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This is the latest version of the iPredikt.it business plan

This is the latest version of the iPredikt.it business plan

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  • 1. Changing the game of iPredikt.it Business Plan sports prediction November 2011Version 1.9 December 2011 iPredikt.it Business Plan28 December 2011
  • 2. Table of ContentsContents1.0 Executive Summary .................................................................................................... 3 1.1 Key Assumptions and Projections ................................................................................... 52.0 The Company ............................................................................................................. 6 2.1 Mission ............................................................................................................................ 6 2.2 Overview ......................................................................................................................... 6 2.3 Start-up cost summary .................................................................................................... 63.0 The iPredikt.it Service ................................................................................................. 7 3.1 Positioning ....................................................................................................................... 9 3.2 Pricing Strategy ............................................................................................................... 94.0 The Market .............................................................................................................. 11 4.1 An overview of the sports industry ............................................................................... 11 4.2 Customers ................................................................................................................. 13 4.2.1 Integration Service ................................................................................................. 13 4.2.2 iPredikt.it Plus ........................................................................................................ 13 4.3 The Competition............................................................................................................ 14 4.4 Estimated Sales ............................................................................................................. 17 4.4.1 Assumptions .......................................................................................................... 175.0 Development and Production ................................................................................... 19 5.1 Development Status ...................................................................................................... 19 5.1.2 Beta Version ........................................................................................................... 19 5.2 Cost of Development .................................................................................................... 21 5.3 Labor Requirements ...................................................................................................... 21 5.4 Expenses and Capital Requirements ............................................................................. 226.0 Sales and Marketing ................................................................................................. 23 6.1 Strategy ......................................................................................................................... 23 6.2 Promotion ..................................................................................................................... 237.0 Management............................................................................................................ 25 7.1 Officers and Key Employees .......................................................................................... 25 7.1.1 Patrick Dodd, 44: Managing Director and Co-founder .......................................... 25 7.1.2 Philip VIckers, 40: Lead Developer and Co-Founder.............................................. 25 7.2 Ownership ..................................................................................................................... 258.0 Financials ................................................................................................................. 26 8.1 Risks............................................................................................................................... 26 8.2 Cash Flow Statement .................................................................................................... 27 8.2.1 Year 1 ..................................................................................................................... 27 8.2.2 Year 2 ..................................................................................................................... 28 8.2.3 Year 3 ..................................................................................................................... 29 8.5 Funding Request and Return......................................................................................... 30 8.5.1 Exit Strategy ........................................................................................................... 31 2|PageVersion 1.9
