 million Sub products 90 average price $40 One-time products 270 average price $12.95 B-to-B Communications est. launch 9/00 Traditionally this marketplace has been a gold mine for business-to-business publishers. Topics include marketplace and competitor information on the telecommunications, wireless, satellite, cable, broadcast radio and television, and broadband industries. The market has an unusually high number of small independent consultants creating a demand for high-quality information products that Newsletters.com can bring to a wider audience TM. Total sites 6,500 Sites we'll contract 281 co-brand/940 affiliate Foot traffic 46 million Sub products 120 average price $395 One-time products 300 average price $199 u ibid 12ibid 13ibid _4ibid Business Plan Page 12 newsletters.corn B-to-B Computer Industry est. launch 10/00 Due to intense interest in the computer industry, Newsletters.com expects to contract and carry a large number of research reports and conference transcripts. Typical newsletters will include Esther Dyson's Release 1.0. Typical Web sites will include Red Herring's _5. Total sites 3,400 Sites we'll contract 80 co-brand/267 affiliate Foot traffic 28.9 million Sub products 28 average price $395 One-time products 170 average price $99 2.7 TECHNOLOGY Newsletters.com's technology includes proprietary systems for content management, co-brand and affiliate management, marketing and e-commerce tools, and billing and fulfillment. The Company has also developed an extensive intranet and will continue to develop extranets for its publisher and Web partners. Major post-funding plans include enhancing system redundancy/disaster recovery and network redundancy systems. The Company will also upgrade its security, Web servers, database hardware and internal file servers. In addition, the technical team plans to purchase network and storage scalability and an ICE Content Syndication System. 2.7.1. EXISTING HARDWARE & SOFTWARE SYSTEMS All Newsletters.com fulfillment, subscription and content management, database and Web application servers have been developed and deployed on the Windows NT platform. Microsoft's Internet Information Server 4.0 serves as our Web server software of choice and Microsoft's SQL Server 7.0 handles our database needs. This platform benefits Newsletters.corn because software developers specializing in Microsoft technologies are readily available, the software is affordable and there is a plethora of Windows NT and SQL Server development tools. Hardware Our servers consist of one dual-processor Windows NT server that serves as a Web and FTP server, a single-processor system running SQL Server 7.0 and Software.com's Post.Office email server, and a Custom-developed Firewall system running BSDi and Network Associate's Gauntlet firewall software. Our internal 100BaseT network is divided into a service network and a secured network. The service network houses all externally accessible systems such as our Web server, database server and e-mail server. Employee workstations, intranet and file servers are deployed on our secured network and cannot be accessed outside the network. Software The following systems have been developed by the Newsletters.com software engineering group to integrate the unique features of our business with the Web: 15ibid Business Plan Page 13 newsletters.com Content Management • A content categorization system that supports an arbitrary number of vertical markets and market niches. • • The capability to store content in any format including but not limited to Adobe Acrobat, XML, HTML, and ASCII text. A drag-and-drop content publishing mechanism that simplifies and speeds the process of inserting content into our database for sale through our co-branded Web sites. Marketing and E-Commerce • Software that uses an interactive quiz to guide customers to content that is relevant to their preferences and interests. • Custom user registration and personalization system. • E-Commerce software that is capable of selling hard goods, content subscriptions, digital content, and pay-as-you-go subscriptions. Web Partner Management • A co-brand and affiliate management system that has been deployed over our corporate intranet. • Co-brand customization branded Newsletters.com system that allows co-brand partners to edit their own cosites. Content Fulfillment • Extensible software that will permit us to quickly add fulfillment instructions for any product sold on our Web sites or through our co-brands. • Handles coordination of orders between Newsletters.com and publishing partners. Newsletters.corn • • • Intranet Custom developed to address our content, user, publication, and affiliate management needs. Handles internal contact management, corporate communications and project management. Provides content management functions that control the featured content on our Web sites and co-brands. 2.7.2. FUTURE HARDWARE & SOFTWARE PLANS The main focus of our technology plan is to design and build all systems that will easily scale to meet the demands of partnering with thousands of Web sites. Upon funding, Newsletters.corn plans to co-locate its systems with a co-location and managed services company such as: Digex, Exodus, or Global Center. Post-funding Hardware plans include: • Improvements in system redundancy and disaster recovery. • A scalable storage solution. • Network redundancy. • Additional load-balanced Web servers. • Clustered database servers. • New internal file server. Business Plan Page 14 newsletters.com Future Software plans include: • Usability improvements to our Web site(s). • A multi-vertical architecture that will allow us to quickly roll-out new vertical sites. • A publisher extranet that will facilitate better communication between publishing partners and Newsletters.com. • ICE Content syndication system. • Self-publishing capabilities. • Broadband video and audio content. 2.8 CUSTOMERS OR PURCHASERS OF THE PRODUCT 2.8.1. KEY INFORMATION BUYER TRENDS The Expert Information Marketplace has a projected growth rate of 12% over the next three years due to four major trends:16 Growth of Online Information Buyers The Internet now provides a way for one intermediary -- like Newsletters.tom -- to costeffectively gather and distribute information products to a wide audience. Traditionally, information publishers sold their products via direct marketing offers on a dollar-for-dollar basis. In other words, they would only risk marketing campaigns that returned a dollar for every dollar spent. This kept their pool of potential buyers artificially small for two reasons. First, because marketing efforts were limited to customers who preferred purchasing via direct mail. And second, because publishers would only risk mailing to "proven" lists of prior information buyers. Newsletters.corn breaks these old marketing paradigms and capitalizes on consumers' new buying preferences. Many information sellers on the Web such as the Wall Street Journal have already demonstrated that Internet marketing and fulfillment have opened the open the door to millions of dollars in new sales that would not have been possible via traditional methods. For the first time, information products can be cost-effectively aggregated and marketed to millions of potential customers who are already visiting Web sites looking for information on specific topics. In addition, Newsletters.tom will have co-branded stores located on all relevant sites. The Rising Information Addiction Rate It's common knowledge among publishers that customers often become "addicted" to purchasing information products. The average consumer newsletter subscriber purchases three or more subscriptions at the same time and often on the same narrow topic. This trend was borne out in a 1997 Reuters study that stated "over half of the respondents 'craved' information and almost 50% claimed that if information was a recognized drug, they knew people who would be considered addicts." Three quarters of respondents "believed that PCs, the Internet and information generally would become addictive in the future while 54% claimed to get 'high' when they found information they were seeking." _6Ben Delacroit, Editor, Business Information Markets2002: The Strategic Outlook. 1998. Business Plan Page 15 newsletters.com Newsletters.com plans to become these "infojunkies" online retailer of choice by offering a complete range of expert information products in an easy-to-search store. As Americans' online consumption of "free" information increases, Newsletters.com is confident that there will be an equal increase in the amount of fee-based information that will be consumed Decreasing Information Product Loyalty Industry-wide renewal trends reveal that although customers are loyal to a particular topic, they are less and less likely to be loyal to a particular product. For example, an average of only 30% of customers renew after their first purchase of a specific newsletter. However, they continue to spend subscription dollars on the same topic but will switch products to try a different information source. Newsletters.com will take advantage of this trend by offering an unusual depth of products to each marketplace. The online information store won't stock just one newsletter from one leading expert per topic but will instead offer hundreds of information choices. Newsletters.com will also capitalize on this trend by placing co-branded business information stores in thousands of Web locations. Rising Interest in Business Research Information One of the biggest trends in the business information marketplace is the substantial growth in sales to business researchers. A leading professional research association, the Society of Competitive Intelligence Professionals, has seen its membership grow 353% in the past five years (from 2,363 members in 1994 to 6,694 in 1998). A study conducted by the association shows that business research professionals spend more than half of their working week conducting research and the overwhelming majority (80.8%) use online and Web-based services In addition, 80% of respondents to the above mentioned Reuters Information Addiction Survey said they felt "driven to gather as much information as possible to keep up with customers and competitors." One third said they believed their colleagues were obsessed with gathering information and 43% claimed they continued to search for work-related information while on vacation. With the advent of the Web, consumers have become a small but growing segment of the business research marketplace. Demographics from many sites, including Multex and Medscape, show that consumers are actively seeking access to information that was previously offered only to the professional and business-to-business communities. Newsletters.com will take advantage of this marketplace in two ways. First, by quickly launching into the underserved small business information marketplace. (Many content aggregators sell enterprise site licenses to large companies, but almost none target America's millions of small business people.) And secondly, by cross selling business research publications to its consumer buyers when appropriate. Business Plan Page 16 newsletters.com 2.8.2. KEY WEB MARKETPLACE TRENDS According to Forrester Research, 48 million workers worldwide had Internet access in 1998, and by 2004 this number will grow to 200 million. The consumer marketplace is even larger according to International Data Corporation which projects the number of Internet users will grow from approximately 100 million at the end of 1998, to approximately 320 million at the end of 2002. As of 1998, studies cited by Iconocast newsletter show that consumers and business people spent an average of six and ten hours per week on the Internet, respectively, and more than 50% access the Internet on a daily basis. Rather than cannibalizing their current subscriber base, publishers are finding a larger, new customer base via the Web. For example: • The Wall Street Journal Interactive ($29-$59 year), which has 250,000 paid subscribers as of September 1998, estimates that 68% of its subscribers do not subscribe to any print edition of the paper. • Putnam's Turnaround Letter ($199 a year) has doubled its circulation of 50,000 to a healthy 100,000 since it began to sell subscriptions via the Web in 1995. • AI Frank's Prudent Speculator ($177 year) grew its circulation from 3,500 in 1995 to a current subscriber base of 8,500 by selling via online retailers (including Newsletters.com). Online Subscription Sales of Electronic Products Many companies are also having success selling Web-only information products. Examples include: • Microsoft's Money Central site has 48,000 subscribers paying fees that start at $9.98 per month ($I 19 per year) for premium content. • Dr Weil.com got "several thousand takers" for an online course offered to consumers at $14.95. Total estimated revenue was $45,000 - $55,000. And these sales were made from a site already rich in free content from the Doctor. • Astrology.net draws 500,000 visitors each month and has been profitable since 1998 with sales of more than a dozen personalized reports ($9.95 - $39.95). The majority of revenues are generated by its 500 affiliated sites that receive a percentage of the revenues and "free" astrology-related information (such as daily horoscopes) to enrich their site's content offerings. • Multex sells research reports to individual and institutional investors at prices ranging from $10-$150 per report. • Sportsline USA announced 1998 sales of membership and premium content services in excess of $5 million. (This amount does not include the company's revenue from sponsorships or advertising.) 17 2.8.3. TRADITIONAL PRODUCTS ON THE WEB Traditional print information products are being drawn to the Web by market forces. A Simba study predicts that "as companies become more familiar with publishing on the Internet, the sale of print newsletters should trail off after 2000." The study continues to say that the traditional print loose-leaf providers are under extreme pressure to offer the information in an electronic format. The Simba study also says that most conference and _7Newsletters.com in-house research, 1999. Business Plan Page 17 newsletters.corn seminar producers are convinced that the Web will produce millions in revenues for them in the near future. Leading research report publisher, The Gartner Group (a $511 million company in 1997) has announced that 70% of its clients now receive their information in electronic formats. 