BUSINESS PLAN(2009-2013)

abc - An Academically oriented Social Networking site

TABLE OF CONTENTS

1. EXECUTIVE SUMMARY..................................................................32. COMPANY DESCRIPTION.....................................................6

2.1. Introduction...........................................................................72.2. Business Model......................................................................82.3. Services................................................................................102.4. Company Structure..............................................................12

3. MARKET ANALYSIS............................................................133.1. Industry Analysis.................................................................143.2. Industry Growth Prospects..................................................173.3. Competitive landscape.........................................................19

4. MARKETING PLAN..............................................................284.1. Target market......................................................................294.2. Marketing Strategy..............................................................37

5. SWOT, RISKS AND EXIT PLAN...........................................406. FINANCIAL HIGHLIGHTS...................................................43

6.1. Key Financial Indicators......................................................446.2. Capital..................................................................................446.3. Projections...........................................................................466.4. Valuation..............................................................................49

LIST OF TABLES

Table 1: Social Networking - Unique Visitors.................................................16Table 2: Social Networking Users – Worldwide............................................17Table 3: Social Networking usage trends........................................................17Table 4: Growth Rates of Popular Social Networking Sites.....................19Table 5: Competitor Analysis – Direct Competitors.....................................21Table 6: Competitor Analysis – Indirect Competitors..................................23Table 7: Social Networking by Region..............................................................30Table 8: Social Networking sites by Education.............................................31Table 9: Social Networking users by Age.........................................................32Table 10 : Comparison of Demographics and Lifestyle..............................33Table 11: Estimation of the Target market......................................................36Table 12: Key Financial indicators......................................................................45Table 13: Capital requirements............................................................................46Table 14: Projected Income Statement.............................................................47Table 15: Projected Cash flow Statement........................................................48Table 16: Projected Balance Sheet.....................................................................49Table 17: Number of users.....................................................................................50Table 18: Valuation Based on Projected Cash flows....................................50Table 19: Discounted Cash Flow Valuation.....................................................51

1. Executive Summary

OpportunityABC will be the first social network in the world offering collaboration tools such as the ones offered by Google docs and Basecamp and this will really allow members to work together. The site proposes to function as a connecting place between researchers, academicians, professors, politicians, business men/entrepreneurs and students of all academic sectors. It will also serve as a point of contact for the academic sectors and the professional working class.

It has been noticed that most of the social networks till date have tried to mimic feature of a particular category of social network. And in contrast users are looking out for sites that clearly differentiate their services.

Business Model ABC will start off with a combination of Freemium model and Advertisement model. It will also incorporate the features of Referral pay revenue model little later (2011).

Market and IndustryThe market growth rate for a social networking site is entirely dependent on the efforts taken by the site to differentiate its service and generate awareness among internet users. The total number of social networking users in June 2008 was around 580 million, that grew 64 million (12.4%) during the last 6 months.

Asia, Europe, the Middle East and Africa (EMEA) and North America contribute to the larger amount of social networking users. Asia contributes 35% of users, while Europe, the Middle East and African region contributes 28% of users, followed closely by North America contributing 25%. The Caribbean and Latin America region contributes 12% of total social networking users.

CompetitionABC’s direct competitors will include players of typical social networks like the Facebook, Myspace, Hi5 followed by players of academic/informational databases like the Wikipedia, and other paid data bases followed by players of professional and academic networks like the LinkedIn, Academici and Studivz.net.

ABC’s indirect competitors include Google docs, BaseCamp, Zoho.com, ConceptShare.com, SlideShare.com, MindMeister.com, Nature.com and Science.com.

Target Market

ABC’s target market would be the educated customers between the 18 to 35 years of age. Its target market will be the universities and educated working class in the regions of Asia, North America and Europe.

Marketing StrategyAs an initial phase of the marketing strategy, ABC will hire able academicians and researchers to seed content like articles, research papers and other ideas on current market topics, enable internet visitors to post queries to the site even if they have not yet registered. Later, ABC will adopt viral marketing.

Financial HighlightsThe total funding requirement for the project is Euro 1000,000 and this would be funded in the form of 20% from Owner’s contribution and 80% from investors.

The number of unique visitors forms the base for revenue generation for ABC. Though the financial plan expects no visitors in the first year of operations i.e.: 2009, it is projected to be 1.3 million in 2010 and projected to rise to 10.9 million by end of 2013.

Discounting the Cash Flows from the project using a discount rate of 15% the proposed plan generates a NPV of more than Euro 4.7 million and an IRR of 121%, which indicates the proposed plan, will generate handsome returns. The use of high discount rate is because of the inherent risk involved in the project.

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2. Company Description

2.1. Introduction

ABC aims to launch an academic oriented social networking site. The site proposes to function as a connecting place between researchers, academicians, professors, politicians, business men/entrepreneurs and students of all academic sectors. It will also serve as a point of contact for the academic sectors and the professional working class. The site is determined on providing a platform to enable users share knowledge, technology, ideas, academic literatures, commentary, analysis, descriptions, research materials, make political agreements, associate in social interactions and conduct online workshops without any hassles.

Value PropositionABC will be the first social network in the world offering collaboration tools that allows its users to create and edit documents online while collaborating in real-time with other users. The site will characteristically inherit the features of Google Docs and BaseCamp. ABC’s knowledge sharing platform provides collaborative tools like Web-based word processor, spreadsheet, presentation, calendar, wiki-style web-based text documents, file sharing, time tracking, messaging system, business-oriented online chat service and form application. The firm’s platform also operates as a one-to one marketing and communication tool for entrepreneurs and marketers.

The vital features of ABC ABC will enable users to post papers, articles or research materials

on the site. Users will feel nice to be able to upload the papers, with an abstract, author’s profile, information on other sites it was sited/where it was accepted (optional), title, other papers that the author has sourced etc without big hassles like media filters.

Serving as a network based upon citations will prove very powerful to ABC. This feature will not only enable one to see what papers cite other papers but also points to who cites other people. Such a feature will help students to track e mentors, cite courseware etc. The feature is also of great use to marketers to track the profiles of users with interest in a particular product category.

Enabling users to set up groups/corporations related to various areas of research or interests of students, politicians, entrepreneurs or any other academic division will make ABC a really interesting site. A user could connect to all the other users with similar interests. For instance an user interested in data mining research group will get to share his/ her ideas with all the

others in the that group. This feature will also prove very powerful to ABC as one could see where/how others with same interests might get their influence/work/information from.

2.2.Business Model

ABC will start off with a combination of Freemium model and Advertisement model. It will also incorporate the features of Referral pay revenue model little later (2011).

The Freemium business model works by offering basic services for free, while charging a premium for advanced for special features. The model offers service for free in order to acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc, then offer premium priced value added services or an enhanced version of the existing services to the customer base.