  • 3. 1.0 Executive SummarySports are an undeniable and integral part of society - both online and offline. In 2010 ESPNconducted market research on sports fans in America in which they asked the followingquestion: “On a scale from 0 to 10 where zero means you are not a sports fan at all, 5 means you are an average sports fan and 10 means you are a super sports fan, where would you place yourself on that scale?”The results of the survey showed that 222 million Americans stated that they were sportsfans of which, 71 million fell into a segment ESPN called the Avid Sports Fan – People whogave themselves a rating of 8 out of 10 or higher.Avid Sports Fans do more than just watch the matches on the weekend – they are goingonline to extend and enhance their sports experience. They are playing in fantasy sportsleagues, betting with bookmakers and going on social networks, blogs, forums and fan sitesto read up on the latest news, interact with other fans and make predictions about theupcoming match.In fact, passionate sports fans have one thing in common – when talking about an upcomingmatch the conversation will invariably end with predictions about the final score. True sportsfans know that the closer your prediction is to the actual score the more clout you carry.Unfortunately there isn’t an easy way to keep track of your picks over time, announce yourpicks to your network of friends and family or easily assign rank and reputation once thematch has ended. This is the problem that iPredikt.it solves.iPredikt.it is a New Zealand registered limited liability company that provides a webapplication that can be embedded in any website that improves community and dramaticallyincreases traffic by allowing avid sports fans the ability to predict the final score of anupcoming match. The predictions are announced to their respective friends and followerswith a message similar to the following example:I predict Steelers 24 Saints 14. What do you think? #Steelers #Saints #iPredikt.itBecause of the network effect, one prediction could elicit the predictions from thousands ofother sports fans. Moreover, the link in the message goes to the website where theprediction was made, thus significantly increasing traffic to partner websites. Once thematch has ended iPredikt.it then assigns rank and reputation to all of the participants basedon the accuracy of their predictions.The biggest competitor, UPICKEM, charges their customers up to $850/mo for the privilegeof embedding their pick the score application into their respective websites. In spite of thiscost, UPICKEM has been integrated into over 1900 websites and has had more than 6 millionplayers participate. 3|PageVersion 1.9
  • 4. The primary goal of iPredikt.it is to have its application integrated into as many third partysites as possible. In doing so, iPredikt.it will have more users and process more predictionsfor more types of sports than any other pick the score service. To accomplish this, theiPredikt.it service will be free to integrate and be free to play.iPredikt.it will generate revenue from advertising, affiliate fees from online bookmakers andselling subscriptions to premium services - “iPredikt.it Plus” and “iPredikt.it Alert”.The “iPredikt.it Plus” package will provide users with access to much more functionality andstatistics than is available with basic (free) access. This includes access to the iPredikt.itbetting line and odds comparison tables and the ability to see how their prognosticatingability compares with all participants or interesting subsets of participants, such ascelebrities, sports figures, friends and followers. The recurring monthly charge for thisservice will be $.99 – a price made commonplace by smart phone applications.The “iPredikt.it Alert” service is a notification service that alerts people when a top rankedmember makes a prediction. This service is targeted at the subset of customers whoregularly bet on sports. iPredikt.it will charge a recurring monthly fee of $9.99 for thisservice.The iPredikt.it application has been in development for 3 months. It was decided that thefirst major milestone would be to produce a minimum viable product that was limited infunctionality yet robust enough to be able to determine proof of concept and gaugedemand. This minimum viable product is now referred to as the ‘beta version’ and waslaunched on 11 November.Both of the founders of iPredikt.it – Patrick Dodd, MBA and Philip Vickers will be activelymanaging the operations. Overall management of the company goes to Dodd who brings 15years of experience in marketing management, consulting and entrepreneurism to thecompany. Vickers, the development manager, brings 15 years of software and webapplication development as well as significant experience in building and managing teams ofdevelopers. For the past 7 years Vickers has been managing Codenza, a successful Aucklandbased web application development company which he founded.The iPredikt.it founders have collectively invested $22,500 in developing the beta version ofthe service. The founders are now seeking an additional $150,000 in order to build out theapplication to a point where it has the capability of generating revenue and become a viablebusiness.From the research conducted, start up, pre revenue businesses that have an excitingbusiness idea or business plan, a strong management team in place to execute on the planand a final product or technology prototype have valuations between $1 million – $2 million.As iPredikt.it meets all of the above criteria, a valuation of of $1.5 million has been set.In exchange for an investment of $150,000, iPredikt.it will offer a 10% equity stake in thecompany.The minimum amount to participate is $25,000. 4|PageVersion 1.9
