MobileLads

Innovative mobile marketing solutions

09.09.2004
Business Plan
Venture cup 2005
Jan-Henrik Lång (27437)
Henric Suuronen (25732)
Table of Contents
Table of Contents........................................................................................2
1. Executive summary ................................................................................3
1.1 Strategy and competition ....................................................................4
1.2 Objectives .........................................................................................5
1.3 Mission .............................................................................................5
1.4 Keys to success..................................................................................5
2. Services and technical implementation .......................................................5
2.1 The MobileLads registration website ......................................................6
2.2 The web based advertising management system.....................................8
2.3 The mobile service .............................................................................9
3. Revenue model ..................................................................................... 11
3.1 Revenue summary............................................................................ 11
4. User groups and potential markets .......................................................... 11
5. Expected market growth and emerging new possibilities ............................. 12
6. Competition and market segments........................................................... 13
7. Financial Plan........................................................................................ 14
7.1 Five year sales projection and cash flow analysis sheet .......................... 15
7.2 Funding .......................................................................................... 15
8. Management team................................................................................. 16
8.1 Management Summary ..................................................................... 16
8.2 Personnel plan ................................................................................. 16

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1. Executive summary

The business idea of MobileLads is to offer companies innovative mobile

marketing solutions forming a mobile advertising agency. The initial service
offering of MobileLads will enable targeted marketing in the last minute. This
service will form a building block for the company and will create a loyal clientele
and customer database. After the initial service has taken off additional mobile
marketing services can be offered e.g. location based advertising, questionnaires,
interactive ads, MMS coupons and competitions. MobileLads would also offer
mobile campaign planning, management and strategy services. The growth
opportunities for MobileLads are considerable, as mobile marketing services will
grow to account for 7 billion dollars during the year of 2005 in Europe (Frost &
Sullivan, Wireless Media Finland 05/2003)

MobileLads first service will be targeted to companies in the leisure and

entertainment industry by providing them with means for selling excess capacity.
The MobileLads B2B solution is ideal for companies that face significant
economies of scale e.g. cinemas, hotels, and amusement parks. These companies
suffer from high and low seasons even on a day-to-day basis. A common scenario
is a cinema showing a blockbuster movie in the middle of the week to a nearly
empty audience. Deep discounting in the last minute would even these variations.
However, launching campaigns in traditional marketing media such as television,
radio and newspaper require serious planning weeks or even months in advance.
This makes them obsolete for marketing in the last minute. This is where
MobileLads steps in. The basic carrying idea is to allow price conscious consumers
to register at the MobileLads’ website in order to receive personalized
advertisement of deeply discounted products and services to their personal
mobile devices. In some cases, the products and services can also be paid
directly with the mobile phone supporting the impulsive purchase behaviour. Most
importantly, the service will not cost the end-consumer anything; the company
advertising will pay MobileLads for the usage of the advertising system through
which the company can send mobile SMS ads to registered customers. Customers
who have expressed their interest in e.g. discounted movie tickets are more likely
buy than the audience reached through traditional magazine or television ads,
thus significantly saving in marketing expenses and generating additional revenue
to the cinema.

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The money-making mechanism of MobileLads relies on charging partnering
companies for their usage of the advertising system and a provision of sold
products/services through the service. Once a loyal clientele is achieved through
the initial service, cross-selling of other MobileLads’ products will generate
additional revenue streams.

MobileLads will start its business venture in Helsinki by establishing an office and
hiring the required staff. The advertising system can be developped rapidly in
only a few months but gathering the necessary registered price conscious
customers will require an additional 3 months after which the service can start.
The success of the business will rely on getting registered customers since the
actual system development is trivial. Within the Finnish market, MobileLads plans
to target companies in the bigger cities such as the metropolitan area of Helsinki,
Tampere, Oulu, Turku and some others. MobileLads will focus on larger
businesses with big capacity such as movie theatres, spa hotels, amusement
parks, concerts, sports events just to name a few. The concept is highly portable
to foreign markets thus enabling rapid growth opportunities on European
markets.