ABC initially follows the feature of Freemium and advertising model. It will depend on ads for its revenues and not charge its users for any of the basic service provided.

The freemium model helps initial visitors try out the features of the site without any hassles. This is where the site has to prove its service

and capabilities. A perfect seeding will help the site prove its capabilities at this stage.

Though ABC depends on the ad model for its revenue in the beginning, the model might not be able to generate any significant revenue without a sizable customer base. Hence ABC will initially have to depend on the freemium model to prove it’s self and also consider investing on the referral pay revenue model and an affordable marketing plan to gain awareness about its presence in a very short span.

A combination of referred pay revenue model at this stage will really prove beneficial to the site. Lure the existing users to win prices if they refer an user belonging to the exact target audience group that ABC is looking for (For instance - a student referring his professor would be very beneficial for ABC, or, the maximum number of feeds directly or indirectly routed through a particular user will be rewarded). This way the freemium model coupled with referred pay revenue model will help the site to create its initial user base. Though expensive, the combination will act as a great tool to spread awareness about ABC. The model will greatly help the site increase its subscriber base in a short span, as having a huge set of educated subscriber base is the most important feature for a site to succeed in long run.

It will depend on the referral model to check for identity and authenticity of user profile, the referral model will particularly used when any subscriber wishes to conduct online seminars, conferences etc. The user must either be referred by at least 5 members of the same institution irrespective of positions or give proof of reference from the organization itself. This will help ABC to check for the authenticity of its users. Creation of false identities can be avoided.

Later with time, when the site gains awareness among customers and gains a sizable number of users who trust the value delivered by ABC, the site will pull in the features Paid membership model.

This will help the site create for itself another source of revenue. But the risk ahead such a model is that ABC will have to keep itself abreast of all the changes in the market, and constantly to match its deliverables to the requirements and tastes of the customers in vogue. Gradually the site will have two sources of revenues – ads and customers.

2.3.Services

ABC as an academic oriented social networking site will offer the following services:

Unique Features offered by ABC Papers - ABC enables users to post papers, articles or research

materials on the site. Users will feel nice to be able to upload the papers, with an abstract, author’s profile, information on other sites it was sited/where it was accepted (optional), title, other papers that the author has sourced etc without big hassles like media filters.

Citations - Serving as a network based upon citations proves very powerful to ABC. This feature will not only enable one to see what papers cite other papers but also points to who cites other people. Such a feature will help students to track ementors, cite courseware etc. The feature is also of great use to marketers to track the profiles of users with interest in a particular product category.

Collaboration- Being able to collaborate with other academic sites on papers and projects would be critical. Enabling users to list skills, research groups been with, and work that one looks out for would be an excellent value add for the site.

Groups- Enabling users to set up groups/corporations related to various areas of research or interests of students, politicians, entrepreneurs or any other academic division will make ABC a really interesting site.

► Academic/ Career Networking features Next Generation Classroom Provide increased parental Involvement to guide students User created blogs to share ideas Users can share their portfolios Serve as a platform to conduct online workshops and

conferences Promote technological transfers Operate as an one-to-one marketing and communication

platform to marketers and entrepreneurs or even academicians to gain publicity for their work and research

Enable teachers and students to assign and submit homework online

Enable students and researchers to search, view and interact with ementors in the industry side

Conduct contests among users to provide the best feeds on various topics, contests to refer maximum number of users, contests to provide tips to make the site better or even conduct an online seminar competition on various topics that fits the news of the time and reward the most worthy user contributions

Online calendars where users can share their plans and ideas with various other online professional or social groups and friends or working partners located across the globe

Tags to connect users with common interests Enable creating/making/join groups with similar interests Enabling to add RSS content Message Boards Chat rooms Blogging Micro Blogging Web Widgets Conduct online workshops, conferences and fairs Facilitate online agreements

► Social Networking features Personal mailbox Media Player Chat rooms Video sharing Online contests / competitions/ quizzes with rewards to enhance

user login rate Picture galleries and photo sharing Tags to connect users with common interests Web widgets Profile wizards that allow non- technical users to create their

own custom page design and advanced profiling for users who would like to personalize their profiles with their own custom styles

Enable creating/making/join groups with similar interests Instant messaging and online chatting User created blogs to share ideas Micro blogging Users can share their portfolios Blogging Podcast

2.4.Company Structure

i. Executive Team

ii. Development Team

Chief Executive Officer

Emanuele Caronia

Product Manager

TBD

Accounts Manager

TBD

Assistant to CEO

TBD

Software Developer 1 Software Developer 2

System Administrato

r

Edoardo Batini

Consultant 1 Consultant 2 Consultant 3

3. Market Analysis

3.1. Industry Analysis

Human networking has been around since the dawn of civilization, but new technology promises to bring it into the Internet age. New companies are quickly forming around the idea that networks can be

created, traversed, searched, and analyzed for the benefit of social and business users.

The Interactive Social Networking Industry comprises companies seeking to navigate, analyze, or display social connections of friends, colleagues, and acquaintances. The more advanced features allow weak links and friend-of-a-friend links to be exploited for social or business networking purposes. A user may use these applications to find contacts, or to understand what relationships exist.

Social networking sites focus on the building online connectivity for communities of people who wish to share their interests and activities. Users across the world could associate with online social networks for a variety of reasons like, Personal networking to share information and keep in touch with friends; Research financial, family, and other personal decisions; Network with other business associates and clients; Attend virtual classes to obtain online degrees or certifications; Connect with other hobbyists who share your passion for the same interests and activities; Conduct scientific or academic collaboration and research or Accumulate and spread news or rumor across the global community.

Social networks act as an exploratory tool for people interested in exploring the interests and activities of others. The various categories of social networks include, Informational networks like Wiki or Do-It-Yourself Community; Professional Network like LinkedIn or Canon Professional Photographer Community; Educational Networks like Academici.com or Studivz.net; Academic research based networks like Thomson Reuters Scientific Research or OVID Health Research; Networks for hobbies like GardenWeb or Automotive Forums or typical Social networks like the Facebook, MySpace and ORKUT.

It has been noticed that most of the social networks till date have tried to mimic feature of a particular category of social network. And in contrast users are looking out for sites that clearly differentiates their services. The new ways of communication created by the social networks have embraced millions of users worldwide, to the extent that it has become an enduring part of their day to day life.

The total number of social networking users in June 2008 was around 580 million, that grew 64 million (12.4%) during the last 6 months. (That’s over twice as fast as the total internet audience.)

Table 1: Social Networking - Unique Visitors

Social Networking: Growth Total Unique 1H 08 Growth

Visitors (000)

Jun-08 Dec-07 % in (000)

Total Internet: Total Audience 860,514 815,797 5.5% 44,717Social Network: Total Audience 580,510 516,318 12.4% 64,192Facebook 132,105 97,792 35.1% 34,313MySpace 117,582 107,167 9.7% 10,415hi5 56,367 31,428 79.4% 24,939Friendster 37,080 29,735 24.7% 7,345Orkut 34,028 25,138 35.4% 8,890Bebo 24,017 21,282 12.9% 2,735Other 179,330 203,776 -12.0% -24,446

Source: comScore Inc.