2.9 INDUSTRY OR MARKET The overall U.S. Expert Information Market is in excess of $10 billion and is estimated to grow within the next three years to a total of over $12 billion :s. 2.9.1. THE VALUE OF EXPERT INFORMATION This graph shows the increased value of expert (and more costly) information versus free information from various sources. Title: (chart2.ai) Creator: Adobe Illustrator(R) 8.0 Preview: This EPS picture was not saved with a preview included in it. Comment: This EPS picture will printto a PostScript printer, but not to other types of printers. The price of expert information products ranges from $5 - $200 on the consumer side to $100-$25,000 on the business side. Millions of customers buy these products in order to improve their personal lives, careers and businesses by helping them make informed decisions. This form of electronic media has five key advantages over other media (i.e., magazines, newspapers, free online information, etc.) Trustworthiness Customer-focus Created by famous or industry experts. Created to serve customers' advertisers or public relations. needs rather than those of Niche-Oriented Exclusivity Provide tightly focused content that is topic specific. Offers proprietary information in the form of exclusive data and/or expert analysis. _sBen Delacroit, Editor, Business Information Markets 2002: The Strategic Outlook. 1998. Business Plan Page 18 newsletters.com "Must Have"Quality Contains essential, "need to know" information rather than widely available free, "nice to know" information. For example, although there is an abundance of free Web traffic statistical information, industry executives are willing to pay expert providers such as Media Metrix up to $12,000 per month for "must have" proprietary Web traffic information. American consumers are well accustomed to the idea of paying for quality content in an environment that's flooded with "free" (advertising supported) products. The best example of this are the millions of consumers who pay for basic cable channels every month even though there are numerous free broadcast television programs available to them. 2.9.2. MARKET SIZE & CHARACTERISTICS OF EXPERT INFORMATION PRODUCT TYPES Product Sales Chart 1999 B-to-B Business Letters B-to-B Loose leafs B-to-B Research Reports & Services B-to-B Conferences & Seminars B-to-B Single Article Sales Consumer Newsletters $1,195 Billion 1,305 2,130 4,585 n/a 900 2000 1,350 1,380 2,500 5,857 rda 1,017 % Annual Growth 12.97% 5.75% 17.37% 27.74% n/a 13.0% Total Expert Information 10,115 12,104 19.66% l_zu Note: Figures for the multi-billion corporate enterprise marketplace are not includedhere, as Newsletters.com does not plan to enter that marketplace. More than 80% of newsletter publishers have discovered that it's cost-efficient to sell a variety of similar expert information products because all will share similar customer profiles and similar demand. The same industry experts will often also be the ones creating the products. (For example, Jupiter Communications produces newsletters, research studies and conferences.) Newsletters.com online. will be the only aggregator in most markets to sell all product types There are five types of Expert Information Products that can be divided into two basic fulfillment categories: subscription-based products that are fulfilled over a period of time and one-time products that are fulfilled once. After an initial start-up period, Newsletters.com expects to carry a total of 1,600 subscription products and 4,500 onetime products serving its 11 marketplaces. 19ibid 20Newsletters.com in-house research, 1999. Business Plan Page 19 newsletters.com 2.9.3. EXPERT INFORMATION PRODUCTS Subscription Newsletters The subscription newsletter market consists of close to 11,000 fee-based newsletters produced by a fragmented group of more than 2,000 publishers. The market is projected to be worth $2.1 billion in 1999 growing to $2.4 billion by 2002. The majority of sales dollars are from the business-to-business marketplace at an estimated total of $1.2 billion for 1999. Newsletters.com will take advantage of this opportunity by aggregating newsletters from a majority of publishers into interest-specific, easy-to-search, online information stores. Because millions of consumers do purchase traditional, print newsletters on a wide variety of topics such as health, pets and parenting21. Our research shows that currently there is no other online aggregator of consumer newsletters except in the investment marketplace. Subscription Loose-leaf Services The business loose-leaf market offers approximately 1,788 products. Valued at $1.2 billion in 1997, the market is forecast to rise to $1.4 billion in 2002. Loose-leaf services are information products that subscribers receive updated pages throughout the year and usually keep for reference in a binder. There are no statistics available on the consumer loose-leaf market at this time, however unlike the business market these products are usually sold in continuity plans22. Newsletters.tom will take advantage of the business-to-business loose-leaf market by aggregating loose-leaf services from various publishers onto its interest-specific online information stores. The Company will examine consumer market opportunities at a later date. In the meantime, Newsletters.corn expects to make substantial sales particularly in the legal and legal/regulatory loose-leaf markets. One Time Products: Research Reports, Market Studies & Special Reports The business-to-business research report and study market was $1.9 billion in 1997 and is forecast to grow to $2.5 billion in 2002. There are approximately 1,000 publishers of these products, from large players like the Gartner Group and Find/SVP to hundreds of cottage-industry players. (In fact, the majority of smaller players are industry experts formerly employed by the bigger players.)23 Research reports and market studies are sold mainly to the business marketplace for prices ranging from $200 - $25,000; the typical product is priced around $2,000. Special reports are sold mainly by associations or serve as "free gift with subscription" premiums for newsletter publishers and range in price/value from $10-$8024. In addition to aggregating and selling currently published reports, Newsletters.com will also create new special report products by bundling other aggregated content. This tactic has proven to be successful in the newsletter publishing arena with on the newsletter products like the "Top 50 Case Studies from PR News" achieving best-seller status. 21Ben Delacroit, Editor, Business Information Markets 2002: The StrategicOutlook. 1998. 22ibid 23ibid 24ibid Business Plan Page 20 newsletters.com Conferences and Seminars American companies with 100 or more employees spent $3.59 billion on small conferences and seminars in 1996, an increase of 18.4% from 1995. Using a conservative estimate of 8.5% growth _er year, we project sales of $4.6 billion in 1999 and $5.9 billion by 2002 in this market 2 . Unlike the trade show marketplace, these conferences focus on presenting niche-topic speakers to a select paying audience rather than attracting crowds to vast exhibit halls. Newsletter and research report buyers are among the best markets to cross-sell conferences to because they are proven niche information buyers. Additionally, wellknown newsletter editors are often speakers at these events. Newsletters.com will to take advantage of this opportunity by initially offering text transcripts of key speeches from experts within each industry through its online information stores. In the future, we will expand our content offerings to include broadband audio and video sales and fulfillment capabilities. Many event producers already make ancillary profits from event transcripts and they have expressed willingness for them to be sold by third parties. Based on our research, Newsletters.com is the only expert information aggregator that is currently planning to sell these products via the Web 26. Single Article/Issue Sales Although there is no firm data available on the total market size for single article and single-issue sales, 80% of newsletter publishers report income from one or both of these sources. Aggregators such as Lexis/Nexis have proven that both consumers and business people are interested in single information items. Newsletters.com estimates that 5% of the Company's sales will be generated by single article/issue purchases. The price for these products will be low (from $5 - $35) but Newsletters.com expects substantial customer interest in them. 2.10 COMPETITION Newsletters.com will win with a superior product mix and uniquely customer-centric marketing. 2.10.1. NEWSLETTER.COM'S COMPETITIVE ADVANTAGES Newsletters.com has two major competitive advantages that will enable it to succeed over other content aggregators and other Web-based information stores: a superior product mix and its uniquely customer-centric marketing strategy. 2.10.2. Superior Content Mix Newsletters.com online information stores will stock their shelves with an unusual depth and breadth of high-quality content. 25ibid 26ibid Business Plan Page 21 newsletters.com Guaranteed Quality Newsletter.corn's product quality is an enormous customer benefit in an age when many information sources on the Web are less-than-expert or influenced by advertisers. Unlike many other aggregators who mix in lower quality information content (i.e., newswires, local newspapers and trade journals), Newsletters.com only offers highquality information that has been created by an industry expert not an advertisingsponsored environment. Respected, industry experts will write all of the Company's offerings. Customers have four tools to help them evaluate each expert's value for themselves. Beginning with in-depth expert profiles, free samples of each expert's work, product reviews by a Newsletters.com in-house topical authority and product reviews from actual customers. Depth & Breadth of Product Mix Newsletters.com is the only online information retailer currently planning to offer the complete range of Expert Information Products. The company will sell a total of 1,600 subscription products and 4,700 one-time products by the end of the year 2000. Although many aggregators carry business-to-business newsletters, studies and consumer finance newsletters, few (if any) also carry the following useful Expert Information Products: • • • Audio transcripts of conferences and seminars. Consumer products like special reports and newsletters on topics outside the investment arena. Products from a wide range of experts in each industry versus just offering the top 10. 2.1.3.CUSTOMER-CENTRIC MARKETING Unlike many other online information stores that can be difficult to navigate, Newsletters.com store sites are designed and built around the needs of the customer. Complete Suite of Customer Search Tools Many competitors' site don't offer much more than a "search" button for their customers' needs. However, Newsletters.com will offer a variety of tools for quick and easy customer searches. These tools will include: • • • • • • • Interactive survey to learn what product is right for each individual's needs. Intuitively organized content categories. Top 10 Best Seller lists, customer and Newsletter.com product reviews. "Degree of difficulty" content ratings for technical subjects. 24-hour online customer service. Cross-referenced recommendations. Personalized email alerts on new products. Business Plan Page 22 newsletters.com Targeted Information Stores Most Web information stores, such as Powerize and eLibrary, carry all their products on all topics in a single "information store" or "online library." Newsletters.com knows this is an ineffective strategy for two reasons. First, customers do not want to wade through information unrelated to their interests. That is why Newsletters.com will develop 12 targeted online information stores. Each one is designed to cover a specific industry or topic area. Everything in each store -from the experts profiled to daily special offers to the Top 10 Bestsellers list -- is targeted to a specific marketplace (i.e., women, pet owners, small business owners, legal professionals, etc.). Secondly, most information customers don't even think of themselves as "information customers." Instead, they are simply people searching for a "solution" to a problem. Again, Newsletters.com information stores are designed to help customers solve their individual problems. Each store will offer targeted introductions to the experts best suited to customers' needs rather than simply offering one giant library of information that customers must wade through. Instead of being relegated to the typical information store dead-end, Newsletter.com online information stores will be located everywhere on the Web where potential customers are already visiting. (Hence the Company's slogan, "We Are Where You Are.") For example, the Newsletters.com: Finance store appears on hundreds of highly trafficked personal finance Web sites such as National Discount Broker and StockPoint. Web marketing metrics reveal that marketing placed in contextually relevant sites do pull significantly higher results. Therefore, Newsletters.com will integrate co-branded versions of its online information stores into a total of 3,156 high-traffic, relevant Web sites by the end of 2000. 