1.1 Strategy and competition

The MobileLads business model is not unique as such, companies such as
Add2Phone and 12Snap are direct competitors but they lack a similar service. The
initial service of MobileLads can easily be copied by these competitors and
competition will probably appear if the service is successful. However, an effective
barrier against competitors can be built by pursuing a first mover strategy with
the highly innovative initial service. When MobileLads manages to reach a critical
amount of business partners early and tie them up to its services strong network
effects can be achieved. Signing up a deal with a new business partner increases
the amount of registering end-users hence benefiting also the existing business
partners. Furthermore, when new business partners join the MobileLads
community and place links to the registration website all partners benefit from
the marketing efforts of each other. The value of the registered price-conscious
end-users is also unquestionable. The customer database built with the initial
service offering will be the biggest defence against competitors and will give
MobileLads significant advantages in widening the product portfolio in the future.
An alternative strategy would be collaborating with an ordinary advertising
agency.

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1.2 Objectives
1. A turnover of 10 million euros and a profit of 1 million by the fiscal year 3
2. Reach break-even within two years in each country where the service is
launched
3. To reach a market share of 10% on the European mobile advertising market
within 3 years

1.3 Mission
MobileLads is to offer an innovative and cost-effective way for businesses to
unload excess capacity and generate significant additional revenue. In all areas of
business, MobileLads has to keep the customer in focus and monitor changing
needs and desires of its clientele. The limited amount of possible business
partners with business models suitable for the MobileLads service makes
preservation of existing partners a top priority.

1.4 Keys to success

1. The light organization with a minimum amount of employees gives cost
leadership
2. The early-mover advantage can generate significant customer loyalty and
support the Get Big Fast strategy.
3. The management team is familiar with the end-user (the people receiving
discounts) target segments as being a part of it themselves. This gives superior
knowledge of market segment behaviour.

2. Services and technical implementation

The MobileLads solution is built upon the effective use of standard technologies
such as SMS and a website accessed through the fixed Internet. By using widely
spread standards and not the latest technology the broadest market (i.e. end
users who are willing to receive deeply discounted offers) can be reached
efficiently. This is especially important when considering the target segment of
such a service. It is likely that a main target segment for a cinema using
MobileLads solutions is students and youth equipped with somewhat older mobile
devices. According to statistics, mobile phones have a lifetime of 2-3 years in
Finland, which means that the current end-user would not have means to use

5
sophisticated technologies. Therefore, it is viable to depend on existing
technologies and not future. MobileLads can later bring in to use newer
technologies such as WAP.

The system and service proposition of MobileLads consists of the following two
subsystems 1. MobileLads registration website and 2. MobileLads advertising
system website. On the registration website, the end-user will register in order to
receive discounted offers. Whereas on the MobileLads advertising system website
partnering companies can manage advertising campaigns. MobileLads will serve
as an intermediate and facilitator between the end-users (e.g. students who wish
to go to the movies cheaply) and the partnering company (e.g. a movie theatre).
Consequently, the whole
process involves three
parties: the end-user,
MobileLads and the
partnering company. The
whole interaction process
starts when an end-user is
driven to the MobileLads
website in order to register
to the
Picture 2: Kinopalatsi link to
MobileLads

service. End-users are attracted to the registration site by advertisements and

links on the partnering companies’ own corporate websites or general MobileLads
marketing campaigns.

2.1 The MobileLads registration website

The registration website contains a registration form for new end-users and a log
in area for previous customers. An end user can both at a first visit and later on
change the advertisements he is going to
receive and their frequency. The website
Customer
database with the registration form is on
MobileLadss’ server and it is common for
all of its business partners. That is, an
preferences stored
end user can get at the same time

Registration website registers/modifies

preferences
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discounts from many different companies that have completely different business
models. The end-user simply selects the companies with check boxes
Picture 3: End-user registration

From which companies do How many messages in total on the personal preferences page. If
you wish to receive discount do you wish to receive from
messages? the companies of your interest
there were to exist separate registration
Kinopalatsi 1-2 per week
forms on all the different partnering
Caribia kylpälä
Naantalin Kylpylä Note! You can get off the sms companies’ websites, the end-user would
posting list anytime/anywhere by
FinnKino sending an sms ”off” to 16876 or have to register to each separately. This
simply by unregistering at
Muumimaailma FinalCall.fi
would be a time consuming and
Ravintola Prima
frustrating activity. Furthermore, with a
Börs Nightclub