There are around 300+ social networking players in the industry. For the year 2008, the market became increasingly concentrated amongst the 6 market leaders in the industry (Facebook, MySpace, Hi5, Friendster, Orkut, Bebo).

Although the unique visitors to the leading 6 social networking sites increased by 88 million, unique visitors to the other 276 social networking sites in the category actually fell by 24 million from December to June. This might be due to the lack of differentiated service provided it is really becoming hard for the new social networks to gain traction at this point

Regional AnalysisAs per the below table, Asia, Europe, the Middle East and Africa (EMEA) and North America contribute to the larger amount of social networking users. Asia contributes 35% of users, while Europe, the Middle East and African region contributes 28% of users, followed closely by North America contributing 25%. The Caribbean and Latin America region contributes 12% of total social networking users.Although Europe, the Middle East and Africa totally contribute to 28% of users worldwide, Middle East and Africa has a very small portion (refer Table 7).

Table 2: Social Networking Users – Worldwide

12%

28%25%

35%

Asia North AmericaEurope, the Middle East and Africa Caribbean and Latin America

Source: Datamonitor Plc

Table 3: Social Networking usage trends

Source: wave_3

The target market for a social networking site is ever growing. Day in and day out new users join social networking sites. New users for social networking sites pour out through the following means,

Younger generations grow up to be social networking users Grown ups but computer illiterates might gradually find the

need to use a social networking site for various reasons like finding contacts.

Other than new users joining social networking sites, already existing users of other sites might find the need to join a new social networking site.

3.2. Industry Growth Prospects

The market growth rate for a social networking site is entirely dependent on the efforts taken by the site to differentiate its service and generate awareness among internet users. The growth rate could ideally range from 0% to more than 1000% as in case of Facebook, which witnessed a 1234.10% growth rate for the period 2004-2006.

Facebook was launched in Feb 2004. More than half (around 9500 students) of Harvard students became its users within the first two months of its launch and by the year end (2004) it registered more than 2 million users. It portrayed a growth rate of 1234.10% in two years (for the period 2004 - 2006).

All that is needed for an elevated growth is to differentiate ABC from the existing players. For instance, Facebook differentiated itself as a place where you share real information with real friends in a secure setting, in spite of launching years after some of its rivals.

Facebook started on college campuses in early 2004, and only connected with people who already knew each other on campus. But over the years it opened up to new networks like, high schools, companies, and eventually cities and countries. Yet, Facebook retained this concept of privacy, while its rivals like MySpace made the user profiles public. Facebook even today only lets others see excerpts of a user profile unless they’re friends or in the same network as the user is. The result is that Facebook has near-universally convinced its users to provide real information about them.

Another instance is that of LinkedIn. Though the idea of launching LinkedIn as a professional networking site got conceived in 1997, the site got officially launched in 2003. LinkedIn started with an initial investment of $4.7 million and only 300 users (all of them were close contacts of its founders), but, ended the year 2003 with 81,000 members and 14 employs. The site pumped in investments of $10M, $12.8M and $53M in the years 2004, 2007 and 2008 respectively.

The below analyzes the growth rate of the various sites. The growth rates indicate that user growth rates are very low in the initial stages of launch but project monstrously depending on the rate of efforts taken by the site to differentiate itself and generate awareness among users.

It is also felt that the sites have experienced massive growth rates only through viral marketing. Sites like Face book and LinkedIn have also partnered with latest video games, large firms and university

sites for ads to bring in awareness about the site and thus foster user growth rates.

Table 4: Growth Rates of Popular Social Networking Sites

Site Year of Launch

Unique Visitors y-o-y growth('000) %

Sep-06

Sep-07

Sep-08

2006-07

2007-08

Facebook 2004 7765 18090 39003133.0

%115.6

%

MySpace 2003 55849 68449117,58

2 22.6% 71.8%

Hi5* 2003 18098 28174 56367 55.7%100.1

%

LinkedIn 2003 1762 4075 11,924131.3

%192.6

%Youtube 2005 25,860 47,417 75,389 83.4% 59.0%

Twitter.com 2006 N/A 533 2,359 N/A342.6

%Wikipedia 2001 35650 51648 60,200 44.9% 16.6%

*Hi5 – visitors as of June 06, 07 and 08Source: comscore Inc., Nielsen Ratings

The growth rates of various firms except for Face book’s growth rate portray the fact that social networking sites take a minimum of 3 years to be up and running with massive user bases.

Academici and Studivz.net – Monthly Unique Visitors

Source: Compete.com

3.3.Competitive landscape

ABC aims to come up with a combination of in vogue features of various kinds of social networking sites. It will have in it, the much desired features of social networking sites (popular features of Face book)+ Informational networking features (Popular features of Wiki)+ Professional Networking features (popular features of LinkedIn)+ Educational Networking features (features of Academici.com). ABC will be the first social network in the world offering collaboration tools such as the ones offered by Google docs and Basecamp and this will really allow members to work together.

The site would in effect be a hybrid of individual centric networking and customer centric network. This quality of ABC, inheriting the features of more than one type of social networking site with educated user base makes it have a wide of range of competitors.

Other than the features of social networking sites, databases and professional & academic networks, ABC will also have in it the characters of web-based project management tools and other online applications facilitating real time collaboration and knowledge sharing. This makes ABC face competitive threats not only from social networking sites, databases and professional & academic networks, but, also from a set of indirect competitors like Google docs, BaseCamp, Zoho.com, ConceptShare.com, SlideShare.com & MindMeister.com.

ABC’s direct competitors will include players of social networks like the Facebook, Myspace, Hi5 followed by players of academic/informational databases like the Wikipedia, and other paid data bases; players of professional & academic networks like the LinkedIn, Academici and Studivz.net.

The table below shows the comparative analysis of the direct competitors of ABC. It is quite evident from the below table that:

1. Majority of the visitors to academic sites listed in the table are from the Afro-American, Canadian and Asian regions

2. Most of the sites depend on Ads for revenue3. Most academic based social networking sites use a free

membership model to begin with. Gradually as a the site begins to get popular and the site has proved its worth it gradually shifts to the Freemium model, to the extent that few of the sites have started on completely following the paid membership model.