2.10.4. SPECIFIC COMPETITORS There are six main types of competitors in the content aggregation or Web information sales business. However, as detailed below, very few match Newsletters.com's business or marketing model. Business Information Aggregators Selling to Corporate Enterprises These include DowJones/Reuters Interactive, Newsedge, Lotus Notes, SageMaker, Westlaw, Bloomberg, Dialogue and Lexis/Nexis. Their business models are based on selling "buckets" of information to large organizations' Intranets. Unlike Newsletters.com, they do not target medium and small business or consumers. Their product mix includes a generous portion of non-expert content (i.e., newspapers and press releases) but they do not generally carry consumer content or conference/seminar transcripts. They also do not market or sell information as individual products or provide users with detailed information about the content's original creator. Newsletters.com Advantage: Even if these players decided to enter the Web information store arena, they would need to change their product mix and marketing techniques substantially to compete effectively with Newsletters. com. Business Plan Page 23 newsletters.corn General Information Aggregators Selling Online These include Gale Group/IAC, Powerize, Newslettersonline, Publications Research Group, Frost & Sullivan and Infonautics. They sell individual products or database "subscriptions" to aggregated information. The majority of their content is business-tobusiness. Few have more than a single Web store. None have category-specific stores. Their product mix is incomplete or "muddied" with some carrying only market research products and others carrying only low quality information. And, none features a wide range of customer search tools. Newsletters.corn Advantage: Newsletters.com "customer-focused" than these players. is designed to be considerably more Specific Category Aggregators Selling Online These include Investools, Dick Davis, Multex, AllNet Research (Internet.com), Hoovers, Health Information Network and Web-Vantage. They sell quality information products on a single category such as personal investing or competitor information. None of these have launched stores in topics outside their current fields. None carry a complete range of products. Some just carry newsletters; others just special reports. Newsletters.corn Advantage: Newsletters.corn will have first-mover advantage in categories where none of these competitors currently inhabit. Newsletters.com will already have the greater selection of product offerings in categories where they go headto-head with the competition. Content Owners Selling Content via the Web These include Phillips Publishing, Cowles/Simba, TheStreet.com, the Wall Street Journal, New York Times and hundreds of smaller publishers. Some are more successful and Web-savvy than others, however most refuse to sell anyone else's content but their own. Newsletters.corn Advantage: Content owners with unusually strong brand names who have already found a measure of success on the Web will probably continue to remain on their own. Others who will have only moderate success selling content via their Web sites are prime aggregation targets for Newsletters.com 's. Subscription Service Bureaus These include Rowe, Ebsco and Faxon. These companies generally do not aggregate content, fulfill content, sell non-periodical products or sell to individuals. Their primary business model is to act as an intermediary between publishers and professional librarians. Librarians use their services, often at a cost above that of actual content prices, to consolidate and maintain orders for periodicals. Newsletters.corn Advantage: Although these bureaus appear to be Newsletters.corn's direct competitors, they are in a very different business and are unlikely to enter our arena in any substantial way. Online Magazine Newsstands These include eNews, Freeshop, Magazines Online, Publishers Clearing House, GrapeApe and several others. They sell subscriptions and occasionally current issues of consumer magazines via stores on the Web. Few have aggressive affiliate programs or a Business Plan Page 24 newsletters.corn large Web presence. Most have interactive tools to enable customers to choose products. However, none provide instant gratification of an information need via online fulfillment, none have experience selling high-priced information products and none have opened category specialty stores. Newsletters.corn Advantage: As many traditional, print publishers have discovered, selling and fulfilling magazines is a very different business than selling and fulfilling Expert Information Products. In order to enter Newsletters.com's business, these players would have to build new fulfillment systems and commit substantial resources to implementing new product marketing techniques. They are more likely to become allies of Newsletters.com than head-to-head competitors. 2.11 MARKETING & BUSINESS DEVELOPMENT Newsletters.corn's marketing strategy slogan." "We Are Where You Are" Newsletters.corn is focusing its marketing efforts in an aggressive yet cost-effective strategy to place its information stores everywhere on the Web where millions of potential customers are already visiting (see APPENDIX G). In essence, Newsletters.corn's stores will become "the" information stores of the Web - ubiquitous and impossible to miss - no matter where you happen to visit. The Company will open 3,000 co-branded information stores within the next 15 months. The Company's aggressive "We Are Where You Are" marketing strategy will attract new customers and offer cross-sell opportunities. Its highly personalized "My Newsletters.corn" retention program will provide value-added services designed to create customer loyalty and build lifetime value. % of New Sale Expected for Each Channel 1% 25% IIIAffiliate U Web Co-Brand 0 Syndication, PR, Email & Viral Marketing 2.11.1. WEB CO-BRANDS & AFFILIATES Newsletters.corn will generate 75% of new traffic and sales via an aggressive Web partnership program. This program has been developed to take advantage of the millions of consumers already visiting Web sites related to Newsletters.com's 11//12 planned information stores. Instead of forcing customers to come to just one central Newsletters.corn store, the Company will place stores on sites that visitors already frequent. Business Plan Page 25 newsletters.com The company has two types of alliances with Web sites: co-brands and affiliates. Web Co-Brands Newsletters.com is aggressively pursuing co-branded relationships with sites that receive more than 250,000 page views per month from visitors specifically interested in a related Newsletters.com information store category. (See APPENDIX G.) The co-branded site owners will benefit by receiving both 20% of gross traffic-generating appeal of continually updated expert information Newsletters.com free headlines and article sampling program.) Currently, has 142 such arrangements (see list in APPENDIX D) and plans to open 3,200 co-branded stores within 15 months. sales and the content (via the Company an additional Unlike typical affiliate relationships which involve merely placing a hotlinked banner that will direct sales back to your site, participating co-brand sites will actually contain a complete Newsletters.corn-powered expert information store within their site. This store has all the features of a Newsletters.corn store, carefully maintaining a co-branded logo and color scheme of the Web site it appears within. This arrangement has two major benefits. First, Newsletters.corn benefits from the relationship the host site has already built with its visitors and also increases their degree of trust and interest in the store's products. Second, research reveals that many Web visitors dislike clicking on banners and links that "take them someplace else," this cobrand design will certainly increase visitor acceptance because customers appear to still be on the original host site. Newsletters.com will maximize traffic click-throughs on co-branded sites by creating coop marketing campaigns -- an ongoing series of direct response banners, buttons and email advertisements which our co-branded partners can use within their sites and in their own emailed newsletters. The Company will use professional co-op marketing account representatives to encourage all of our top 100 co-brands to implement these tools. Web Affiliates Newsletters.com offers affiliate relationships to smaller Web sites that are specifically geared to one of the Company's topical information stores. The sites receive 10% of gross sales from all customers they direct to a Newsletters.com store. Currently, the company has 123 such arrangements and plans an additional 13,000. While these arrangements will only account for approximately 2% of total traffic and sales, they are a reliable method to generate brand awareness at a minimal cost. Therefore, Newsletters.com is setting up inexpensive, scalable, automated systems to generate, maintain and serve these relationships as cost effectively as possible. 2.11.2. SYNDICATION, PUBLIC RELATIONS & VIRAL MARKETING Newsletters.com expects 25% of its new traffic and sales to be generated via aggressive syndication, public relations and viral marketing campaigns. These campaigns send a message to interested Web visitors using the store's "free sample" article program as the offer. (For information on email campaigns to customers and returning visitors, please see the "Customer Retention" section below.) Business Plan Page 26 newsletters.com Syndication Newsletters.com will use two different "syndication" techniques to increase traffic. The first is a free "headline box." This box is the size of a typical vertical banner and contains the latest "free sample" headlines from a Newsletters.corn information store. Visitors who click on the headlines will be hotlinked directly to the complete free story which will be surrounded by Newsletters.corn product marketing materials and purchase offers. This free headline box will be offered to all Web sites by the first quarter of the year 2000. Newsletters.com expects the majority of its projected 17,000 affiliates will choose this option. In the second type of online syndication arrangement, sites will agree to distribute Newsletters.com's frequently updated "free sample" articles to related sites via their networks. The articles will contain hotlinked action-buttons that readers can use to visit Newsletters.com's information store to learn more about its expert information products. The Company already has signed contracts with several major content syndicates, including iSyndicate, Planet Direct, Screaming Media and Infospace. Public Relations Expert Information Publishers such as Jupiter Communications and Phillips Business Information have proven that public relations campaigns can directly generate Web traffic and sales. Unlike traditional public relations where the goal is to influence the press, online public relations is aimed at placing releases in online news feeds that the general public will see directly. For example, releases carried by BusinessWire are automatically fed to more than 800 key Web news sites including Yahoo! News where both consumers and businesspeople go for information. A carefully worded release announcing a new "free report" by an industry expert can draw thousands of visitors in less than an hour. For example, many human resources professionals would click on a link to learn more about a new report with proprietary information on the latest compensation trends. Viral Marketing Campaigns Each of Newsletters.com's "free sample" articles includes a visibly placed offer for readers to "send this article to a friend." Using a technique similar to that used by the highly popular Blue Mountain Arts Web site, the "friend" will receive an email with the name of the person who referred them along with the URL where they can obtain their free article. This destination URL will feature a My Newsletters.com page personalized for the recipient along with marketing offers for other related information products. 2.11.3. CUSTOMER EXPERIENCE Newsletters.com's online information stores will use a variety of proven techniques to maximize click-through conversions (i.e., persuade a high percentage of visitors to actually purchase a product.) These strategies include the following: Business Plan Page 27 newsletters.com Benefits Copy, Free Premiums and Other Information Marketing Best Practices Marketers in every industry agree, you "sell the sizzle, not the steak." To that end, Newsletters.com will go beyond simply offering free content samples to utilize a fullrange of benefits-orientated marketing techniques. These will include "free premium" offers with paid sale and "limited time" special offers -- designed to move customers to take action and purchase the product. Customer-Focused Store Design Newsletters.com's stores will be designed with the customer experience foremost in mind, including easy to navigate, quick download speed and 24-hour live customer service support. Stores will also feature easy-to-find information on guarantees, privacy policies and order security. Products Chosen & Reviewed by an Industry Specialist Newsletters.com will hire a Producer for each online information store. The Producer will be responsible for choosing and marketing a constant supply of quality information products that will appeal to his/her specific marketplace. Also, the Producer will create new product offerings by bundling aggregated content into other formats (i.e., special reports). The benefit of this approach is that every store's stock and daily displays will be selected and managed by a specialist who understands that marketplace and know what information products will appeal to customers. Promote Industry Experts Unlike other content aggregators who often don't list the original author or content provider, Newsletters.com will promote and highlight each industry expert. Stores will include pictures, biographies, exclusive interviews and customer comments for all experts. The Company believes this strategy will the various authors and will therefore promoting the credentials and expertise demonstrates that it truly is providing top create the feeling that customers actually know trust these expert sources. In addition, by of its industry experts, Newsletters.com also quality information from the top. Tools that Make the Purchasing Process Easy Each store will feature a variety of tools to make it easy to select and purchase information products. This is critical because each store will carry a large number of products. Web site tools will include: online surveys, useful search engines, intuitively categorized product catalogs, cross-referenced products, detailed product descriptions, product reviews by customers and 24-hour live customer service. 