Turun Kaupungin centralized website registration the end-

Teatteri
user has more control over the total
Save Preferences
amount of received messages.
Picture 4: Setting preferences

The MobileLads website will be built in-house with common web standards HTML
and CSS. The site will be dynamic relying on a central MySQL database with PHP
handling the interface. The most vital component stored in the database is the
customer information, which has to be back-upped every night on a secure
separate disk. Special attention will be given to security issues because of the
sensitive customer information gathered and stored. The database is maintained
with effective use of triggers which automatically update for instance the amount
of messages every end-user has received for a given time period.

CustomerINFO Interest Company

*Customer_ID *Customer_ID *Company_ID
FirstName *Company_ID Name
LastName admin_password
password
city reservation Product
phonenumber *Customer_ID *Company_ID
MMS_enabled *Company_ID *Product_ID
desired_messages *Product_ID max_seats
received_messages *Time
Validation_ID
Amount
isPaid
Picture 5: Customer database table design

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The registration website is initially directed for fixed internet users using desktops
and laptops and no separate mobile interface is provided. The registration
procedure requires some amount of input and this is inconvenient on current
mobile devices used by the users in the target segments. However, as new highly
sophisticated devices become more widely used a mobile interface to the
registration site can be developed.

MobileLads collects revenue from its business partners and therefore the end user
does not have to pay anything for the service.

2.2 The web based advertising management system

This system is used at the actual point of sales of the partnering company for
example at the ticket office of a cinema. The system enables the manager to
make fast discounting decisions
movie advertising system
conveniently when needed. The
title time preview of message partnering companies will have
Kill Bill vol. 2 13.30 Sender: Kinopaltasi.fi
Kill Bill 13.30 4€ administrative access to a
Action movie starring:Uma
amount of receivers
Thurman, David Carradine.
tailored interface on the
332 To reserve a ticket reply to this
message with code of movie and MobileLads website.
maximum amount of tickets desired amount of seats e.g. ”5” If
reserved you wish to pay the tickets add
pay in the beginning e.g. ”PAY 5”
50
You will receive an sms validation
code once completed!

Send

Picture 6: Making a SMS ad

The following scenario might take place in a cinema (picture 6 on the previous
page). The manager of Kinopalatsi movie theatre notices after lunch that a
Tuesday afternoon is especially quiet with hundreds of empty seats in every
movie show. The manager takes immediate actions and connects to the
MobileLads advertising system. There he can easily generate SMS advertisements
and send them to previously registered end-users. The manager inputs the name
of the movie and the start time of the show. He also enters the amount of SMS
messages to be sent, which corresponds to 332 in our example. The amount of
receivers entered determines the price of the MobileLads service. Noteworthy is
that people generally go to the movies in pairs or bigger groups. This means that
a SMS sent to one person might create two or more new visitors to the movie
theatre. Compared to a more traditional way of handling excess capacity
(lowering ticket prices during the weekdays) MobileLads is more efficient because
it takes advantage of the impulsive shopping nature of customers and allows last-

8
minute discounting. A message can also be used during weekends to attract
customers to a movie that has been shown for a longer period. People even might
go and see a movie for a second time if the price is right. The manager also
enters the maximum amount of tickets to be sold. If there are for example 345
empty seats for a show, the manager decides to reserve 50 seats to the
MobileLads system.

The web based advertising system must be tailor-made for each company
participating. For instance, a spa hotel wanting to advertise during slow seasons
does not need to enter information about maximum amount of tickets sold as in
the movie theatre scenario. The messages will function as ordinary
advertisements for companies similar to the mentioned spa hotel with no real
limited number of sold tickets. In these cases, the validation code is sent directly
with the original SMS message and no confirmation from the customer’s side is
needed. At the spa hotel or similar the customer only needs to show the received
message in order to get the discounted price. The customers are allowed to share
and forward the SMS to their friends, generating a snowball effect.