Table 5: Competitor Analysis – Direct Competitors

Name Description Net Worth

Business Model

User Demographics Average number of its users

using other social

networks

Daily Ad Revenue

(Mar 2009)Total

Users/worldwide

distribution of User base

Educated users

Face book Face book is a social networking site

$481.8 Million

Free user Model

73,787,766 - High % of college graduates

2.9 $660,003 74%- Cauc14%- AfrAm6%-Asians5%- Hisp1%- Other

MySpace MySpace is a social networking site

$301.13 Million

Free user Model

53,066,785 - High % of people with no college

2.4 $412,502.83 69%-Cauc

12%- AfrAm4%-Asians14%- Hisp1%- Other

LinkedIn Professional Network

$16.28 Million

Free user Model

11,228,746 - High % of graduates and post graduates

3.2 $22,300.12 79%- Cauc

9%- AfrAm8%-Asians3%- Hisp2%- Other

HI5 Hi5 is a social networking site

$141.71 Million

Free user Model

2,176,014 - High % of people with no

2.8 $194,120.29 30%- Cauc

21%- AfrAm

college6%-Asians41%- Hisp2%- Other

Academici.com

Encourages networking for the academic sector only

$4,467.60 Freemium Business model

1791 - High % of Graduate and Post Graduate users

4 (approximatel

y)

$6.12 Academicians in US make up majority of its users base

Wikipedia Wiki is an free informatory network

$344.15 Million

Free user Model

1,525,839 - High % of Graduate and Post Graduate users

4 (approximatel

y)

$471,431.57 67%-Cauc

10%-AfrAm 9%-Asians 13%-Hisp 1%-Other

studivz.net Encourages networking for the academic sector only

$15.35 Million

Free user Model

26,668 - High % of Graduate and Post Graduate users

4 (approximatel

y)

$21,021.75 85%-Cauc

2%-AfrAm 2%-Asians 7%-Hisp 3%-Other

Source: http://siteanalytics.compete.com/academici.com/?metric=uv; Quantcast.com; http://websiteoutlook.com/www.academici.comhttp://mywebsiteworth.com/site/academici.com

Indirect Competitors

ABC’s indirect competitors include Google docs, Basecamp, Zoho.com, Conceptshare, Mindmeister and Slideshare. The indirect competitors are not social networking sites but the ones which provides collaboration tools.

Table 6: Competitor Analysis – Indirect Competitors

NameYear of inceptio

nDescription

Unique Visitors (2008)

Demographics

UsersRate of educated users

Google Docs

Oct 2006 The site acts as a free, Web-based word processor, spreadsheet, presentation, and form application. It allows users to create and edit documents online while collaborating in real-time with other users. Google Docs have merged in it the features of two services - Writely and Spreadsheets.

130,285,302

78% cauc, 7% AfrAm, 1% Asians, 9% hisp; 5% others

29% no college, 59% college, 12% school graduates

Base camp

2006 The site offers to-do lists (is similar to Google calendar), wiki-style web-based text documents, milestone management, file sharing, time tracking, and a messaging system, integration with its own Campfire product (is a web-based, business-oriented online chat service)

160,548 NA NA

Zoho.com

2005 Zoho.com offers a suite of online web applications geared towards increasing productivity and easy collaboration. Office tools include a word processor, spreadsheet, presentation tool, hosted wiki, notebook, mail, and CRM.

333,568 80% cauc, 8% AfrAm, 4% Asians, 6% hisp; 2% others

37% no college, 43% college, 20% school graduates

ConceptShare

2006 The site allows users to easily share discuss and mark-up designs for review over the web.

8,473 NA NA

Mindmeister.co

m

November 2007

Mindmeister is a collaborative online mind mapping tool. It facilities real-time collaborations between users across the world to conduct brainstorming sessions.

41,680 NA NA

slideshare.net

2005 The site offers, embedding slideshows into your own blog or website, share slideshows publicly or privately, synch audio to your slides, market your own event on slideshare, join groups to connect with SlideShare members who share your interests, download the original file.

925,203 NA NA

Source – Quantcast.com; science.com; nature.com; compete/siteanalytics.com

Other indirect competitors include websites which offer scientific contents through which students & professionals can find/buy/read articles. The websites include: 1. www.nature.com

Nature is the world's foremost weekly scientific journal and is the flagship journal for Nature Publishing Group (NPG).

Nature.com is one of the most popular scholarly websites on the internet, serving almost 12 million visitors a month. Authors, editors and readers interact through letters, blogs, file-sharing and social networks.

The group has gained reputation for innovation, developing timely and award-winning solutions to scientists' information needs.

He site also offers an excellent file sharing resource, Connotea. NPG is a subsidiary of Macmillan Publishers Ltd Launched in 1869 the firm had 627849 unique visitors in Feb

2008 and 778491 unique visitors in Feb 2009, the user growth rate for the period is 24%.

2. www.science.com Founded in 1880, is the outlet for scientific news, commentary,

and cutting-edge research, with the largest paid circulation of any peer-reviewed general-science journal.

The firm has 14407 unique visitors in Feb 2008 and 10398 unique visitors in Feb 2009, the growth rate for the period is -28%.

Source: Compete.com

i. Competitive Advantage

Services provided by ABC will be a combination of features offered by social networking sites like the Face book, Informational networks like Wiki, Professional Network like LinkedIn and Educational Networks like Academici.com.

ABC will also have in it the characters of web-based project management tools and other online applications facilitating real time collaboration and knowledge sharing as with Google docs and BaseCamp.

a) Benefits to customers

The value preposition offered by the site to its customers is as below,

Job opportunities: The students/individuals associated with ABC can get better jobs through personal contacts. Even the professors/researchers/Ementors from various fields can get hold of prospective individuals for their professional/business requirements through personal contacts.

Promotion and Exposure: The ideas/ literatures or work material of researchers, professors, aspiring students will gain a huge exposure as their expertise and skills are promoted within the big social community in a fast pace.

Learning: Individuals gain opportunities to learn new concepts, technologies, avail online help from the experts and contacts for professional growth. Sharing knowledge also aids to further improve awareness of a subject and build reputation.

Marketing: The Social Networking sites act as a best tool for word-of mouth marketing.

Alliances and Referrals: ABC also provides opportunities to form strong alliances and referrals. This feature aids individuals to get academic as well as professional contacts for growth.

Papers - ABC enables users to post papers, articles or research materials on the site. Users will feel nice to be able to upload the papers, with an abstract, author’s profile, information on other sites it was sited/where it was accepted (optional), title, other papers that the author has sourced etc without big hassles like media filters.

Citations - Serving as a network based upon citations proves very powerful to ABC. This feature will not only enable one to see what papers cite other papers but also points to who cites other people. Such a feature will help students to track e mentors, cite courseware etc. The feature is also of great use to

marketers to track the profiles of users with interest in a particular product category.

Collaboration- Being able to collaborate with other academic sites on papers and projects would be critical. Enabling users to list skills, research groups been with, and work that one looks out for would be an excellent value add for the site.

Groups- Enabling users to set up groups/corporations related to various areas of research or interests of students, politicians, entrepreneurs or any other academic division will make ABC a really interesting site.