2.11.4. CUSTOMER RETENTION & RETURN MARKETING Available e-commerce metrics indicate that popular Web retailers can expect to generate approximately 50% of their sales from return customers. Newsletters.com has budgeted to hit this mark within a year of each store launch. The Company will use the following techniques to reach this goal: Business Plan Page 28 newsletters.com Permission-Based Personalized Email Newsletters.corn plans to deploy aggressive, permission-based email marketing campaigns to increase sales from visitors and buyers who fill out request forms. These campaigns will include: • HTML formatted messages to those whose systems can read it. • Personalized announcements of items of specific interest to the recipient. • Teaser copy and links to new expert information products. The Company will build an extensive in-house visitor and customer database to allow it to personalize and target email messages. The Company will also be testing email formats and techniques to maximize response rates. Newsletters.com has specific privacy, anti-spam policies and systems in place to encourage visitors and customers to join our email programs without fear. My Newsletters.com Each customer, email recipient and viral marketing recipient (as described above) will automatically gain access to a personalized section of the Newsletters.corn home Web site. This section, titled, "My Newsletters.corn" will include these types of features: • Electronic fulfillment of their latest issue and/or other purchases. • Searchable archives of all previous issues and items purchased. • A virtual "filing cabinet" where customers can keep and organize content clippings from items purchased. • Special offers for new products related to their areas of interest. • An upcoming events calendar. • A personal news alert service. • The ability to purchase single issues and/or articles to forward to friends. 2.11.5 CURRENT STATUS After spending 18 months building scalable, proprietary technology and back-end systems, Newsletters.corn is now ready to start on the next stage of its plan to build a 3rd generation e-commerce enabled store and drive millions of potential customers to it. The Company is in the process of hiring an experienced online information marketer to head the marketing and business development team and implement its aggressive marketing plan (as described above) designed to generate an aggregate of $500 million in gross revenues over the next five years. 2.12 PRODUCTION & CONTENT MANAGEMENT One of the biggest challenges to aggregating content from multiple sources is the ability to convert all the information into usable digital formats and manage the files efficiently. Newsletters.corn has developed scalable content management systems to accomplish this task. The Company is researching many ways to improve content management efficiency and will probably outsource a portion of this work to specialty service vendors. (See the Technology section for more information.) Business Plan Page 29 newsletters.corn 2.13 LABOR FORCE & EMPLOYMENT In addition to the Management Team mentioned in Section 3.0, the Company is staffed with two full-time software developers, three full-time content managers, one full-time Director of Relationships, one part-time affiliate manager, and one part-time bookkeeper. The Company will require additional staffing to expand its operations and to successfully enter other vertical markets. The Company's close proximity to the University of Maryland ensures a steady, lowcost supply of skilled labor. APPENDIX H includes Newsletters.com's current organizational chart along with three-month, six-month and one year projected staffing needs post institutional financing. 2.14 CONTRACTORS To accelerate the time to market, it will be necessary for the Company to hire contractors to perform certain functions of business operations. After an infusion institutional funding, the Company is contemplating hiring an outside Web design and analysis firm to assist with our Web development process. Outsourced tasks will include current design analysis, design of future Web sites, usability testing and graphic design. In addition, the Company is considering outsourcing some of its content management and conversion functions to reduce salary and liability overhead. Other business functions may be outsourced from time to time to reduce overhead and or to speed up a product time to market. 2.15 EQUIPMENT In addition to basic office machinery, the Company makes large equipment purchases when necessary to help perform basic business operations. These types of equipment purchases include (but are not limited to): desktop computers, Web servers, routers, switches, hubs, and high-speed scanners. Most Company equipment is financed by capital leases, of which the Company has remained current with all capital lease payments. It will be come necessary in the future for the Company to purchase additional equipment to help expand its current operations. (Please see the Use of Proceeds section for additional information.) 2.16 PROPERTY & FACILITIES Currently, the Company maintains one office suite that is approximately 1,800 square feet at a cost of $29,460 per year in rental fees. The building, located in College Park, Maryland, was chosen for its close proximity to the University of Maryland to ensure a supply of inexpensive technical labor. 2.17 PATENTS & TRADEMARKS Newsletters.com filed a patent application with the USPTO on June 3, 1999 entitled "Pressure and Method For Syndication Of Information To Sites For Publication." The invention was designed to create multiple points of sale for specialty content, by way of syndication, such that partner sites allow content to be purchased using the partner sites "look and feel," and transactions are processed through the Newsletters.corn commerce system. The patent has been assigned, with all rights, to the Corporation. Business Plan Page 30 newsletters.com 2.18 RESEARCH & DEVELOPMENT We are constantly researching new developments in hardware and software that will allow us to better serve our users, publishers and affiliates while also improving system scalability, reliability and availability. Today, our research efforts are focused on these projects: • The development of a content syndication system. • Self-publishing. • Distribution and sale of broadband audio and video content. 2.19 LITIGATION Newsletters.com is not currently aware of any current or pending litigation against the Company, nor is it engaged in any litigious activities against another company or individual. 2.20 GOVERNMENT REGULATIONS Newsletters.com is currently unaware of any current or pending federal, state, or local laws/regulations that will prevent it from conducting its current or future operations. 2.21 CONFLICTS OF INTEREST To date, the Company has two investors who have family relationships with the President of Newsletters.com. Andrew Gold is a major shareholder and Director of the Company. In addition, the Company's Chief Executive Officer has a family relationship with the Company's general legal counsel who sits on the Company's Board of Advisors. 2.22 DEMAND There are approximately 300 publications that have yet to be implemented on Newsletters.com's co-branded sites. The reason for this backlog is due to the Company's timing of entering several other vertical markets and its lack of funds to hire technical personal. 2.23 TAXES Since the Company's inception, the Company has not yet had to pay state, local, or federal income taxes because of its losses. The Company has remained current with its payroll taxes and uses ADP for its payroll processing needs. 2.24 CORPORATE STRUCTURE Historically, the Company's original corporate structure was a sub-chapter "S" so its small number of investors could personally take advantage of its fiscal losses. In April 1999, the Company's Board of Directors voted to change the corporate structure to a "C" Corporation allowing the Company to attract a greater number of investors and institutional ownership. Business Plan Page 31 newsletters.com 3. Management 3.1 DIRECTORS & OFFICERS Board of Directors Ari Jacoby, Chairman Elie Ashery, Director Jeff Osborn, Director/Investor Jeff Osborn has been involved in the networking business and the Internet since 1983. He was employed by UUNET Technologies, Inc., the world's largest Internet Service Provider, from 1993 to 1997 in roles including Director of Sales and Marketing, VP Sales, VP Sales and Systems Engineering, VP Sales and Service, and VP International Sales. Annual company revenues in this period grew from $8 million to $600 million, and market capitalization from $30 million to nearly $3 billion. Mr. Osborn currently manages Osborn Capital, and is an early investor in HarvardNet and ArrowPoint Communications. Doug Humphrey, Director/Investor Doug Humphrey is the founder and former CEO of Digex, one of the first Internet service providers to specialize in serving businesses. After taking the company public, Digex was sold to Intermedia Communications (NASDAQ:ICIX). Mr. Humphrey immediately started his second venture Skycache, Inc., which was recently been funded by The Carlyle Group, Intel, IVP, and NEA. Jonathan Silver, Director Jonathan Silver is a General Partner in Commonwealth Holdings, Inc. (CHI), a diversified private investment partnership with interests in technology, financial and professional services, communications, and the health and fitness industries. CHI, and Silver individually, invest in, acquire or provide financing for small to mid-size growth companies. In addition, CHI, and Silver individually, assist portfolio companies with strategic planning and management support. The portfolio has returned in excess of 35% annually since its inception. Steve Walker, Investor Steve Walker is the founder of Trusted Information Systems and a pioneer in information systems security. After taking the company public, it was sold in 1998 for $350 million. Mr. Walker is the recipient of several awards including KPMG's "1998 High Technology Entrepreneur Award". Mr. Walker is currently the president of Steve Walker & Associates in Glenwood, MD. Advisory Board Mark Goldberg, President, Bioventures LLP Barry Unger, Professor of Business at Boston University and co-founder of the MIT Forum. Eiliott Blatt, VP Marketing, Ariel Research Corporation. Steve Walker, President, Steve Walker & Associates. Founder of Trusted Information Systems. 3.2 KEY EMPLOYEES Ari Jacoby, CEO Ari Jacoby is currently responsible for approaching institutional investors, managing The Company's public relations activities and creating partnerships with major multi-vertical Web sites. Prior to founding Newsletters.corn, he worked for Congressman Joseph P. Business Plan Page 32 newsletters.com Kennedy (D-MA), Senator Robert Dole (R-KA), and Vice President AI Gore. While at college, he founded a profitable wholesale ticketing company and grew it to the largest of its kind in the Washington metropolitan area. Mr. Jacoby is a graduate of Georgetown University with a degree in Government. Elie Ashery, President Elie Ashery is currently responsible for the Company's general management as well as handling all private and angel investors. His prior experience includes two and half years as a financial analyst and investment researcher for Newby & Co. -- a brokerage firm specializing in small cap securities. Mr. Ashery also marketed a new networking division of LZR Electronics, Inc., a distributor and manufacturer of electronic components. He is a graduate of the University of Maryland with a degree in Finance. Richard Kilcoyne, VP, Technology Richard Kilcoyne is responsible for supervising the technology and content management teams and managing all technology research and development, including intranet, extranet and Web. Previously, he founded and led Datafront, Inc., a company that provided businesses with Web-based business applications. Datafront joined forces with Newsletters.corn in March 1999. Prior to Datafront, Mr. Kilcoyne founded the Intemet Group at Automated Graphic Systems - a nationwide printing and graphic communications company. Mr. Kilcoyne's technical expertise includes proficiency in several commercial programming environments as well as relational database systems, component-based development and Internet technology. He is a graduate of the University of Maryland with a degree in Computer Science. The Company is in the process of hiring more experience Management team. management to lead the Professional Services Newsletters.corn does outsource all of its legal work, auditing, and other professional services to highly regarded firms in the Washington, DC-area. Most of the firms have agreed to aggressively lower their fees in exchange for a pledge that the Company will use their services in good faith as it grows. (A list of these firms and their contact information is located in APPENDIX F.) 3,3 MANAGEMENT & FIDELITY The Company has not been implicated in any criminal or civil action, nor is the Company in the process of, or contemplating starting bankruptcy proceedings. 3.4 REMUNERATION Due to limited funds, certain employees of the Company have been receiving wages significantly below comparable industry positions. Therefore, in order to retain key management and staff, the Company will experience an increase in salaries post institutional financing. (Please see Section 7 that outlines management and staff salaries.) Business Plan Page 33 newsletters.com 3.5 STOCK OPTIONS PLAN In April of 1999, the Company's Board of Directors voted to adopt both a "Standard Form of Newsletters.corn, Inc. Incentive Stock Option Agreement" and a "Standard Form of Newsletters.tom, Inc. Non-Qualified Stock Option Agreement." The Board of Directors also voted to reserve 23.7% of the Company's common stock, fully diluted, as a stock option pool. The Company plans to use its stock option pool to attract qualified management and to incentivise and retain key employees. 3.6 PRINCIPLE SHAREHOLDERS To date, there are three principle shareholders that own more than ten percent of the shares outstanding fully diluted. Ari Jacoby and Elie Ashery, Company CEO and President, respectively each own 17.5%. Company Director Andrew Gold owns 11.3%. For additional investors, please see the Company's capitalization table which is available upon request. 3.7 EMPLOYEE AGREEMENTS The company currently has one employment agreement with Richard Kilcoyne, Vice President of Technology. The agreement outlines annual compensation and stock option provisions. Details of the agreement are available upon request. Business Plan Page 34 newsletters.corn 4. Description 4.1 FINANCIAL STRATEGY of the Financing It is the Company's goal to raise roughly $4 to $5 million of equity and or debt financing to expand its operations to become an industry leader. The funds raised will be used to expand its current business development efforts with publishers and web sites, obtain additional computer and networking equipment, and hire the necessary personnel to run the Company's operations efficiently. (Please see the Use of Proceeds section.) 