Some of the companies participating in the MobileLads community will offer the
possibility to pay the discounted ticket directly with the mobile phone and not
only to reserve a ticket for the discounted price. When it comes to the different
payment possibilities one must consider which way is the most convenient for the
end-user. By far the easiest method is to add the payment in the end-users
phone bill. This form of payment requires no difficult registration to mobile
accounts and can be used by everyone with a contract with a Finnish mobile
operator. The operator obviously takes a fee for this service, which is of 20-30%
(Sonera) magnitude of the total ticket payment. In the example of a discounted
movie ticket of 4€ a corresponding 1-1.5€ will go to the operator leaving the
cinema a income of 2.5-3€. However, there are implications that these fees will
be lowered to around 10% in the near future. The advertising and SMS
generating system is also developed in-house by the contracted system developer
in cooperation with the management. The system developer will bring the
required expertise of building up the SMS platform on the MobileLads server.

2.3 The mobile service

The MobileLads system relies on SMS technology and no real application is
needed in the mobile device. Only basic SMS support is required which is present
in somewhat every mobile
1. sms ad

4. validation codes Ad 2. request for a ticket

Cinema
system
server 3. confirmation and validation code
server
9
phone. From the users point of view the advertisement

Picture 7: Using the service from the end-user view

procedure starts when the user receives a MobileLads SMS ad with the advertised
product, information and product identification code. The user then simply replies
to the message by writing the amount of seats desired and the product code. If
the user wishes to pay for the tickets at the same time he ads the word pay to
the message. The sold and reserved validation codes will be sent with XML to the
partnering companies’ systems.

Picture 8: The SMS ad

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3. Revenue model

MobileLads will generate revenue when making business partnerships with

companies wishing to take advantage of the innovative mobile marketing
platform provided by MobileLads. The first source of income occurs when a
company signs with MobileLads. The initial fee is around 1000€ depending on the
size of the signing business. This fee is to cover the development expenses facing
MobileLads when making the tailored web advertisement system to the
partnering company. The second fee is associated with the amount of SMS to be
sent in each product marketing campaign. Each sent SMS will cost the partnering
company 0.10€. For example in the cinema example when the manager decides
to send 300 SMS messages the associated costs will be 30€. Additionally
MobileLads will take a 15% fee of the value of all sold tickets.

3.1 Revenue summary

1. Initial fee 1000€
2. SMS fee 0.10€/each
3. 15% of total sold products

4. User groups and potential markets

As stated before, mobile marketing is attractive especially for companies offering
products and services to mass markets. The demand for such products can
fluctuate depending on current season, day of week, weather and other
incontrollable variables. This suggests that these companies would be in a need
for an effective way of distributing marketing campaigns in the last minute for
example one or two hours before an event starts. Launching campaigns in
traditional marketing media such as television, radio and newspaper require
serious planning weeks or even months in advance. This makes them obsolete for
marketing in the last minute.

The primary target groups for the MobileLads product is movie theatres (e.g.
Kinopalatsi, FinnKino), amusement parks (e.g. Linnanmäki, Särkänniemi,
Muumimaailma), restaurants, bars and nightclubs (e.g. Hamburger Börs, Prima,
Wanha, Tavastia) and spa hotels (Caribia, Serena, Naantalin Kylpylä). These are
typically facing strong economies of scale (modest variable costs and high fixed

11
costs) meaning that an extra customer does not significantly increase their
expenses but can create significant added revenue. A visitor to a movie theatre
or a spa is also likely to use other services offered there (buy popcorn, soft
drinks, candy or visit the spa restaurant after the stay). These additional services
have traditionally high margins. According to statistics found on
easycinemas.com, the average seat occupancy rate in movie theatres in Britain is
only 25%. This suggests that the demand for means for selling excess capacity is
real.

This mobile marketing concept can easily be adapted to businesses globally

wherever the mobile penetration rate is high and the mobile device usage has
reached even the low-income segments (i.e. students and youth). Furthermore,
the target groups described can be found in just about any industrialized country.
Given the mentioned characteristics MobileLads is planning to start the service in
Finland where the penetration rate is exceptionally high and the target segment is
well known. After a successful launch in Finland the model can be expanded first
within EU and then to other selected countries matching the criteria. There is less
sense in launching the service in multiple countries in the same time since an
existing customer does not benefit if the service is available in another country
than his own.