Some of its other benefits include: People with shared interests make friends, friends stay connected, and physicians share life-saving information. ABC can be one site that can provide a user with all the needed tools to keep a journal, manage appointments, receive customized news, share ideas or information and converse on hot topics as well as stay in touch with kith and kin. Users and businesses with their own websites can also create profiles with links back to their sites to improve their site's search engine ranking. This widens their business. A user needing a product or service might prefer to search for the product or service on a social network site rather than using a basic search engine. Or, a potential customer could discover the company while browsing connections of connections.

b) Identity Check

ABC has come up with competent methods to verify the real identity/relevance of the people involved in the network.

A user can however get subscriptions to the site without any references/ recommendations. They can also share their comments and ideas without any filters. But users who wish to post citations/ materials, conduct online workshops or conferences on the network will have to get in at least 5 references for his identity in relevance to his profile displayed

Another option for identity check would be to be referred by the firm or the research center or the university that the individual/ group is a par of.

The profile, contacts, communications of the person who wants to make friends or join an online group will be open for checks from the opposite party. Users can accept or reject any users friendship request based on his current associations, interactions and profile

If a particular user chooses not to add a particular user to his group. They have the facility to block the messages sent by the particular user

Any user, apart from the initial request to be added to a particular group/ individual user will not be able to send messages or interact without the personal interest of the group/ individual user

4. Marketing plan

4.1.Target market

a) Demographics

Worldwide Social Networking users

According to a report by ComScore, the total number of social networking users in the world has increased by 25% in June 2008 and jumped from 464 millions to 580 millions, majority of this growth came from the increasing popularity of Facebook and Hi5.

As evident in the below Table 7, Asia, Europe and North America contribute the majority of unique visitors to Social networking sites. Asia is not only the fastest-growing region for social networking, it is also the largest. But in contrast to the more number of unique visitors contributed from Asia, it is also reported that Asia rank fourth in the average minutes per month per visitor, pioneered by Latin America, North America and Europe.

Table 7: Social Networking by Region

Social Networking by Region

35%

9%

33%

66%

23%

0

50

100

150

200

250

Asia Pacific Europe North America Latin America

Middle East -Africa

Uni

que

Vis

itors

(Mil)

0%

10%

20%

30%

40%

50%

60%

70%

% G

row

th 0

7-08

June-07 June-08 Growth

Source: comScore Inc.

Users of various social networking sites by education

Information related to education of users of various sites sorted by highest monthly unique visitors are given in the table below. The lowest values per column are indicated in red and the highest values per column are in green. U.S. Monthly Unique are in millions and other column values are in percentages of entire site’s visitors.

Table 8: Social Networking sites by Education

Site No college % College % Grad

School %

US Monthly

Unique in millions

MySpace 53 38 9 45.00Facebook 44 41 14 32.00

Classmates 51 39 10 12.00Reunion 49 40 11 12.00Tickle 48 39 12 5.80Hi5 54 36 10 5.80My Yearbook 61 32 7 5.50LinkedIn 24 48 28 4.40Flickster 52 37 11 4.20Xanga 50 39 11 4.20Yuku 45 42 13 2.40Livejournal 41 44 14 2.20Tagged 58 34 8 1.90Bebo 51 40 9 1.90Cafemom 58 34 8 1.70Fubar 62 31 7 1.60Yahoo!360 50 40 10 1.60MSN LiveSpaces

47 40 12 1.50

BlackPlanet 40 47 12 1.50Friendster 30 54 16 1.20Ning 42 43 15 0.70Sonico 51 35 14 0.40Orkut 36 39 26 0.40Urbanchat 44 40 15 0.20Twitter 31 49 20 0.20ASmallWorld 9 32 59 0.01

http://tomuse.com/social-networking-demographics-who-has-smartest-and-wealthiest-users/

Popular networking site users by age

Table 9: Social Networking users by Age

<18 Yrs 18-25 Yrs

26-35 Yrs

36-45 yrs

>45yrs

Facebook 17% 52% 21% 5% 5%

MySpace 20% 40% 27% 7% 6%

LinkedIn 2% 9% 49% 24% 16%

Friendster 12% 39% 36% 7% 5%

Plaxo 16% 39% 24% 10% 11%

Hi5 21% 44% 23% 6% 6%Source: http://social-media-optimization.com/2008/05/social-network-user-

demographics/

From the above table it is evident that LinkedIn has the highest percentage of it’s users falling in the age group of 26-35 years, the most sought after age group by advertisers because the people in this age group is not only young but they also have an income stream and also not only have the desire for products/services but are also capable of affording it. Majority of the Facebook’s users fall in the age group of 18-25 years. The people in this age group are young and are highly tech savvy. It is also interesting to note that LinkedIn has a high % of its users falling in the age groups of 36-45 years and above 45 years, understandable given its professional orientation.

Why do people use social networking sites?

The appeal of social networking is different for everyone. On a personal level it is a great way to meet interesting people with similar interests. On a professional level, social networking sites have become a great way to: Expand a company’s online brand. Promote business articles. Promote blog posts and blogging. Keep current on the latest news. Watch the competition …ok “spy” on the competition. Meet colleges. Find employment.

Table 10 : Comparison of Demographics and Lifestyle

Names of sites

Demographics Lifestyle

User Base People with no college

Most accessed features on the site in ascending order

Other sites visited by the population

MySpace 69%- Inactive cauc12%- Active Afr Am4%- Inactive Asians14%- Active Hisp!%- Other Active members

High index of people with no college

Music/Radio 2.7x Instant Messenger 2.6x Teens 2.5x Communities/Teens 2.5x Gaming Information 2.3x Humor 2.2x Discussion/Chat 2.1x Baby 2.1x Fashion/Cosmetics 2.1x Horoscopes 2.0x Hispanic 2.0x Photo/Video Sharing 2.0x Educational Resource 2.0x

onlinepersonals.com hotfreelayouts.com myhotcomments.com applounge.com bitrhymes.com mobwarsapp.com zynga.comwealthymen.com kitnmedia.com freecodesource.com bumperstickersapp.com treadon.us hot-lyts.com whateverlife.com myspacemaster.net

LinkedIn 79%- Inactive cauc 9%- active Afr Am8%- Active Asian3%- Inactive Hisp2%- Others

High index of graduates and post graduates

Large number of small, medium and large businesses access this site

Names of sites

Demographics Lifestyle

User Base People with no college

Most accessed features on the site in ascending order

Other sites visited by the population

Facebook 74%- Inactive Cauc14%- Act AfrAm6%- Act Asians5%- Inactive Hisp1%- Other inactive members

High index of college graduates

Communities 3.4x Teens 2.9x Bridal 2.8x Fashion/Cosmetics 2.6x Baby 2.3x Schools/Universities 2.3x African American 2.3x Discussion/Chat 2.3x Humor 2.3x Parenting 2.3x Men 2.2x Music/Radio 2.2x Educational Resource 2.2x Women 2.2x Science/Nature 2.2x

mepopular.com ayisnap.com nliven.comhonestybox.com contextoptional.comsgnbar.comsocialreach.com whohasacrushonu.netmobscience.com coolapps.com 11piecesofflare.comsnapinteractiveappsmakeitwrok.comrailsmachina.compodzone.org