4.2 CAPITAL STRUCTURE To date, Newsletters.corn has 5,481,871 common shares outstanding and 15,000,000 common authorized shares by its Board of Directors. Since the Company's inception, the founders have raised a total $635,000 in equity financing. Total long-term liabilities equal $60,000, of which most are capital leases used to finance computer and networking equipment. Summary of Projections 2000E Revenue I] EBIT 4.3 $4,119,739 ($5,299,913) 2001E $30,141,409 $1,845,832 2002E $46,833,768 $4,102,539 2003E $70,763,598 $11,975,148 2004E $106,887,312 $25,214,651 USE OF PROCEEDS This is a combination of Capital Expenditures and Staff. (See Financial Models & Projections in section 8.) 4.4 INVESTOR INVOLVEMENT Newsletters.corn will allocate Board of Directors seats for new major investors in this round of financing. Business Plan Page 35 newsletters.corn 5. Risk Factors 5.1 LIMITED OPERATING HISTORY As the Company has a limited operating history (19 months), it can be difficult for investors to determine the potential future value of the Company and its assets. Therefore, Management insists that its investors are qualified investors willing to accept a substantial risk associated with their investment in the Company. 5.2 LIMITED RESOURCES As a result of large anticipated capital expenditures, the Company will not have the necessary funds to continue its operations. Therefore, it will be necessary for the Company to seek additional rounds of equity and or debt financing until the Company is able to sustain and grow its operations internally. (Please see the Company's financial projections in section 8 for further explanation.) 5.3 LIMITED MANAGEMENT EXPERIENCE The Company is currently managed by its founders, Ari Jacoby (CEO) and Elie Ashery (President), both of whom have limited managerial experience. Once the Company has obtained the funds necessary to expand its operations, it plans to hire an experienced Chief Executive Officer and Chief Financial Officer. (Please see the projected organizational chart in section 8 for additional information.) 5.4 MARKET UNCERTAINTIES The Company is subject to market forces (the demand for high value information) of which could have an adverse affect on the Company's operations. The main concern management has with current market conditions is the augmentation of demand for high value information via the Internet. In addition, Management is also concerned with the supply of publishers in various verticals and the availability of newsletter content to achieve certain vertical market penetration. 5.5 PRODUCTION UNCERTAINTIES Management is concerned with publishers' ability to supply their content to the Company on a timely basis. In addition, the Company must rely on content to be supplied from hundreds of publishers and it has already encountered numerous challenges with format compatibility and conversions. As a result of these inadequacies, the content management process is slowed from time to time. Market forces that impede the Company's content flow could have a material affect on its operations. 5.6 DEPENDENCE ON KEY MANAGEMENT As top management does play a critical role in the Company's growth and vision, it would be a temporary setback in the event of termination or death of key personnel. However, the Company's operations are not solely dependent on one particular individual and could survive any of the aforementioned. Business Plan Page 36 newsletters.com 6. Return on Investment and Exit 6.1 STRATEGY FOR CREATING SHAREHOLDER FOR NEWSLETTERS.COM VALUE 6.1.1. VALUATION METRICS Most industry analysts believe that on-line aggregators will be the most profitable on-line content and commerce businesses 27. Aggregators account for more than 50% of Internet traffic and time spent on-line, supporting the two biggest activities of Internet users: searching and using content. Because the major asset of the Internet aggregators is the strength of their brands, valuation models for Internet companies in general are difficult to define. A linear multivariate relationship does not yet exist between Internet site financial or business metrics and Internet site market valuation. Because of the difficulty in formulating models, some analysts now include multiples of EBITDA for 2002 as the basis for their valuations! Metrics more commonly followed for Content/Affinity Portal valuations usually include traffic, as measured by new Registered Users, unique visitors per month and unique page views per month. Revenue momentum and brand strength are also important in financial analysts' valuations 28. In their valuation models, financial analysts also follow are aggregate Registered Users, Banner and Sponsorship sell-through, unique visitors per month, dwell time, minutes per month, and brand awareness 29. Newsletters.com must be able to quantify these metrics in order to extract shareholder value. 6.1.2. ANALYST COVERAGE Newsletters.com is pursuing analyst coverage from various brokerage firms. Tactically, this will require an extensive communications program from top management, our Investor Relations counsel and our Board members. 6.2 PUBLIC OFFERING OR SALE Management is positioning Newsletters.corn for either a strategic acquisition or a public offering in the next 18 months. Interest in the Company's first offering, Newsletters.corn: Finance, is strong. In the past 3 months, several companies have approached Newsletters.corn about possibly acquiring the company. They are: Internet.com, CBS Marketwatch, Quote.corn, Hoovers, and Thomson Financial. 27Henry Blodget, CIBC Oppenheimer, "Analyzing the Aggregators", April 14, 1998, p5; The Health.net Industry: The Convergence of Healthcare & The Internet, Steve Fitzgibbons, H&Q Industry Report, January 8, 1999 28Henry Blodget, CIBC Oppenheimer, "Analyzing the Aggregators", April 14, 1998, p. 1 29The Health.net Industry: The Convergence of Healthcare & The Internet, Steve Fitzgibbons, H&Q Industry Report, January 8, 1999p.3 Business Plan Page 3 7 newsletters.com 7. Explanation of Financial Plan Assumptions for Financial Projections & Analysis of Operations 7.1 DERIVATION OF ESTIMATED FOOT TRAFFIC The basis for our revenue assumptions is foot traffic -- the number of Web users that pass by a Newsletters.com co-branded web site. We established five categories (1 - 5 stars) of Web sites and their traffic figures. The figures below exclude personal homepages, Newsletters.com (potential) affiliate applicants and Web sites with foot traffic less than 250,000 page views per month (PV/M). We will refer to the revised group as Relevant Market Players (RMP). 1 Star Web Sites represent 50% of all RMP whose average website foot traffic is around 250,000 PV/M to 500,000 PV/M. Their average number of visitors per month, we determined, is roughly around 50,000 visitors per month. 2 Star Web Sites represent 35% of all RMP whose average website foot traffic is around 500,000 PV/M to 1,000,000 PV/M. Their average number of visitors per month, we determined, is around 143,000 visitors per month. 3 Star Web Sites represent 12% of all RMP whose average website foot traffic is around 2,000,000 PV/M to 5,000,000 PV/M. Their average number of visitors per month, we determined, is around 400,000 visitors per month. 4 Star Web Sites represent 2.5% of all RMP whose average website foot traffic is around 5,000,000 PV/M to 10,000,000 PV/M. Their average number of visitors per month, we determined, is around 800,000 visitors per month. 5 Star Web Sites represent .5% of all RMP whose average website foot traffic is more than 10,000,000 PV/M, average traffic of 25,000,000 PV/M. Their average number of visitors per month, we determined, is around 2.5 million visitors per month. The information above is summarized in Table 1-1. Table 1-1: General Foot Traffic Breakdown for Newsletters.eom RMP One Star Two Star Three Star % of RMP 50% 35% 12% PV/M 375,000 750,000 3.5 million Visitors/month 50,000 143,000 400,000 *Visitors per month does not equal number of unique visitors. Four Star 2.5% 7.5 Million 800,000 Five Star 0.5% 25 Million 2.5 million To determine the total estimated traffic per category, we took a weighted average of the 99.5% of the visitors per month (1, 2, 3, 4 stars of RMP combined) to determine constant visitor value (CVV). For the remaining .5% of the RMP, we took a separate average (depending on the actual Web site's foot traffic and visitor records) to acknowledge the value of larger partnerships and to differentiate the consumer activities in different industry sectors. Business Plan Page 38 newsletters.com Table 1-2: Weighted average of visitors per site = Constant Visitor Value (CVV) Visitors/month X (% of RMP) = Weighted Average Avgl+ Avg2 + Avg3+ Avg4 = CVV (constant visitor value) Visitors/month* % of RMP Weighted avg. One Star 50,000 50% 25,000 Two Star 143,000 35% 50,000 Three Star 400,000 12% 48,000 Four Star 800,000 2.5% 20,000 Total 1,393,000 99.5% 143,000 =CVV *Visitors per month does not equal number of unique visitors. Constant Visitor Value (CVV) is applicable to 99.5% ofNewsletters.com Table 1-3 Total Estimated Foot-Traffic via Co-Branded Partners RMP. (Per Category) (CVV) X (# of Co-branded sites expected to contract) = (expected foot traffic for 99.5% RMP) A Total # of websites in each category P. Finance Health (consumer) Women Seniors Collectibles Pets Legal H/R Communications Small Business Technology B-B Health 85,000 45,000 3,300 2,500 29,800 5,226 6,200 3,700 6,500 5,190 3,400 3,500 B Est. # of Target sites for Partnership (RMP) 3,750 2,075 475 418 575 751 675 238 967 675 275 450 C Est. # of sites expected to contract 1088 602 152 135 167 218 180 69 281 254 80 125 D Constant Visitor Value 99.5% E Total est. of foot traffic 99.5% Millions F Estimated additional traffic of 5 starred partners* 40 M 9.4 M 21.8 M 5.0 M 8.8M 5M 2 M 10 M 4M 5M 17 M 4.2 M G Total est. foot traffic from cobranding Partners 195.6M 98.5 M 43.5 24.3 32.7 36.2 27.7 19.9 44.2 M M M M M M M 143,000 143,000 143,000 143,000 143,000 143,000 143,000 143,000 143,000 143,000 143,000 143,000 155.6 M 86.1M 21.7M 19.3M 23.9M 31.2M 25.7M 9.9M 40.2 M 36.3 M 11.4 M 17.9 M 41.3 M 28.4 M 22.1M *5 Star Web Site foot traffic was calculated by evaluating leading Web sites of each sector and their current traffic information. Because .5% of the RMP was too elastic to be weighted with the rest of the 99.5% RMP websites, the figures represent only the potentially achievable partnerships. Business Plan Page 39 newsletters.com A. Total Number of Web Sites in Each Category. We have derived this figure by analyzing the relevant industry sector. The total number of websites include portals, ecommerce Web sites, content based websites, communities, niche-specific websites, homepages and more (depending on the industry). Estimated Number of Target Sites for Partnership. RMP (Relevant Market Players) refer to potential partners who meet our minimum requirement. These figures exclude homepages or websites with less than 250,000 page views per month. Other common characteristics include synergistic demography, content, and technology congruency. These numbers are not directly derived from the total number of websites in the industry but rather, individual research assessment of subcategories within the industry. Estimated Number of Sites Expected to Contract. These numbers represent estimated number of executed partnership based on research assessment and general conversion ratio of 1:3. Constant Visitor Value. Represents the weighted average traffic of contracted 99.5% of the RMP. Total Estimate of Foot Traffic. Multiplying columns C and columns D derive the total estimate of Foot Traffic of each category. These numbers refers to the 99.5% of the RMP and exclude the top 5-starred partners. Estimated Additional Traffic from 5-Star Web Site Partners. These figures represent estimated additional traffic positioned to gain by signing top partners in each category. The figures are derived from taking the average foot traffic of top 10 websites in each category and multiplying it by three (estimated numbers of top deals expected to sign). Total Estimated Foot Traffic from Co-Branding Partners. By adding columns E and columns F, we can derive the estimated foot traffic in each category. B. C. D. E. F. G. Estimated numbers of Target sites for Partnership (RMP = Relevant Market Players) are individually derived from industry observation. Certain categories such as Women or Seniors, we suspected, were more likely to be congruent to our operation and will be complimentary to our services. Other diffused industry as Personal Finance, however, may support sites, which may be not qualify as a potential "partnering" Web site. Business Plan Page 40 newsletters.com 7.1.1 REVENUE ASSUMPTIONS Assumption 20% 0.45% 1.50% Assumption 25% 1.50% Web Site Partners Foot Traffic to see banners/buttons Click through rate (from banners/buttons) Purchase Rate from Click Through Other Source Click through as % of partner click through Purchase Rate Number of Products Purchased Avg. Subs Purchased Avg. One Time Purchased Assumption 0.25 1 7.1.2 EXPLANATION OF ASSUMPTIONS "Foot Traffic" is defined as the monthly visitor traffic on sites carrying a Newsletters.com store. (Foot traffic estimates are explained in section 7.1 .) A "Sub" or "Subscription-based" product is an actual newsletter subscription or high value subscription product billed on a month to month or yearly basis. A "One Time" product is defined as a special-report or research report that is only published/sold once. "Partner Buyers" are defined as buyers generated by Web co-brands and affiliates. "Other Source" is defined as new buyers generated by PR efforts, article syndication and viral marketing campaigns. "Returning Buyers" are defined as previous customers. 7.1.3 BASIC REVENUE PROJECTIONS FOLLOWING FORMULAS ARE BASED ON THE Number of Buyers = (Foot Traffic) (Foot traffic seeing banners) (Click through rate) (Purchase Rate) Revenue 1 = (Number of Buyers) (% of Subscription Products) (Avg. Sub Price Per Vertical) Revenue 2 = (Number of Buyers) (%of one time products) (Avg. Price one time product per vertical) Revenue from Other Sources Number of Buyers = (% of partner click through) (Partner Buy Rate) Revenue 1 = (Number of Buyers) (% Subscription Products) (Avg. Sub Price Per Vertical) Revenue 2 = (Number of Buyers) (% of one time products) (Avg. Price one time product per vertical) Business Plan Page 41 newsletters.com 7.1.4 RAMP-UP RATE & GROWTH RATE (Applicable to Revenue & Foot traffic) Q2 30% Q3 60% ]Q4 I 100% Q1 20% Growth in Foot Traffic = 50% per year starting in Q1 2001 50% per year for years 3-5 7.1.5 RETURNING BUYER SALES % of Partner & Other Source Sales In Current Period Q1 15% ]Q2 I 25% Q3 60% Q4 100% 7.1.6 2001 6 6 NEW VERTICAL LAUNCHES 2002 6 12 2003 6 18 2004 6 24 Note: Other verticals are calculated as an average of existing verticals. This does not include ramp-up or growth in return. 