  • 5. 1.1 Key Assumptions and ProjectionsThe following are the key assumptions and projections for year 1: Market Size # of avid sports fans America 71,000,000* # of avid sports fans UK 15,620,000** # of avid sports fans CA 7,810,000** # of avid sports fans Aus 4,970,000** Total # of avid sports fans 99,400,000* Source ESPN** Estimate Revenue Assumptions Year 1 Year 2 Year 3 Avg # of active users/mo 2,462,500 6,625,000 7,291,667 Avg # of unique visitors/mo to the 492,500 1,325,000 1,458,333 website Avg # of page views per person 3 3 3 CPM rates $5 % of website visitors who purchase 15% ‘iPredikt.it Plus’ service Price for ‘iPredikt.it Plus’ service $.99 % of website visitors who purchase .75% ‘iPredikt.it Alert’ service Price for ‘iPredikt.it Alert’ service $9.95 Revenue projections Year 1 Year 2 Year 3 Affiliate revenue $428,475 $1,152,750 $1,268,750 Advertising revenue $88,650 $238,500 $262,500 ‘iPredikt.it Plus’ Revenue $831,600 $3,148,200 $4,331,250 ‘iPredikt.it Alert’ $2,089,500 $5,932,688 $6,529,688 Total Revenue $3,411,100 $10,472,138 $12,392,188 5|PageVersion 1.9
  • 6. 2.0 The Company2.1 MissionIt is the Mission of iPredikt.it to become the most used sports application in the world byproviding the technology, both mobile and web based, that allows passionate fans the abilityto predict the outcome of popular events and then be accurately ranked among their peersbased on their predictions.2.2 OverviewiPredikt.it is a limited liability company founded in Auckland, New Zealand in 2011 by PatrickDodd and Philip Vickers. Dodd brings 15 years of experience in marketing management,consulting and entrepreneurism to the company. The melding of sport with technologystarted in 2004 for Dodd when he co-founded Resonance Ventures, a company that went onto build the first peer-to-peer sports betting exchange.Vickers brings 15 years of software and web application development as well as significantexperience in building and managing teams of developers. For the past 7 years Vickers hasbeen managing Codenza, a web application development company he founded. When itreceives the required financing, iPredikt.it will bring on two full time developers that havebeen working for Codenza.iPredikt.it has spent three months developing a minimum viable product that will be readyfor beta testing on 15 November. The one month beta test period will provide proof ofconcept and gauge end user demand as well as the demand from websites, blogs andforums that would like to embed the iPredikt.it application.2.3 Start-up cost summaryThe Company’s start-up costs include the technical equipment and infrastructure necessaryto develop the service and website so as to begin capturing the commercial potential viaadvertising and subscription services as well as to help cover the operating expenses for thefirst 12 months of operation. 6|PageVersion 1.9
  • 7. 3.0 The iPredikt.it ServicePassionate sports fans have one thing in common – when talking about an upcoming matchthe conversation will invariably end with predictions about the final score. True sports fansknow that the closer your prediction is to the actual score the more clout you carry.Passionate sports fans make their predictions on Twitter.They make their predictions in forums.And they make their predictions in the comments section of fan sites. 7|PageVersion 1.9
  • 8. Unfortunately there isn’t an easy way to keep track of your picks over time, announce yourpicks to your network of friends and family or easily assign rank and reputation once thematch has ended.Furthermore, there are many sports related websites, fan blogs and news outlets that runpick the score contests. The problem these websites have is that they must pay a significantamount of money to use services that manage pick the score competitions or spend aninordinate amount of time trying to run the competition manually. This is the problem thatiPredikt.it solves.iPredikt.it’s unique selling proposition is that it provides a free and easy way for onlinesports communities to build camaraderie and community among their members andincrease traffic to their websites. This is accomplished by providing an application that canbe easily integrated in any website or forum that provides all of the functionality required tohost a pick the score competition.Let’s imagine that you are an avid sports fan and you decide to go to your favourite onlinesports community/ news resource. Once there you are prompted to participate in a pick thescore contest and are then presented with a list of upcoming sporting events from a menutree.Because you are a fan of the Pittsburgh Steelers you choose the upcoming Steelers vs. Saintsgame. You predict that the Steelers will beat the Saints by a score of 24-14. Once youvemade your pick the following message is sent out to all of your contacts on Facebook,Twitter and/or Google+:I predict Steelers 24 Saints 14. What do you think? #Steelers #Saints #iPredikt.itAs a result of this message, 10 of your contacts also make predictions that then get sent outto their contacts. Due to the network effect your prediction alone elicits the opinion of wellover 10,000 members across the popular social networks. iPredikt.it will then track thosepredictions and assign rank and reputation to all of the participants based on the outcome ofthe game. 8|PageVersion 1.9