Hi5 30%- Inactive Cauc21%- Active Afr Am6%- Active Asians41%- active Hisp2%- Other

High index of people with no college

Hispanic 12.9x Instant Messenger 4.9x African American 4.0x Gay/Lesbian 3.6x Men 3.5x Job Search 3.4x Communities 3.4x Discussion/Chat 3.4x Humor 3.0x

hi5modules.com actonme.com qloud.com pixverse.com hi5networks.com bubome.com wamba.com vagos.es thelegion74.com

Names of sites

Demographics Lifestyle

User Base People with no college

Most accessed features on the site in ascending order

Other sites visited by the population

Active Members

Communities/Teens 3.0x Adult 2.9x Music/Radio 2.8x Teens 2.7x Personals 2.7x Travel News & Info

appspot.com wadja.com xsignia.com mtnonline.com badoo.com bigbooster.com

Orkut 41%- Inactive Cauc 5%- Inactive Afr.AM30%- Active Asians20%- Active Hisp5%- Other Active Users

High index of Graduates and Post Graduates

Instant Messenger 4.6x Discussion/Chat 3.1x Travel News & Info 2.6x Computer Hardware 2.3x Schools/Universities 2.3x Travel 2.2x Photo/Video Sharing 2.1x E-cards 2.1x Travel Agents 2.1x Video 2.0x Business News & Info 2.0x Flowers/Greetings/Gi 1.9x Science & Technology 1.9x Men 1.9x Technology

minglebox.com hipersocial.com 70mmvideos.com chakpak.com axill.in globo.com bubome.com manoramaonline.com invertia.com sortr.com malayalamanorama.com eenadu.net deepika.com ajitjalandhar.com cricinfo.com

Source: Quantcast.com

Target MarketKnowing how to market social networks is an important part of the networking cycle. But before deciding on an efficient market plan it is necessary to be clear about the target market.

The insights of the market analysis parts make it clear that ABC’s target market would be the educated customers between the 18 to 35 years of age.

Its target market will be the universities and educated working class in the regions of North America and Asia. It will also be targeting Europe which has one of the fastest growth rates in social network users and also in the educated user group.

Estimating that initial four months of 2009 will be used in the development stages; it would take nearly end of 2009 to completely Beta-test and launch the site; early 2010 will be used to collaborate with academic institutions and market the site through other sources in the marketing plan itself.

The target market will be the highly educated social network users in North America, Asia and Europe in the age group of 18-35 years. The estimation of the target market is explained in the following table.

Table 11: Estimation of the Target market

Particulars Worldwide

Target regions (Asia, North

America, Europe)Total users 650

million550 million

 Highly educated users (% of Total)

15% 15%

Highly educated users 97.5 million

82.5 million

 Users in Age group 18-35 (% of Total)

62.5% 62.5%

Users in Age group 18-35 406 million

344 million

 Educated users between 18-35 61 million 52 million 

Target market 52 million Total Users (Dec 2008) is arrived assuming a 12% growth for the

half year:Total users as of June 2008 * 12% growth = 580 * 1.12 = 650 Million

85% of users are from Asia, Europe and North America

Target Age group – 18 to 35 years(Based on RapLeaf*** study, majority of social networking users fall in the age group of 14-35 years, but since ABC is an academically based network, the lower age group(14-17) is excluded from the target market.

Highly educated users – % of graduates (Table 8)

*** Based on the study conducted by RapLeaf as of July 2008 on 49,269,050 social networking users located worldwide, majority of them are youngsters between 14 years to 35 years of age group.

SocialNetwork Gender Age Groups

14-17 18-24 25-34 35-44 45-54 55-64 65+

ALL SOCIALNETWORKS

Women 6,322,060 9,651,584 5,683,422 1,929,328 857,965 279,684 97,858Men 4,050,429 7,546,654 5,543,729 2,113,597 873,135 323,251 108,731Unspecified 682,756 1,456,780 1,045,381 428,357 181,913 72,196 20,240

Age Group %14-17 22.4%18-24 37.9%25-34 24.9%35-44 9.1%45-54 3.9%55-64 1.4%65+ 0.5%

Total100.0

%

Source - http://business.rapleaf.com/company_press_2008_07_29.html

4.2.Marketing Strategy

Formulating and implementation of efficient marketing strategies is a vital part of pre and post launch expenditures. Efficient marketing of the site’s competitive insights and content will lead to an increased user growth rate leading to better revenues; build powerful customer relationships and thus retain customer; amplify brand presence and thus increase traffic to website.

As an initial phase of the marketing strategy, ABC will hire able academicians and researchers to seed content like articles, research papers and other ideas on current market topics, enable internet visitors to post queries to the site even if they have not yet registered.

Then ABC will adopt viral marketing. It’s steps to viral marketing are described in the next section.

It will bring awareness about its launch by collaborating with popular online programs like video games; marketing platforms of other social networking sites like Facebook, Orkut and MySpace; associate with popular online stores like the Netflix, whose majority of customers are vigorous users of the internet

It will hire bloggers to seed blogs related to the site, its services and efficiency

To start with, ABC will collaborate with Google and other search engines to optimize its content. It will take steps to place abstracts of its content related to hot market topics on the top pages of the search engine, and when users wish to read further through the abstract, it will prompt the user to register with the site

Once any user registers with the site, ABC will project the other most read articles/papers on the topic and gradually probe them to pull in five other worthy users with attractive rewards for lining in the maximum number of users

Other than just marketing through the online channels, ABC will eventually initiate its next step of direct marketing by collaborating with the websites of universities and work places in the target market; it will also place ads related to the hot topics addressed by the site on notice boards of popular universities and work places; make faculty collaborations; invite

students and professionals for online quizzes and competitions on topics related to current market situations, the best among them can also serve as a content seed to the site

Once the site stabilizes on a minimum level of user base, it will arrange online contests, like case study/article/ white paper competitions on specific topics; invite ideas from the users to increase the net worth of the service offered and reward the best idea; initiate contests between application developers to enhance the technicalities of the site.

ABC will entail anything from leaving fliers at gigs to wearing t-shirts with its URL and Logo on it among the target audience; for instance, distribute T-shirts to high school students or graduates at University with the ABC’s logo and URL. ABC focus will include leaving stickers around possible locations of streets and offices, put posters about ABC on the message boards of the various university or high school campuses.

Steps to Viral MarketingViral marketing for ABC will help it drive new traffic and build new communities and create opportunities for drastic growth in revenues and users base. A successful viral marketing strategy will prove very essential for the success of ABC as a part of its social networking experience.