7.1.7 OTHER REVENUE SOURCES % of Core Rev. 1% 1% 0.5% Source Self Publishing Broadband List Rental International 2001 2% 7.2. 2002 3% 2003 4% 2004 5% ADDITIONAL TRAFFIC -- AFFILIATE MEMBERS Above calculations do not include affiliate members and their traffic. Potential affiliate members include any Web site with traffic of 200,000 page views per month or less. An affiliate member will only contribute a small fraction of the total foot traffic generated because average affiliates have 5000 page views per month with 2000 visitors per month. Nevertheless, we have calculated the number of affiliate members in target for membership and the estimated conversion figures. We expect to achieve wide-spread branding opportunities through our affiliate members. We also expect this to increase awareness of the availability of expert information across all industries. Business Plan Page 42 newsletters.corn Chart below combines the number of traffic generated by both partners and affiliate members. Table 1-3 Total Estimated Foot-Traffic via Affiliate Total # Est. # of Est. # of of Target sites websites sites for expected in each Affiliates to join category Program affiliate (ARMP)* program P. Finance Health (consumer) Women Seniors Collectibles Pets Legal H/R Communications Small Business Technology B-B Health 85,000 45,000 3,300 1600 29,800 5,226 6,200 3,700 6,500 5,190 3,400 3,500 11,250 6,225 1,425 813 1,725 2,250 1800 713 2,903 2,560 825 1300 3,645 2,019 432 350 559 729 825 231 940 750 267 450 Members, Average foot traffic per affiliate website 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 'Per Category) Total Total number est. foot of foot traffic traffic from cofrom brandin affiliate g members Partners 7.3 M 195.6M 4M 98.5 M .9M .7M 1.2M 1.4 M 1.7 M .5 M 1.8 M 1.5 M .5 M .9 M 43.5 24.3 32.7 36.2 27.7 19.9 44.2 41.3 28.4 22.1 M M M M M M M M M M Total est. foot traffic per industry category 202.9M 102.5 M 44.4M 25 M 33.9 M 37.6 M 29.4 M 20.4 M 46 M 42.8 M 28.9M 23 M ARMP = Affiliate relevant market players. Business Plan Page 43 newsletters.com 8. FINANCIAL (See spreadsheets.) 8.1. Base Case (Revenue Model) MODELS & PROJECTIONS Business Plan Page 44 newsletters.com 8.2. Revenue by Vertical Market by Type of Revenue Business Plan Page 45 newsletters.com Business Plan Page 46 newsletters.com 8.3. Revenue Business Plan Page 47 newsletters.com 8.4. Traffic by Vertical for Partner Traffic Not Total Traffic Business Plan Page 48 newsletters.com Business Plan Page 49 newsletters.com 8.5. Traffic Summary Business Plan Page 50 newsletters.corn 8.6. Expense Assumptions Business Plan Page 51 newsletters.com 8.7. Salaries Expense Business Plan Page 52 newsletters.com Business Plan Page 53 newsletters.com 8.8. Projected Income Statement Business Plan Page 54 newsletters.corn 8.9. Projected Statement of Cash Flows Business Plan Page 55 newsletters.com 8.10. Projected Balance Sheet Business Plan Page 56 newsletters.com APPENDICES A-H A B C D E F G H Domain Names Owned by Newsletters.com as of 7/1/99 Publications Under Contract to Newsletters.com as of July 14, 1999 Publishing Agreement First Tier: Contracted Partners Sample Web Co-Brand & Affiliate Contracts Professional Service Firms Sample Co-Brand Current Organizational Chart Page Page Page Page Page Page Page Page 58 59 64 70 75 77 78 79 Business Plan Page 57 newsletters.corn APPENDIX A Domain Names Owned by Newsletters.com Newsletters.com Newsletter.com Renewals.com Enewsletters.com Expertnews.com Fination.net Investalk.net Investool.net Investools.net Newsletternetwork.com Newsletternetwork.net Newslettersource.com Newsletterstore.com Newsletterwire.com Newsletterz.net Newspaperwire.com Publisherwire.com Readandpost.com as of 7/1/99 Business Plan Page 58 newsletters.com APPENDIX B Publications Under Contract to Newsletters.com as of August 1, 1999 Consumer Publications 2 for 1 Active Web Developer AGN Financial Advisor Argus Vicker's Insider ASE/VSE Advisor Astute Investor Biomedical Market Bowser Report BuyBack Better Canadian Penny Stock Reporter Capital Growth Group CDN Reporter Cheap Investor Connective Values Report Contrary Investor Crawford Perspectives Dear Dow Letter Defaulted Bonds Delphi Developer Discover Group Easy Act! Emerging Media Practice Estate Retirement and Planning Fischer's Financial Feedback FoxTalk Fund Kinetics FXC Newsletter Inger's Daily Briefing Global Investing Global Market Strategist Gold Stock Letter Golf Insight & Investing Group Power Growth Stock Letter Heartland Adviser Income Securities Advisor Inger Letter Insider Bulletin Insider Opinion International Finance and Treasury Publisher Macneale Pinnacle AGN Coleman Lombardi Cardwell Biomedical Market Bowser Fried Lombardi Capital Growth Lombardi Matthews Yates Contrary Crawford Troubadour Lehman Pinnacle Lombardi Pinnacle Pinnacle Lombardi Fischer Pinnacle Merriman FXC Inger Lewis Ascani Troubadour Leedom Bollinger Nordstrom Kaplan Leedman Inger Coleman Williams Brown Business Plan Page 59 newsletters.com Investech Fund Advisor Investech Market Analyst Investing for Growth Investor's Edge Investor's Intelligence Lindquist/Lepic Market Lombardi Investment Club Louis Rukeyser's Mutual Funds Louis Rukeyser's Wall Street Low-Priced Stock Advisory Macromedia User Journal Market Momentum Microcap Stock Digest Mid-West Music Review Mutual Fund Strategist National Trend Lines NL Mutual Fund Selections & Timing No Load FundX Oil and Gas Advisory Oracle Professional OTC Growth Stock Watch Pennies to Millions Penny Mines Personal Finance Peter Dag Portfolio Positive Patterns Prudent Speculator Pure Fundamentalist Quiet Investor Red Chip Renaissance Report Rothstein Stock Market Letter Slanker Report Small-Cap Growth Stocks Smart Access Spear Report Special Situations Report Stock Advantage Report Strategic Investing SQL Server Professional System: Futures & Commodities Tax Avoidance Letter Tax Haven Report Technical Analysis of CA Stocks The Money Paper Timeshare Management Investech Investech Lombardi Schaefer Gray Lindquist Lombardi Rukeyser Rukeyser Lombardi Pinnacle Kienlen Elfenbein Writers 6000 Hooper Jimerson Mckee Patrick Lombardi Pinnacle Eiten Lombardi Lombardi Lombardi Dagnino Howard Frank Toral Gay Crown Point Evans Rothstein Slanker Lombardi Pinnacle Spear Individual Investor Group Stock Partners Geist Pinnacle Lombardi Lombardi Lombardi Lombardi Nelson Lombardi Business Plan Page 60 newsletters.com Todd Market Forecast Unique Situations US Investment Report Wall Street Companion Wall Street Trader's Column WAN News White Chip Analyst Zacks Advisor B-to-B Publications American Speaker Arrest Law Bulletin Audio Week Building Permits Law CarLaw Communications Daily Consumer Multimedia Report Daubert Report DC Real Estate DC Education DC Landlord DC Money Mgmt. DC Retirement DC Taxation Emerging Insurance Disputes Emerging Toxic Torts Employee Terminations Law Employer Liability Prevention Employment & Training Report Executive Advantage FCC Report Financial Report Car Fire Station Lawyer Fire Station Management Funding Police Departments Funding Private Schools Funny Business Future Image Report Grants for Cities and Towns Grants for School Districts Hotline Hip Replacement Report Insurance Law Weekly Juris A Landlord Tenant Law Litigation: Asbestos Todd Righty Quickel Forsha Aloof Pinnacle Kerr Zacks Publisher Georgetown Quinlan Warren Quinlan Hudson Warren Warren Mealey's Passport Passport Passport Passport Passport Passport Mealey's Mealey's Quinlan Quinlan MII Georgetown Warren MDR Info. Quinlan Quinlan Quinlan Quinlan Georgetown Gerard Quinlan Quinlan EPSCOS Mealey's Worthington Quinlan Mealey's Business Plan Page 61 newsletters.corn Litigation: Bad Faith Litigation: Biotechnology Litigation: Breast Implants Litigation: Fen-Phen/Redux Litigation: Insurance Litigation: Insurance Supplement Litigation: Insurance Fraud Litigation: Insurance Insolvency Litigation: Intellectual Property Litigation: International Arbitration Litigation: Latex Litigation: Lead Litigation: Patents Litigation: Pedicie Screws Litigation: Reinsurance Litigation: Superfund Litigation: Tobacco Litigation: Drugs & Medical Devices Local Competition Report Local Government Research Group: Liability Managed Care Liability Report Manager's Legal Bulletin Mobile Comm. Report Money Rates Narcotics Law Bulletin NewsShare ClickShare Nurses Report Organized Executive Payroll Legal Alert Personal Legal Alert Police Dept. Disciplinary Bulletin Police Officer Grievances Bulletin Public Broadcasting Report Public Employee Dismissals Bulletin Report on AT&T Satellite Week School to Work School Law Bulletin Search and Seizure Bulletin Sexual Harassment Prevention Training Report Special Education Litigation and Funding State Telephone Regulation Report Tax Law Telco Business Report Television and Cable Action Update Television Digest with Consumer Electronics Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Mealey's Warren Quinlan Mealey's Alexander Hamilton Warren Money Rates Quinlan MDR Info. EPSCOS Georgetown Alexander Hamilton Alexander Hamilton Quinlan Quinlan Warren Quinlan Warren Warren MII Quinlan Quinlan Quinlan Quinlan Warren Petrucelli Warren Warren Warren Business Plan Page 62 newsletters.com Trend Letter Unfair Labor Practices Union Contract Law Video Week Wages and Salary Compliance Warren's Cable Regulation Monitor Welfare Work Worker's Compensation Law Year 2000 Report Zoning Bulletin Georgetown Quinlan Quinlan Warren Quinlan Warren MII Quinlan Mealey's Quinlan Business Plan Page 63 newsletters.com APPENDIX Publishing C Agreement NEWSLETTERS. COM, INC. PUBLISHING AGREEMENT This Publishing Agreement (the "Agreement") is made as of April 22, 1999 (the "Effective Date") by, and between Newsletters.com, Inc. ("Newsletters.corn"), a Maryland corporation with its principal offices located at 7100 Baltimore Ave., Suite 403, College Park, MD, 20740, and Waldo Publishing, Inc. ("WPI") with its principle offices located at 2115 Ward Court, NW, Washington, DC 20037. WHEREAS, WPI (itself or by one or more of its subsidiaries) publishes all the publications listed in Schedule A of this agreement. All publications listed in Schedule A shall be referred to collectively as the "Publications" and each individually as a "Publication," among other publications. WHEREAS, Newsletters.corn desires to distribute the Publications in electronic and/or hard copy format, pursuant to the terms and conditions set forth herein. NOW, THEREFORE, in exchange for the mutual promises and covenants set forth herein, the parties hereby agree as follows: 1. Delivery and Development of the Publications in Electronic and Print Format. During the term of this Agreement, so long as WPI publishes the Publications, WPI shall deliver to Newsletters.com the most current and updated versions of the Publications in electronic form and one (1) hard copy by US mail. In addition, WPI shall deliver to Newsletters.corn in electronic form back issues of the Publications for the 12- month period immediately preceding the Effective Date (the "Back Issues"). 2. Electronic Distribution Rights for the Publications; Hard Copy Subscription Orders for the Publications 2.1 Grant of License for Electronic Distribution of the Publications. Subject to the terms and conditions of this Agreement, WPI grants Newsletters.corn the worldwide nonexelusive right to license, without right of sublicense, distribute, market and sell current and back issues of the Publications in electronic form to end users via the Internet. Newsletters.corn shall make payments to WPI in accordance with Section 3 of this Agreement. WPI understands that Newsletters.corn may distribute, market and sell the current and back issues of the Publications by means of co- branded web sites (cobranded with the brands of Newsletters.corn and its partners ("Co- Brand Partners") that are maintained and operated by Newsletters.corn 2.2 Marketing Obligations. Newsletters.corn shall make a diligent, good faith effort to market the Publications. 2.3 Subscription Orders. Newsletters.com may take subscription orders for the Publications (in hardcopy or electronic form for the Publications) via the Internet, and by credit card. WPI will be responsible for all hard copy deliveries to its customers. If a customer orders for the Publications in hardcopy form, Newsletters.corn shall, immediately upon receipt of the order, forward to WPI's fulfillment house (the address of which WPI shall give Newsletters.corn), information concerning the customer and order Business Plan Page 64 newsletters.com necessary for the subscription to be filled (including without limitation the name and address of the customer and the address to which the issues of the Publication(s) should be mailed). Newsletters.com shall make payments to WPI in accordance with Section 3 of this Agreement. 2.4 Billing of the Publications. With respect to all the Publications, Newsletters.com is granted the option of billing the end user, at its sole discretion on a pro- rata basis, (i. e. monthly, bi-monthly, weekly, yearly, etc.) and may offer the first issue of a one- year or more subscription at no charge. 2.5 Pricing. Newsletters.com is granted the right to sell the Publications to new and renewal subscribers at the same prices offered by WPI, including any discounts, incentives, and other special offers; provided, however, that Newsletters.com shall not use any WPI subscriber list for the purpose of soliciting new or renewal subscriptions to the Publications (except as expressly provided in Section 8A of this Agreement); and provided further, that Newsletters.com only may sell subscriptions to the Publications with the same length of subscription as those offered by WPI (except that Newsletters.com may sell the Publications on a per- issue basis). 3. License Fees Payment. In consideration of the license granted hereunder, Newsletters.com shall pay to WPI license fees equal to fifty percent (50%) of the gross revenue received by Newsletters.corn from the sale of the Publications (whether in hard copy format or digital format or both) for initial subscriptions. For example, if an online user buys an issue of a Publication for $10, Newsletters.com shall pay to WPI $6.50. Newsletters.corn has the right to process subscriptions generated by Newsletters.com for renewed subscription sales in both hard copy and digital formats ("Renewed Subscriptions"), and shall pay WPI license fees equal to eighty percent (80%) of the gross revenue received by Newsletters.com with respect to Renewed Subscriptions in hardcopy formats. Newsletters.com shall pay WPI all license fees quarterly, within seven (7) calendar days after the end of each calendar quarter. Each payment shall be accompanied by a report itemizing the revenue received by Newsletters.com from the sale of the Publications. 