  • 9. Because iPredikt.it will offer the largest number of sporting events from around the world onwhich a prediction can be made, coupled with the ubiquity of its service in popular sportsblogs, forums and social networking sites, it is anticipated that iPredikt.it will processmillions of predictions each week.iPredikt.it can then aggregate these predictions, much like a traditional bookmaker, and usethis Wisdom of Crowds to become the most accurate predictor of sporting events in theworld – something that would surely garner significant attention in traditional sports media.3.1 PositioningSerious sports fans always make a prediction about the outcome of an upcoming match.They do this as a way of demonstrating their expertise and knowledge. Online sports sitesthat cater to serious sports fans are always looking for ways to increase community anddrive traffic. iPredikt.it brings the two parties together in a way that no other pick the scoreservice does.This is why iPredikt.it is positioned as the application provider of choice for sports websiteswho want to attract and retain serious sports fans.3.2 Pricing StrategyThe goal of iPredikt.it is to have its application integrated into as many third party sites aspossible. In doing so, iPredikt.it will have more users and process more predictions for moretypes of sports than any other pick the score service. To accomplish this, the iPredikt.itservice will be free to integrate in any website and be free to play for any sports fan.This is a different business model than all other pick the score services that are 1) eitherstandalone websites that make money from advertising or use the service as a loss leader todrive traffic to their websites or 2) services that charge up to USD $850/mo for the privilegeof integrating their service into a third party website.iPredikt.it will derive revenue from advertising, affiliate fees from online bookmakers andselling subscriptions to premium services.3.2.3 ‘Freemium’ servicesFreemium is a business model that works by offering basic services or products for free,while charging a premium for advanced or special features.iPredikt.it will have initially two premium services - “iPredikt.it Plus” and “iPredikt.it Alert”.The “iPredikt.it Plus” package will provide users with access to much more functionality thanthe basic access. This includes, but is not limited to the following services:  Flexible league table comparison - Rather than being limited to seeing how they rank within the community where the prediction was made, iPredikt.it Plus subscribers will be able to see how they rank globally, as well as how they rank within their Facebook friends, Twitter followers and within particular demographic groups such as professional athletes, celebrities, etc.). 9|PageVersion 1.9
  • 10.  iPredikt.it betting line and odds comparison table - iPredikt.it will harness the wisdom of crowds to become the most accurate predictor of sporting event outcomes in the world. By aggregating predictions iPredikt.it will be able to generate odds and point spreads that are more accurate than those set by the bookmakers. iPredikt.it betting line and odds comparison table will compare the iPredikt.it odds with those from the leading bookmakers.The price for the “iPredikt.it Plus” package will be $.99/mo. and will be a recurring charge.This price was determined in part because most paid smart phone apps are $.99 and peoplehave become accustomed to seeing this price associated with casual online services. It is alsobelieved that a price of $.99 is low enough that would not pose any barriers to purchase.The second premium service is the “iPredikt.it Alert” service. This is a notification servicethat alerts people when a top ranked member makes a prediction. There are many similarservices which charge a significant monthly fee (>$20/mo.). iPredikt.it will charge a recurringmonthly fee of $9.99 for this service. 10 | P a g eVersion 1.9
  • 11. 4.0 The Market4.1 An overview of the sports industrySports are an undeniable and integral part of society - both online and offline. In 2010 ESPNconducted market research in America in which they asked the following question: “On a scale from 0 to 10 where zero means you are not a sports fan at all, 5 means you are an average sports fan and 10 means you are a super sports fan, where would you place yourself on that scale?”The results of the survey showed that 222 million Americans stated that they were sportsfans of which, 71 million fell into a segment ESPN called the Avid Sports Fan – people whoindicated that they were either Serious Fans (41.5m) or Super Fans (29.5m).Being a fan no longer means watching a few matches on the weekend and reading the sportspage on Monday to catch up on all of the sporting news. Rather, people are going online toextend and enhance their sports experience. These highly engaged audiences are activelyseeking more from online destinations.The top sports destination websites such as ESPN, Yahoo, AOL, Fox and CBS are massive andcollectively attract hundreds of millions of unique monthly users. ESPN.com has recentlybroken a 41-month hold by Yahoo Sports atop ComScore’s monthly rankings of online reach 11 | P a g eVersion 1.9