Help People Find ABC As a part of its initial step to viral marketing, ABC will make sure that people know how to find its network. For instance, adding information about the social network as the footer or in signature in e-mails. ABC will post pages reading about the focus of the site on popular forums and chat groups that allow signatures at the bottom of posts. Put the social networking information on popular blogs; hire popular bloggers to write about the focus and benefits of the site. Writing about the site in forums will act as a great source to help ABC pull in like-minded users/individuals.

ABC Will Make Its Site A Fun Place to VisitABC will avail its users many attractive add-ins to customize the look of their page on the site. These will include countdown clocks, music, animations and a vast number of other widgets and gizmos to add personality to individual user pages. These can be a great way for users to share information in a fun way with other people and attract huge user base.

ABC Will Make an Interactive NetworkABC will visit the pages of its members and leave regular comments and feedback on their postings, help them reach like minded.

ABC will keep It FreshABC will regularly keep itself updated on blog related to other social networks as well as ABC related Blogs. A relevant and up-to-date blog will give people a reason to come back and visit ABC site time after time again.

ABC will also keep optimizing its site with popular user postings at regular intervals. This will help ABC constantly stay on top lists of search engines.

Key to Success

ABC will prove to be a success because of the following: 1. End market chosen.2. Services match with academic sector

1. End Market: The site is proposed to serve the developing areas of US, EMEA and Asia.

2. Services match with academic sector: Services provided by ABC matches the interests of the academic sector.

Services of academic sector include Social networks that do not encourage general social groups that

are typically found on sites like Face book or MySpace Would desire to make groups/network with set of people with a

specific qualification Do not mind paying up if the information is really worth Being a part of prestigious data houses like McKinney Quarterly,

Knowledge at Wharton, HBR, EBSCO, Emerald etc.

5. SWOT, Risks and Exit Plan

SWOT Analysis

STRENGTHS Features of both academic and social networking. Superior services than other competitors. Established network of academicians and top universities Combination of business models – Freemium, Advertising &

Referral pay Strong Management team

WEAKNESS Stiff Competition in networking Economies of scale – a problem for start up companies

OPPORTUNITY Rapid growth in Social Networking users worldwide** Lack of established players in academic networking space.

THREATS Current Economic Conditions - Recession Potential New Entrants into the market space

**The total number of social networking users in the world has increased by 25% and jumped from 464 millions in June 2007 to 580 millions in June 2008.

RisksABC will seem to provide a dream come true for students, hobbyists, business men, academicians and professionals wanting to expand their networks. But the site is bound to encounter problems similar to any other social network. The kind of problems could be,

Users might receive invitations from people they do not know. This is because few users will tend connect with everyone they find on the network to drive up their connection numbers.

Circulation/uploading of illegitimate reports related to banned subjects. This is again due to a set of socially irresponsible users who take advantage of social networks to circulate reports on banned subjects to lure children and get their kicks trolling the site and harassing legitimate users.

Privacy is also a concern. Younger users may be unaware of the problems in revealing too much information. Thieves might use profile information for identity theft. Businesses worry about their employees giving out proprietary information or using the business brand in an inappropriate way; for example, a flight attendant posted unprofessional photos of her wearing her official uniform.

6. Financial highlights

6.1.Key Financial Indicators

Table 12: Key Financial indicators (EUR 000)

Key Financial Indicators 2009 2010 2011 2012 2013

Total Revenue 43.3 471.33,462.

812,41

9.325,68

3.9

           

EBIT -436.7 -295.92,270.

610,756

.123,537

.7

Tax 0.0 0.0 0.01,274.

23,223.

7

PAT -436.7 -295.92,270.

69,481.

920,31

4.0           Profitability          Gross Margin - 83% 94% 97% 98%Net Margin - - 66% 76% 79%EBITDA Margin - - 67% 87% 92%EBIT Margin - - 66% 87% 92%           

Free cash flow -439.9 -493.4 473.92,978.

36,956.

0           Discounted Free Cash Flow -382.5 -373.1 311.6

1,702.8

3,458.4

Sum of Free Cash Flows 4,717.2

NPV of the project 4,717.2

IRR of the project 121%

6.2.Capital

The total funding requirement for the project is Euro 1000,000 and this would be funded in the form of 20% from Owner’s contribution and 80% from investors.

The contribution from investor will take place in 2 phases- Euro 300,000 or 30% at the start of the project and Euro 500,000 or 50% at the start of the 2nd year.

Most of this capital funding in the first 2 years is consumed by operating costs for the first 2 years when the revenues are projected to be very minimal and this will not be able to cover the operating expenses of the company for these 2 years.

Table 13: Capital requirements (EUR 000)

Capital 2009 2010 2011 2012 2013Initial Capital 500 500 1,000 1,000 1,000Promoters 200 200 200 200 200Investors/ Private Capital 300 300 800 800 800

Additional Capital 0.00 500 0.00 0.00 0.00Promoters 0.00 0.00 0.00 0.00 0.00Investors/ Private Capital 0.00 500 0.00 0.00 0.00

Capital at the end of the year 500 1,000 1,000 1,000 1,000Promoters 200 200 200 200 200Investors/ Private Capital 300 800 800 800 800

Capital breakupYear 1

Capital expenditure (software & furniture) - Euro 30,000 Startup costs- Euro 27,600 Net Operating Cash Outflow- Euro 382,300

Year 2 Capital expenditure (software & furniture) - Euro 15,000 Startup costs- Euro 16,000 Net Operating Cash Outflow- Euro 462,400 Cash & equivalents at end of Year 2- Euro 66,700

6.3.Projections

Table 14: Projected Income Statement (EUR 000)

Income Statements 2009 2010 2011 2012 2013           

Pay Users Revenue 0.0 182.0 1,612.0 5,795.011,583.

3Advertising Revenue 0.0 13.7 45.7 100.2 152.6

Referred pay users revenue 0.0 0.0 31.2 267.0 1,056.0Other revenues 43.3 80.0 85.0 95.0 100.0

Revenue 43.3 275.71,773.

96,257.

212,891

.9Cost of Revenue 53.3 81.8 200.7 369.3 585.9

Gross Profit -10.00 193.91,573.

25,887.

912,306

.0           Operating Expenses          Personnel Costs 298.2 443.0 503.2 522.5 527.4Sales & Marketing 23.3 70.0 160.0 270.0 280.0General & Administrative 90.7 150.3 293.4 456.4 705.6Depreciation & Amortization 14.4 22.2 34.9 45.2 47.3Total Operating Expenses 426.7 685.4 991.5

1,294.0

1,560.2

           Income Before Taxes -436.7 -491.6 581.7

4,593.9

10,745.8

           Provision for Taxes 0.0 0.0 0.0 1,274.2 3,223.7           

Net Income -436.7 -491.6 581.73,319.

77,522.