4. Support. WPI shall provide Newsletters.com with the following support during the term of this Agreement: (I) promotional materials for the Publications, (II) one (1) year of back issues for all Publications in electronic form, and (III) one full story or article from each current issue from all Publications for promotional purposes on its web site. 5. WPI's Representations and Warranties; Indemnification. WPI warrants that: (I) WPI is the sole author and proprietor of the Products and has the exclusive authority to make the grant of rights set forth herein; (II) WPI has not made any agreement with any other party that conflicts in any way with this Agreement's terms and conditions; and (III) the Products do not infringe any statutory copyright, common- law literary rights, or proprietary right of any third party. WPI agrees to indemnify Newsletters.corn against, and hold harmless from, any loss, expense or damage it may suffer by reason of a breach of any of the foregoing warranties; provided, however, that (a) WPI receives prompt written notification of any claim for which it is being requested to provide indemnification pursuant to this Section, (b) WPI may assume, in a prompt fashion, sole control of the defense or settlement of such claim (including the right to choose counsel for such defense or settlement), and (c) WPI receives, at its expense, such reasonable assistance from Newsletters.corn as WPI may request. In the event that WPI assumes sole control of the defense or settlement of such claim, Newsletters.com may, at Business Plan Page 65 newsletters.com its expense, participate in such defense or settlement. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, AND SUBJECT TO THE LIMITATION OF SECTION 9.1, THE INDEMNIFICATION RIGHTS SET FORTH IN THIS SECTION 5 ARE THE SOLE AND EXCLUSIVE REMEDY FOR ANY ASSERTED BREACH OF THE REPRESENTATIONS AND WARRANTIES OF WPI SET FORTH IN THIS SECTION 5. Newsletters.com's Representations and Warranties; Indemnification. Newsletters.com represents and warrants that: (I) it has the power and authority to enter into this Agreement, (II) Newsletters.corn has not made any agreement with any other party that conflicts in any way with this Agreement's terms and conditions and (III) Newsletters.com shall comply with all laws in connection with the marketing and sale of the Publications. Newsletters.com agrees to indemnify WPI against, and hold harmless from, any loss, expense or damage it may suffer by reason of a breach of any of the foregoing warranties; provided, however, that (a) Newsletters.com receives prompt written notification of any claim for which it is being requested to provide indemnification pursuant to this Section, (b) Newsletters.corn may assume, in a prompt fashion, sole control of the defense or settlement of such claim (including the right to choose counsel for such defense or settlement), and (c) Newsletters.corn receives, at its expense, such reasonable assistance from WPI as Newsletters.com may request. In the event that Newsletters.com assumes sole control of the defense or settlement of such claim, WPI may, at its expense, participate in such defense or settlement. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, AND SUBJECT TO THE LIMITATION OF SECTION 9.1, THE INDEMNIFICATION RIGHTS SET FORTH IN THIS SECTION 6 ARE THE SOLE AND EXCLUSIVE REMEDY FOR ANY ASSERTED BREACH OF THE REPRESENTATIONS AND WARRANTIES OF WPI SET FORTH IN THIS SECTION 6. 7. Format of the Product. WPI retains sole and exclusive discretion concerning all decisions relating to the title, format, design, promotion, distribution and advertising, publication, non-publication and discontinuance of publication of the Publications. WPI agrees to give Newsletters.com reasonable notice in the event that WPI decides to discontinue publication of, or rename, any of the Publications. In the event that WPI ceases to publish a Publication and an existing subscriber has prepaid for issues that will not be published, Newsletters.com agrees to (a) promptly refund to the subscriber any unused portion of the prepaid subscription on a pro- rata basis (i. e., the subscription price multiplied by a traction, the numerator of which is the issues within the subscription period that will not be delivered, and the denominator of which is the number of issues that would have been published during the subscription period were the Publication not discontinued), (b) notify WPI promptly of the amount so refunded (the "Refund"), and (c) provide WPI with data related to the calculation and payment of such Refund. Within ten (10) calendar days of receipt of such information from Newsletters.com, WPI shall pay Newsletters.corn an amount equal to fifty percent (50%) of the Refund, in the case of initial subscriptions, and eighty percent (80%), in the case of Renewed Subscriptions for hardcopy subscriptions only. 8A. Customer Information. Newsletters.com shall promptly deliver to WPI all customer information obtained by Newsletters.com ("Customer Information"). All Customer Information shall be the joint Business Plan Page 66 newsletters.com property of WPI and Newsletters.com. Subject to the terms and conditions of this Agreement, Newsletters.com is granted a non- exclusive license, to utilize the Customer Information for the purpose of providing support to existing customers and to attempt to market the Publications (including Renewed Subscriptions) to such customers, and other business practices. WPI understands that Newsletters.com may distribute, market and sell the current and back issues of the Publications by means of co-branded web sites (cobranded with the brands of Newsletters.com and its Co- Brand Partners) that are maintained and operated by Newsletters.com. 8. Term and Termination 8.1 Tenn. This Agreement will continue in full force and effect for a period of one (1) year from the Effective Date. This Agreement will renew automatically for additional annual periods unless one party requests that this agreement be terminated in writing within thirty (30) days of the expiration of this Agreement. Termination for Material Breach. Either party may terminate this Agreement if the other party (the "Defaulting Party") defaults in the performance of any material obligation hereunder; by giving written notice to the Defaulting Party describing such default (the "Default Notice"). The termination shall become effective forty-five (45) calendar days after giving the Default Notice unless the default described in the Default Notice has been cured within the forty-five (45) calendar day period. The Default Notice shall describe the default with reasonable particularity, and the party giving the Default Notice shall promptly provide the Defaulting Party with such information as the Defaulting Party reasonably may request in order to remedy the default. The Defaulting Party shall pay the other for any reasonable costs associated with providing information to the Defaulting Party pursuant to the preceding sentence. Other Remedies. The remedies stated in this Article 8 shall be in addition to and not in lieu of any other remedies, including damages, to which a party may be entitled. 9. General Exclusion of Certain Damages. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, AND REGARDLESS OF WHETHER ANY REMEDY FAILS OF ITS ESSENTIAL PURPOSE, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY OR TO ANY OTHER PERSON, CORPORATION OR OTHER ENTITY FOR ANY LOST PROFITS, LOSS OF USE, COST OF OBTAINING SUBSTITUTE GOODS OR SERVICES, OR ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY OR PUNITIVE DAMAGES ARISING UNDER OR IN ANY WAY RELATING TO THIS AGREEMENT, EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS OR DAMAGE. Amendment. No amendment or modification of this Agreement will be made except by an instrument in writing signed by both parties. Relationship. Performance by the parties under this Agreement shall be as independent contractors. Nothing contained herein or done under the terms of this Agreement shall constitute the parties entering into a joint venture or partnership, or shall constitute any party the agent of any other party for any purpose. Severability. If any provision of this Agreement is found invalid or unenforceable pursuant to judicial decree, such provision will be enforced to the maximum extent permissible and the remainder of this Agreement will remain in full force and effect. Business Plan Page 6 7 newsletters.com Assig_q_ment.Neither party may assign any of its rights or duties hereunder without prior written consent of the other part, and any attempt to do so shall be null and void, except in the event of a merger, reorganization or sale of substantially all of its assets. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the respective permitted successors and assigns of the parties. Entire Agreement. This Agreement, the exhibits attached hereto, state the entire agreement between the parties relating to the subject matter of this Agreement and supersedes any and all prior agreements and communications, written or oral. Each party represents that it is not relying on any representations, whether written or oral, not set forth in this Agreement, in determining to execute this Agreement. Rights of Third Parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective permitted successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. Governing Law; Jurisdiction. This Agreement is made under, and shall be governed by and construed under the laws of the State of Maryland, without giving effect to its laws, rules and principles concerning choice of law or conflicts of law, and excluding the United Nations Convention on Contracts for the International Sale of Goods. The parties agree that the state and federal courts of Montgomery County, Maryland shall have nonexclusive jurisdiction to hear any dispute or proceeding arising out of or related to this Agreement (a "Proceeding"), and each party hereby expressly (I) consents to the personal jurisdiction of such courts with respect to any Proceeding and (II) waives any objection, whether on the grounds of venue, residence or domicile or on the ground that the proceeding has been brought in an inconvenient forum, to any Proceeding brought in such courts. No Implied License. Other than the licenses granted expressly in this Agreement, no licenses are granted hereunder, whether by implication, or otherwise. Waiver/Exercise of Rights. The failure of any party hereto to enforce, or the delay by any party in enforcing, any of its rights under this Agreement shall not be deemed a waiver or a continuing waiver of such rights or a modification of this Agreement and such party may enforce any or all such rights at any time thereafter, subject to any applicable statute of limitations. No waiver of a particular breach or default of this Agreement shall be deemed a waiver of any other breach or default of this Agreement. All rights and remedies, whether conferred by this Agreement, by any other instrument or by law, shall be cumulative, and may be exercised singularly or concurrently. Counterparts and Facsimile/Photocopy Signatures. This Agreement may be executed in counterparts, and when each Party has signed and delivered at least one such counterpart, each counterpart shall be deemed an original, and, when taken together with other signed counterparts, shall constitute one Agreement, which shall be binding upon and effective as to all parties. A signature received via facsimile or photocopy shall be deemed an original for all purposes. Headings. The Article and Section headings used herein are for convenience only and do not define, limit or construe the content of such sections. All references in this Agreement to Article and Section numbers refer to Articles and Sections of this Agreement, unless otherwise indicated. Business Plan Page 68 newsletters.com The parties hereto have executed the Agreement by their duly authorized representatives as set forth below. Newsletters.com, Inc. Waldo Publishing Inc. By: By: Print: Print: Title: Title: Date: Date: Business Plan Page 69 newsletters.com APPENDIX D CONTRACTED PARTNERS http://www. 1stockquotes.com http://www.abwatley.com http://www.a 1financial.corn http ://www.amerimall.com http://www.atlanticfinancial.com http://www.bblmedia.com http://www.buystock.com http://www.bigtipper.com http://www.canadaone.com http://www.bizprolink.com http://www.stockbrokerbusters.com http://www.bizfn.com http://www.canadianfinance.com http://canstock.com http://cbcnews.cbc.ca http://www.cdn-news.com http://www.creativeinvest.com http://www.crosswalk.com http://www.cstocks.com http://www.cyber411 .com http://www.cyberinvest.com http://www.dailyrocket.com http://www.dollar4dollar.com http://bud.ica.net/news http://www.fourthwave.com http://www.financenter.com http://www.fntn.com http://www.financialweb.com http://www.stockresearch.com http://www.hedgefunds.net http://www.I-Cap.com http://www.imall.com http://www.isyndicate.com http://www.ibchannel.com http://www.infobeat.com http://www.insiderwire.com http://www.interactive.line.com FIRST TIER: # l Stock Quotes A.B. Watley A 1 Financial Amerimall Atlantic Financial BBL Internet Media Benson York Big Tipper Biz Zone Internet Group The Biz Prolink Network Broker Busters, Inc. Business Financial Network Canadian Finance Canstock CBC News Online CDN-News Creative Investment Research Crosswalk.com Cstocks Cyber Networks, Inc Cyber Invest Daily Rocket Dollar 4 Dollar eBuddy News Fourth Wave Financenter Financial Intranet Financial Web Green Mountain Asset Management Hedge Funds I-Cap I-Mall l-Syndicate IBCHANNEL Info Beat Insider Wire Interactive Line Business Plan Page 70 newsletters.com Internet Multimedia Innovations Internet Wire Investcom Investor Links Investorama Investors Alley Investors Guru Investrade Invest Young Isleuth Kingfine Lab Puppy Live Trade Low Risk M & A West Market Central Market Trents Mens Quarters Momentum Finance Money Minds Money Search Money Caf6 My discount Broker Nanospace National Discount Broker Net Quote New Visions, Inc Penny Stock Picks Pink Bull Planet Direct Resume Store Road-Show.com Search IQ Senior Citizen Senior.corn Seniors.com Site-By-Site Skyline Network Small Cap Journal Stock Trader Stock First Stock Pickers Stock Plaza