5. Expected market growth and emerging

new possibilities
People are getting more price-conscious and are often seeking for cheaper
alternatives as seen in the airline and travelling industry for the past years. This
trend is likely to prevail and expand to new product segments such as
entertainment products and services. In addition, the general popularity of
recreational activities to balance the stress of
use the joystick to select
desired seats
free every-day life is increasing and demand for such
taken

6 products likewise. The emerging new technologies

5
such as the MMS give new possibilities of offering
4
3 image and sound enhanced services. Future
2
1 mobile advertisements of MobileLads for a movie

screen could show the main poster of the movie or even a

short movie teaser. These features would
Picture 9: Selecting seats through a WAP interface

12
make the advertisements even more appealing thus supporting the impulsive
purchases. A future scenario would include the possibility for the end-user to
have an image for instance of which seats are free in a movie theatre and choose
where to sit with the mobile phone through a WAP interface. The user would
browse the rows of the theatre with the joystick or similar pointing device on his
mobile phone.

6. Competition and market segments

The business model of MobileLads can easily be copied and competition will
probably appear if the service is successful. However, an effective barrier against
competitors can be built by pursuing a first mover strategy. When MobileLads
manages to reach a critical amount of business partners early and tie them up to
its services strong network effects can be achieved. Signing up a deal with a new
business partner increases the amount of registering end-users hence benefiting
also the exiting business partners. Imagine the following scenario. MobileLads
starts slowly its business by only offering mobile discounts only on tickets to
cinemas. The MobileLads website will be visited by movie enthusiasts and money
savers such as students and youth. After a while, an amusement park joins the
MobileLads network hence directing e.g. families with children to the MobileLads
registration website. These new end-users sign up in hope for cheap amusement
park tickets but are also likely to be interested in additional services such as the
mentioned movie tickets. It is a small step to assign also for discounts from
another company. Furthermore, when new business partners join the MobileLads
community and place links to the registration website all partners benefit from
the marketing efforts of each other.

The business model of MobileLads is also supported by the characteristics of the

service. Once a partnering company has joined the MobileLads community and
set up the service it faces serious switching costs if it decides to change service
provider (i.e. it has already made marketing efforts for the MobileLads website).
This fact increases the customer retention rates of MobileLads.

The MobileLads business model is also apt for strong scale economies. The initial
costs of website development and system development are of fixed nature and

13
costs are not increased significantly when a new partner signs up. This fact
supports also the fight against smaller competitors because MobileLads can
spread fixed costs over a growing revenue base.

As described the MobileLads business model is facing strong network effects,

customer retention rates and economies of scale. These characteristics suggest
that a Get Big Fast strategy is likely to succeed. This means that MobileLads will
start by marketing aggressively to gain momentum and a large customer base
and by that also avoiding threats from competitors.

7. Financial Plan
The sales projections of MobileLads for the following 5 years depends on the
snowball effect of the service popularity. The first year the estimated number of
participating companies is estimated to only three. However, once the service
gets attention the amount of companies increases rapidly to face saturation
around the level of 30 year five. In order to reach larger markets international
expansion should be considered around year four. MobileLads has to invest in
marketing aggressively during the first years but once it has achieved a
reputation, the marketing efforts will be taken care of by the partners (with links
on their own websites). The initial hardware cost 15000€ will be depreciated over
a period of two years causing a yearly depreciation of 7500€. The third year
additional hardware has to be purchased to support the growing business. This
cost of 10000€ will be depreciated over a three year period. The funding capital
expenses are not included in the calculations since contracts for external capital
have not yet been made.