0

The revenues for Year 1 and Year 2 are projected to be minimal. But from Year 3 the revenues are projected to grow significantly and by Year 5 it is projected to grow beyond Euro 12.8 million.

Net income for Year 1 is projected to be a net loss of Euro 436,700, but the company is projected to generate net profits from Year 3 and is projected to generate a net income of more than Euro 7.5 million for Year 5.

Table 15: Projected Cash flow Statement (EUR 000)

Cash Flow Statements 2009 2010 2011 2012 2013

Net income

-436.

7

-491.

6581.

73,31

9.77,522.

0Adjustments:          

Depreciation & Amortization 14.4 22.2 34.9 45.2 47.3In-process research and development          Changes in Current Assets and Current Liabilities          

Accounts receivable 0.0 -16.9-

127.1-

384.9 -587.5Prepaid expenses and other assets          Accounts payable 40.0 23.9 35.4 39.3 40.2Accrued expenses and other liabilities          

Net Cash Provided by Operations

-382.

3

-462.

4524.

93,01

9.37,022.

0Purchases of Software & furniture -30.0 -15.0 -35.0 -25.0 -50.0Other Startup costs -27.6 -16.0 -16.0 -16.0 -16.0Net Cash Provided by Investing -57.6 -31.0 -51.0 -41.0 -66.0Capital raised 500.0 500.0 0.0 0.0 0.0Short Term Credit          Long Term Loan          Net Cash Provided by Financing

500.0

500.0 0.0 0.0 0.0

Net Change in Cash 60.1 6.6473.

92,97

8.36,956.

0           Cash and Cash Equivalents, Beginning of Period 0.0 60.1 66.7 540.7

3,518.9

           Cash and Cash Equivalents, End of Period 60.1 66.7

540.7

3,518.9

10,474.9

The net cash inflow for Year 5 is projected to be more than Euro 6.9 million.

The net operating cash outflow is estimated to turn positive from Year 3.

As previously mentioned, the net operating cash outflow for the first 2 years is negative.

Table 16: Projected Balance Sheet

(EUR 000)

Balance Sheets 2009 2010 2011 2012 2013

Cash and Cash Equivalents 60.1 66.7 540.73,518.

9 10,474.9

Accounts Receivables 0.00 16.87143.9

4528.8

1 1,116.35Prepaid Expenses and Others          

Total Current Assets 60.1 83.6 684.64,047

.711,591.

3           Software 3.8 6.3 15.0 20.0 26.3Furniture 18.8 20.0 26.3 20.0 32.5

Intangible Assets          Unamortized startup costs 20.7 25.8 26.9 24.0 24.0Other Long Term Assets 0.0 0.0 0.0 0.0 0.0

Total Assets 103.3 135.7 752.84,111

.711,674.

0

Accounts Payable 40.0 63.9 99.3 138.6 178.8Bank Credit 0.0 0.0 0.0 0.0 0.0Accrued Expenses and Others          Total Current Liabilities 40.0 63.9 99.3 138.6 178.8           Long Term Debt          Other Long Term Liabilities          Total Liabilities 40.0 63.9 99.3 138.6 178.8           

Share Capital 500.01,000

.01,000

.01,000

.0 1,000.0Promoters Capital 200.0 200.0 200.0 200.0 200.0Investors Capital 300.0 800.0 800.0 800.0 800.0

Retained Earnings -436.7 -928.3 -346.62,973.

1 10,495.2Total Stockholders Equity 63.3 71.7 653.4

3,973.1

11,495.2

Total Liabilities & Equity103.3 135.7 752.8

4,111.7

11,674.0

Table 17: Number of users

2009 2010 2011 2012 2013Monthly Unique Visitors 0

1,300,000

4,350,000

7,950,000

10,900,000

Ad Users 0 910,0003,045,0

005,565,0

007,630,00

0

Registered Users 0 130,000565,00

01,360,0

002,450,00

0Pay users 0 6,500 28,250 68,000 122,500Referred users 0   12,000 72,000 264,000Referred Pay users 0   600 3,600 13,200

The number of unique visitors forms the base for revenue generation. Though the financial plan expects no visitors in the first year of operations i.e.: 2009, it is projected to be 1.3 million in 2010 and projected to rise to 10.9 million by end of 2013.

The number of ad users who form the base for advertisement revenue is projected to rise from 0.91 million in 2010 to more than 7.6 million in 2013.

The pay users/ users of premium services are projected to rise from 6,500 in 2010 to more than 2.4 million in 2013.

6.4.Valuation

Table 18: Valuation Based on Projected Cash flows (EUR 000)

Key Financial Indicators 2009 2010 2011 2012 2013

Free cash flow -439.9 -493.4 473.92,978.

36,956.

0           Discounted Free Cash Flow -382.5 -373.1 311.6

1,702.8

3,458.4

           

NPV of the project 4,717.2           IRR of the project 121%

The company requires an initial capital of Euro 1 million of which Euro 500,000 will be infused in the start of Year 1 and Euro 500,000 will be infused in the start of Year 2. Discounting the Cash Flows from the project using a discount rate of 15% the proposed plan generates a NPV of more than Euro 4.7 million and an IRR of 121%, which indicates the proposed plan, will generate handsome returns. The use of high discount rate is because of the inherent risk involved in the project.

Table 19: Discounted Cash Flow Valuation (EUR 000)

 Discounted Cash Flow Valuation 2009 2010 2011 2012 2013

Revenue 43.3 275.7 1,773.

9 6,257.

2 12,891

.9

Growth  536.1

%543.5

%252.7

%106.0

%           

EBIT -

436.7 -491.6 581.7 4593.910745.

8Less: Adjusted Tax 0.0 0.0 0.0 1274.2 3223.7

NOPLAT-

436.7 -491.6 581.7 3319.7 7522.0Add: Depreciation and Amortization 14.4 22.2 34.9 45.2 47.3 +/- Change in net working capital 40.0 7.1 (91.7) (345.6)

(547.3)

Free Cash Flow before CAPEX(382.

3)(462.4

) 524.9 3,019.

3 7,022.

0 Capital expenditures 57.6 31.0 51.0 41.0 66.0            

Free Cash Flow of the firm(439.

9)(493.4

) 473.9 2,978.

3 6,956.

0

Discount Rate 15.0%Assumed perpetual growth 10.0%Free cash flow 9,914.8

Terminal value165,48

5.0   Present value of FCF 4,717.2

Present value of Terminal value82,275.

3

Implied value of the company86,992

.5

Using a discounted cash flow method of valuation, the implied value of the company at the end of Year 5 will be Euro 86.9 million.

It should also be noted that the assumed perpetual growth of 10% after Year 5 is very conservative as revenues are growing more than 100% by Year 5.

Thus, if the promoters decide to sell their company after 5 years, their company would be valued at Euro 86.9 million, while the total investment is only Euro 1 million.