  • 12. among U.S. sports sites by returning to the top slot for the first time since 08 with acompany-record 52.2 million unique visitors in September 2011.It’s not just these mega sports sites that are attracting sports fans. According to Technorati,there are 11,234 sports related blogs on the Internet. Many of these blogs have formedformal networks, primarily for advertising purposes. The largest of these is the Yard BarkerNetwork, a conglomeration of 875+ unique and independent sports blogs that reaches 15million unique users a month.Sports fans are also after different activities that let them extend the sporting experience.Two such activities are fantasy sports leagues and sports betting. The Fantasy Sports TradeAssociation estimates that 32 million people age 12 and above in the U.S. and Canada playedfantasy sports in 2010 (this roughly correlates to the same number of people who callthemselves ‘Avid Sports Fans’). Participation has grown over 60% the past four years with19% of males in the US playing fantasy sports [source]. Fantasy Sports is estimated to have a$3–$4 Billion annual economic impact across the sports industry [source].The hobby has also moved beyond the U.S. with fantasy leagues for soccer, cricket and othersports. For example, according to a 2008 study by Ipsos, the number of British fantasy sportsplayers aged 16-64 is estimated to range between 5.5 and 7.5 million. Of those, 80% of theseplayers participate in fantasy soccer [source].Another activity in which sport fans engage is sports betting. Betting on sports events ismassive. For example, sport England estimates the value of spending on sport-relatedgambling in England grew from £1.7bn in 1985 to £2.8bn in 2008. And that figure is likely tohave grown further, with an estimated £1bn bet on the most recent World Cup alone in theUK [source].Sports betting is illegal throughout most of the United States. This makes it difficult to figureout how much money is bet on sports since the majority of it is done illegally. However,experts estimate a "handle" of more than $200 billion annually [source].These sports betting revenues are impressive but even more impressive are the actualnumber of people/bets that make up those revenues. The worlds leading online bettingexchange, Betfair, processes a staggering 3 million transactions per day and at peak timesmatches more than 12,000 bets per minute. Betfair also has more than 350,000 users andabout 95,000 active monthly users.Making a prediction on the outcome of a sporting event does not require one to place acorresponding wager, however. Sports fans from all over the world are able to makepredictions via websites and Facebook applications such as Canal+ Pronostics Ligue 1, aFacebook application for making predictions on French 1st division soccer matches. Thisapplication currently has 195,000 monthly active users, which is quite impressive given thatit is only available as a Facebook application and that it is limited predicting the outcome ofFrench 1st division soccer matches.Sport is more than a preoccupation with avid fans - it’s a passion. And passionate fansinvolve themselves in online activities such as fantasy sports, sports betting and predictingthe outcome of upcoming events to extend their sporting experience. There has never been 12 | P a g eVersion 1.9
  • 13. a better time to be a sports fan with the ubiquity of internet and mobile technologies. A truesports fan can eat, sleep and breath sports 24/7 - and they are.4.2 CustomersiPredikt.it has two types of customers: 1) the websites, blogs and forums that haveintegrated the iPredikt.it application into their respective sites and 2) the sports fans that areparticipating in the pick the score contests.4.2.1 Integration ServiceThe primary customers for the iPredikt.it integration services are English language sportsrelated websites, blogs and forums that would like to increase traffic and strengthen theironline communities. Most of these websites will be located in North America but some willbe located in the UK given the depth of soccer matches in the event menu tree. Many ofthese websites already run some type of pick this score competition, either as a manualprocess done in the comment sections or pay a third party pick the score provider tomanage the contests.4.2.2 iPredikt.it PlusIt is believed that there are many similarities between those fans that make well researchedand educated predictions on the outcome of upcoming matches and those fans whoparticipate in fantasy sports leagues. Therefore, it is believed that the demographics foreach group will be similar if not identical. The following table presents the userdemographics for Fantasy Football participants in America. Age Group: - 12-48 - 25-34 strongest demographic - 13% teenagers Gender: 93% male Household Income: $60-100,000 avg annual income per year Education: 70% have a Bachelor’s Degree or higher How Many are Playing: - 29.9 million fantasy football participants - 11% of US population - 69% growth rate from 2003 - 50% consider themselves die hard football fans Fantasy Players Spend: - $200/person on fantasy football per year - $800 million on fantasy sports products - $3 billion spent on related media products - 3-4 hours per week managing teams - 30 minutes per day managing teams Source: http://www.thefantasyfootballtimes.com/fantasy-football-demographics/ 13 | P a g eVersion 1.9