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7.1 Five year sales projection and cash flow analysis sheet

1 2 3 4 5
Amount of partners 3 10 20 25 30
Income
Initial fees 3 000 € 10 000 € 20 000 € 25 000 € 30 000 €
SMS fees 16 425 € 54 750 € 109 500 € 136 875 € 164 250 €
Ticket sales 41 063 € 136 875 € 273 750 € 342 188 € 410 625 €
Total Income 60 488 € 201 625 € 403 250 € 504 063 € 604 875 €

Expenses
Total payroll 76 000 € 100 000 € 103 000 € 108 000 € 108 000 €
SMS sending 13 688 € 45 625 € 91 250 € 114 063 € 136 875 €
Marketing 5 000 € 5 000 € 3 000 € 1 000 € 1 000 €
Hardware 15 000 € 10 000 €
Other(electricity etc) 6 000 € 6 000 € 6 000 € 6 000 € 6 000 €
office rent 12 000 € 12 000 € 12 000 € 12 000 € 12 000 €
Total expenses 127 688 € 168 625 € 225 250 € 241 063 € 263 875 €

Operating Profit -67 200 € 33 000 € 178 000 € 263 000 € 341 000 €
Depreciation 7 500 € 7 500 € 3 333 € 3 333 € 3 333 €
Taxable profit -74 700 € 25 500 € 174 667 € 259 667 € 337 667 €
Net Profit 26 370 € 132 587 € 195 487 € 253 207 €
PV -67 200 € 25 356 € 122 584 € 173 787 € 216 442 €

Net Profit margin -111,10 % 13,08 % 32,88 % 38,78 % 41,86 %

NPV 5 years 470 969 €

Following attributes are used in the calculations above:

Initial and yearly fee 1000
Average amount of sms sent each day per
company 150
Average price of product 5
Average amount of sold tickets 50
Price of sms 0,1
Portion of ticket sales 0,15
SMS price for MobileLads 0,05
US Government treasury bill rate 0,04
Tax rate 0,26

7.2 Funding
Mr Suuronen and Mr Lång are both willing to invest 15% (17550€) each of the
needed capital at the initial state. The business is likely to run with loss the first
year and the total operating expenses will be around 117000€. Currently
MobileLads is looking for a venture capitalist to come up with the remaining 70%
corresponding to roughly 81900€.

15
8. Management team

8.1 Management Summary

Henric Suuronen and Jan-Henrik Lång will own jointly 30% of MobileLads with an
equal amount (15%) each of the company. They will work with an equal status
but will concentrate on different aspects of the business.

Henric Suuronen will be in charge of the early development of the system and will
direct the development and election of suitable development partners. Mr.
Suuronen has experience in website development and highly valuable personal
contacts, which may assist in the system development phase. Especially the
development of the SMS generation system will be overviewed by Mr. Suuronen.
Once the system is up and running Mr. Suuronen will research the possibilities of
expansion and implementation of new technologies.

Jan-Henrik Lång will concentrate on the customer relations and sales. He will
actively search for new business partners and direct the marketing efforts of
MobileLads. He will also be charge of possible recruitment of additional personnel
once need for such is present. The system maintenance and upgrading will be the
responsibilities of the both associates in order to cut costs.

The most vital part of the system the SMS generation and sending tool will be
done by the hired system developer because the management team lacks the
required expertise. The system developer to be contracted has to have previous
experience of developing SMS systems.

8.2 Personnel plan

The first half year of business is concentrated on the development of the system
and making initial contacts to possible business partners. A secretary will be
recruited to assist with every-day routine tasks at the office. A sales officer will be
recruited to assist Mr. Lång with company sales and support. Additionally, a
system developer is signed to take care of initial system development with Mr.
Suuronen. The organization will be tried to keep as small as possible, preferably
with only five employees during the initial five-year period.

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Personnel Plan
FY 1 FY 2 FY 3 FY 4 FY 5
Management team 40 000,00 € 50 000,00 € 55 000,00 € 60 000,00 € 60 000,00 €
Secretary 12 000,00 € 16 000,00 € 16 000,00 € 16 000,00 € 16 000,00 €
Development team 12 000,00 € 18 000,00 € 16 000,00 € 16 000,00 € 16 000,00 €
Sales team 12 000,00 € 16 000,00 € 16 000,00 € 16 000,00 € 16 000,00 €
Total people 5 5 5 5 5
Total Payroll 76 000,00 € 100 000,00 € 103 000,00 € 108 000,00 € 108 000,00 €

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