Stock Point Stock Point Affiliate http://www.ool.on.ca http://internetwire.com http://www.investcom.com http://www.investorlinks.com http://www.investorama.com http://www.investorsalley.com http://www.investorsguru.com http://www.investrade.com http://www.investyoung.com http:///www.isleuth.com http://www.kingfine.com http://www.labpuppy.com http://www.livetrade.com http://www.lowrisk.com http://www.financialnewsstand.com http://www.marketcentral.net http://www.innonline.net http://www.mensquarters.com http://www.mfinance.com http://www.moneyminds.com http://www.moneysearch.com http://www.moneycafe.com http://www.mydiscountbroker.com http://www.sciweb.com http://www.ndb.com http://www.netquote.com.au http://www.blackstocks.com http://www.pennystockpicks.com http://www.pinkbull.com http://www.planetdirect.com http://www.resumestore.com http://www.road-show.com http://www.searchiq.com http://www.seniorcitizen.com http://www.senior.com http://www.seniors.com http://www.site-by-site.com http://www.skyline.net http://www.smallcapjournal.com http://www.stocktrader.com http://www.stockfirst.com http://www.stockpickers.com http://www.stockplaza.com http://www.stockpoint.com http://fc.stockpoint.com Business Plan Page 71 newsletters.corn Stock Vault Stockz.com Sunlogic Teltran The Hedge Funds The Real Life Investing Guide The Up-Tick Trading Charts Trendvest Vickers & Company Wall Street Directory Wall Street Electronica Wall Street Traders Column Wall Street View Web Data Woqats World Wide Traders Worldly Investor Wyse Zacks Investment Research Ziegler Thrift AFFILIATES: 2 Hot Links Absolute Intemet Active Trading Adams Business Media Advantage Innovations Afterhourtrades Alaska Computer Consultants CONTRACTED http://www.stockvault.com http://www.stockz.com http://www.sunlogic.com http://www.teltran.com http://www.hedgefunds.net http://www.rlig.com http;//www.theup-tick.com http://www.tradingcharts.com http://www.trendvest.com http://www.vickersnet.com http://www.wsdinc.com http://www.wallstreete.com http://www.wstraders.com http://www.wallstreetview.com http://www.webdata.com http://www.woqats.com http://www.worldwidetraders.com http://www.worldlyinvestor.com http://www.wyse.com http://www.zacks.com http://www.ziegler-thrift.com MEMBERS http://www.2hotlinks.com http://www.absolutinter.net http://www.activetrading.com http://www.aip.com http://www.advantagein.com http://www.afterhourtrades.com http://www.ak-consult.com http://www.american-investment.com http://www.analiz.com http://www.analystsonline.com http://www.abslive.com http://www.azpire.com http://members.aol.com/baccom http://www.bearmarketcentral.com http://home 1.gte.net/tmckenzi http://www.onlinepublications.com http://capex.net http://www.capitalistconnection.com http://www.onlineinvestmentcenter.com http://www.connectsource.com http://www.crawfishnet.com American Wealth Research Institute, LLC. Analiz Yatirim Arastirmalari Analysts Online Atlantic Broadcasting System Azpire, Inc BAC Marketing Bear Market Central Best Practices 2000 Bud's Bargin Barn CAPEX Capital Exchange Capitalist Connection CDH Worldwide Media Connect Source Crawfish.net Business Plan Page 72 newsletters.com Divine Treasury Corporation DREAMTEAM Real-Estate Brokers & Association EMAR Publishing Epic Investments Financial Chat Network Financial Econometrics FBSU.com Futuresweb.com, G.T.I., Ltd GetStock.com Global Investing Harvest Advisors, Ltd Home Shopping Spree Hot Stock News Icemall Infosoft Insider Trading Group Insurance Methods Inc., ta eComway.com Internet Investing InternetCap.com iPathway Kilima KMT Publications LRS Marketing Mallbusters.com Market Street Equity Fund Midnight-Trader Millennium III Marketing Millionaires' Club Mnet*mall New World Trading Ltd Nil Oregon Citylink Orient Impex Pacific Attitude Planet Earth Intemet Shop Premier E-City RJ Soft Ram Sales Rate Of Return Red Roos Riverbend Communications Inc http://www.divinetreasury.com http://members.aol.com/quinn24229/prof/index.htm http://www.ukonlineinvesting.com http://www.epicinvestments.com http://www.financialchatnetwork.com http://www.financial-econometrics.com http://www.fsbu.com http://www.futuresweb.com http://www.gtistart.com http://www.getstock.com http://www.global-investing.com http://www.harvestadvisors.net http://www.homeshoppingspree.com http://www.hotstocknews.com http://www.icemall.com http://www.infosoft.net http://www.tradinginside.com http://ecomway.com http://www.internetinvesting.com http://www.internetcap.com http://www.ipathway.com http://www.kilima.com http://www.wallstreetwest.net http://www.lrsmarketing.com http://www.mallbusters.com http://www.marketstreetfund.com http://www.midnight-trader.com http://www.howtoplus.com http://www.millionairesclubs.com http://net-mall.hypermart.net http://www.acommodity.com http://infoparadise.business.webjump.com http://www.oregoncitylink.com http://www.bargainmart.com http://www.pacific-attitude.com http://www.planetearthinter.net/shop/cgi?oil http://www.PremierECity.com http://www.rj soft.com http://chalmers.com.au/-russell/moneymatters.htm http://www.RateOfReturn.com http://www.users.bigpond.com/mj http://www.virtualquincy.com gfile/red Business Plan Page 73 newsletters.com Rocky Ledge Company Roughneck's Financial Place Online Schlecht (HomeBiz Network) Senior Explorer Services4You Shelton Traders Group Shpiez Feldman E-Publishing Simmons Financial Services Simones.net Simple Site Small Stocks Smart Executive SoftPOWER SSI Stellcorp Services Stock Informant StockSystem.com,Inc StockZoo Store Runner, Inc Tacoma NW Financial Website TD Trader Teleworld Plaza The Money Store Taking Stock.net The Royal Den Publishing Corporation Total Action, Inc Trading Range Technologies, Inc. Try America, Inc. USC Publishing Voice Technologies Wall Street Access Wall Street Online WebKing Productions WebSperts.com WEBstationONE Whealth Wise White Chimneys Capital Zenbiz.com http://www.rocky-ledge.com http://www.dplive.com/roughnec http://www.hbnsos.com/cgi-bin/free.web?PJ5175 http://www.seniorexplorer.com http://www.services4you.com http://www.sheltontraders.com http://www.advortex.com http://business/fortunecity.com/gap/602 http://www.simones.net http://www.simplesite.freewire.co.uk http://www.smallstocks.com http://www.smartexecutive.com http://www.softpwr.com http://www.smart-investors.com http://www.stellcorp.qc.ca http://www.stockinformant.com http://members.aol.com/dataminer http://www.stockzoo.com http://www.storerunner.com http://www.tdtrader.com http://www.teleworldplaza.com http://www.myfreeofficespace.com/themoneystore http://www.takingstock.net http://www.futurefortune.com http://www.totalaction.com http://www.target-range.com http://www.tryamerica.com http://www.portalpage.com http://www.virtualsuburbia.com http://www.wsaccess.com http://wallstreetonlinesite.com http://www.iolapc.com http://www.websperts.com http://www.webstationone.com http://www.whealthwise.com http://www.guerillatrading.com http://www.zenbiz.com 1/investing http://www.anglefire.com/biz2/unsecured Business Plan Page 74 newsletters.com APPENDIX E Sample Web Co-Brand & Affiliate Contracts NEWSLETTERS.COM, INC. WEBSITE CO-BRANDING AGREEMENT THIS AGREEMENT is between Newsletters.eom, Inc. ("COMPANY") with offices at 7100 Baltimore Avenue, Suite 403, College Park, MD, 20740 and Bryan Berg doing business as Big Tipper.com with offices at 32 Stoney Point Laguna Niguel, CA 92677. Production of Co-Branded Site. Newsletters.com will provide and maintain a co-branded Internet website edition of its Newsletters.corn Newsletter section (the "co-branded site"), at no cost to Big Tipper.comand on a non-exclusive basis. Newsletters.corn will be responsible for the production, daily update and hosting of the co-branded pages. All co-branded pages shall incorporate side by side logos of Newsletters.com and Big Tipper.com with back-links to each party's proprietary website, as well as Big Tipper.corn's navigation bar. Layout and Design. The layout, design and content of the co-branded site, shall be similar to the Newsletters.com homepage at http://www.Newsletters.com Big Tipper.com shall have the right to approve the design of the co-branded site, prior to its public deployment. Such approval shall not be unreasonably withheld. If within 10 days after delivery of samples of such material, the receiving party has not notified the sending party of its disapproval, such material shall be deemed approved. Materials substantially similar to materials approved on an earlier occasion shall also be deemed approved. Remittance for Sales. Newsletters.com shall remit to Big Tipper.corn twenty percent (20%) of all verified sales originating from the Big Tipper.com-Newsletters.com co-branded website no later than thirty (30) days from the beginning of each calendar quarter. For example: payments shall be made no later than thirty days after the end of the months of March, June, August, and December. Private-Label Newsletters.com Product Technical Implementation. The Private-Label Newsletters.com Product will be implemented in the following manner. Client will insert links to the Private-Label Newsletters.com Product at various points within Client Internet Site pages. When a User navigates to that link, the user will actually transfer to Newsletters.com's World Wide Web servers. All of the HTML, graphics, content, CGI and other components for the Private-Label Newsletters.corn product will run on the Newsletters.com server. Featured Data Contributor Services. Newsletters.com shall have the right to sell data contributor services as part of the content of the co-branded site pages, in the form of featured data and services that may be highlighted and may include hyperlinked logo images of the participating third-party content and financial services providers. Newsletters.com shall be entitled to any such revenues derived there from. A description of the availability of such data contributor services shall be included on the bottom of the front page of the co-branded site, including a Newsletters.com contact telephone number and unique mail. Copyright and Additional Information. Newsletters.corn represents and information it provides to the co-branded site: (i) it owns and has the copyright information does not or will not infringe on any copyright, US patent or any right of any third party, and (iii) it has the right to publish such information. warrants that all thereto, (ii) such other proprietary Newsletters.com Business Plan Page 75 newsletters.com also represents and warrants that it has the right to sell all publications offered on the co-branded site. All co-branded pages shall include a Newsletters.corn copyright notice and a hyperlink to a page with additional information about Newsletters.com. Term. The initial term for this Agreement will be one (1) year from the date hereof and will be automatically renewed for consecutive one year terms, unless either party provides notice to terminate 30 days prior to the end of the then-current term, provided that either party may terminate this Agreement, upon notice to the other party, in the event that such other party shall be in material default under this Agreement. Errors and Omissions. Newsletters.com agrees to take all reasonable actions necessary to keep the co-branded site current, accurate, true and complete and to notify Big Tipper.corn of any errors or omissions. Newsletters.corn shall not be liable to for any reason, for any errors, omissions, delays or inaccuracies in the co-branded site provided or with respect to the display, dissemination and/or link of any information, nor for any interruption of service due to events beyond the reasonable control of Newsletters.com. Newsletters.corn shall not be liable to Big Tipper.com or to any other party for any special, direct, indirect, incidental consequential or exemplary losses, claims or damages, howsoever caused, arising out of or in connection with this Agreement and/or the supply of or failure of the co-branded site, even if Newsletters.corn has been advised of the possibility of such damages, including without limitation, lost business or profits. Remittance. Each party will defend, indemnify, and hold harmless the other party and the officers, directors, agents, distributors, franchisees and employees of the other party from any and all third party claims, demands, liabilities, costs or expenses, including reasonable attorney's fees resulting from the indemnifying party's material breach of any duty, representation, or warranty contained in this Agreement. Notification. Each party agrees to (i) promptly notify the other party in writing of any indemnifiable claim and give the other party the opportunity to defend or negotiate a settlement of any such claim at such other party's expense and (ii) cooperate fully with the other party at the other party's expense, in defending or settling such claim. Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland. IN WITNESS WHEREOF, the parties have executed this Agreement as of 1998. Big Tipper.corn Newsletters.com, Inc. By: Name: Title: By: Name: Title: Business Plan Page 76 newsletters.corn APPENDIX F Professional Service Firms Attorneys Michael Lincoln Rob C. Masri Cooley Godward LLP 2002 Edmund Halley Drive Reston, VA 20191 TEL: (703) 262-8000 FAX: (703) 262-8100 E-Mail: rmasri@cooley.com, Stuart Mopsick Tax Attorney 1607 Crestline Road Silver Spring, MD 20904 TEL: (301) 384-8486 Accounting Chris Mann PricewaterhouseCoopers, LLP 1751 Pinnacle Drive, Suite 1100 McLean, VA 22102-3811 TEL: (703) 918-3262 FAX: (703) 918-3398 Chris.Matin@us.coopers.corn Banking ChevyChase FSB 7406 Baltimore Ave. College Park, MD 20740 TEL: (301) 927-4363 Finance Steve Graubart Calvert Ventures, L.L.C, 1918 18 th Street, N.W. Suite 22 Washington, D.C. 20009 TEL: (202) 986-5566 FAX: (202) 986-6950 Insurance Massey, Neal P. Insurance Exchange, Inc., The 751 Rockville Pike Suite 3A Rockville, MD 20852 TEL: (301) 279-5500 FAX: (301) 424-2829 mlincoln@cooley.com Business Plan Page 77 newsletters.com APPENDIX G Sample Co-Brand ln/'Beat _e_stooshortto missa_es_ in'beat home htfobeat e-mail se_ices [ web _ flds is the new link my _sletters_com shol_i_¢ cart help/cus_mer service Our Top I0 Best-Sellers Featured Expert Exclusive Interview withLouis Ah'eady a Newsletters.cam Customer? Si_q-In View"your to subscriptions. Siglt-Up for our FREE [your@email.here Weekly Update: I. c_ _wa_¢ a. so_ _o_ Cmaxlim P_¢t( Stock 3. P_t_r 5. A.co._ _L,._m- Use this toolto findwhich New m'tieles froln today's feann'ed experts: 6. 7. 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