  • 14. It is forecasted that 15% of the monthly active users (MAUs) who visit the website will payfor the iPredikt.it Plus package.4.2.3 iPredikt.it AlertThe iPredikt.it Alert service is designed for people who regularly bet on sports. Unfortunatelyit is difficult to determine the US market size in terms of the number of participants due tothe illegality of sports betting in the US. Even in the UK where sports betting is legal, marketsize is expressed in terms of pounds (£s) rather than participant numbers.It is predicted that 1% of the MAUs who visit the iPredikt.it website will pay for the“iPredikt.it Alert” service.4.3 The CompetitionThe most common competitor is the sports editor of an online journal or the owner of a fansite or forum that runs a pick the score competition by having participants make their picksin the comments section of the site. While this method does generate significant readerparticipation, it is cumbersome and difficult if not impossible to rank participants over time.The primary advantage of this method is that it is free. 14 | P a g eVersion 1.9
  • 15. There are not many automated services that allow users to predict the actual scores ofsporting events. Most follow a ‘pick the side’ model and are often set up as a contest. Forexample, the contest would be to pick the winning side for all of the NFL games played eachweek. In this scenario contestants are asked to predict the score for the marquee matchup,which acts as a tie breaker.The drawbacks to this type of prediction model are that it requires much less skill andcontestants are forced to pick the outcome of a match/game for which they may not havemuch knowledge. Furthermore, without collecting predictions on the actual scores, theseservice providers miss out on the real value of the business, which are the aggregated scoresthat can be converted into a betting line.There are a few pick ‘em services currently on the market. The most notable is UPICKEM, acontest platform developed by Second Street that can be integrated into any website andallows users to pick the winners of popular sporting events such as NFL and NBA games. Todate, UPICKEM has been integrated into over 1900 websites and has had more than 6million players participate.UPICKEM is targeted at local and regional newspapers in North America. Their service,though technically not a ‘pick the score’ service, as contestants are limited to simply pickinga side rather than the actual scores, is positioned as a managed contest platform. Thismeans that UPICKEM handles everything associated with the contest from customer serviceto the sourcing of prizes. The service is white labelled so that their partners can control thebranding and the cost to license the technology is USD $850/mo.Another notable competitor is PicktheScore.com. The Pick the Score business model issimilar to that used by UPICKEM in that it charges websites an integration fee. However Pick 15 | P a g eVersion 1.9
  • 16. the Score also offers a different service that is targeted at not for profit organisationsinterested in fund raising and operates as follows. A not for profit organisation creates abranded contest space on the Pick the Score server. Participants in the pick ‘em contest arecharged $5. 70% of the prize money goes to the winner of the contest, 20% to the not forprofit and 10% to Pick the Score. This is a new service and is being targeted at the NorthAmerican market.The rest of the competitors are small websites or Facebook applications. These tend to beniche focused that are targeted at particular teams or leagues. There is no charge toparticipate and are used to build community.The following table illustrates the key differences between iPredikt.it and its two maincompetitors. Feature iPredikt.it UPICKEM PicktheScore Integrate into 3rd party website yes yes yes Free to integrate yes no no Predict an actual score yes no no Uses predictions to determine yes no no betting odds Provides overall contest no yes no management including procurement Participants can compete for a pool no no yes of prize money Revenue share opportunities no no yes 16 | P a g eVersion 1.9
  • 17. 4.4 Estimated Sales4.4.1 AssumptionsAt the outset, the market for iPredikt.it is comprised of people from America, Canada, UK,and Australia who classify themselves as ‘Avid Sports Fans’. According to the ESPN poll, thereare 71 million ‘Avid Sports Fans’ in America. The number of ‘Avid Sports Fans’ for the othercountries was extrapolated by determining the percentage of the American population whowere ‘Avid Sports Fans’ and then applying that percentage to the overall populations in theother countries. # of avid sports fans America 71,000,000 # of avid sports fans UK 15,620,000 # of avid sports fans CA 7,810,000 # of avid sports fans Aus 4,970,000 Total # of avid sports fans 99,400,000There were two approaches used to determine monthly active users (MAU) both of whichyielded similar results. The first method was to simply estimate that the first month ofcommercial operation MAUs would be roughly 1% of the total market or 448,000. Thesecond method was to assume that initial MAUs for iPredikt.it should be at least 3 timesgreater than the Canal+ Pronostics Ligue 1 pick the score Facebook application or 585,000.Taking a rough average of the two, it was estimated that initial MAUs would be 500,000. Initial MAUs : 500,000The monthly growth rate is seasonal with September through March being the peak season.The percentage of MAUs who would visit the iPredikt.it website was assumed to be 40%.Therefore unique visitors to the iPredikt.it website in the first month are estimated to be200,000. % of MAUs visiting iPredikt.it website: 40% MAUs visiting iPredikt.it website in 200,000 month 1: Avg # of page views/MAU 3 eCPM rate $54.4.2 AdvertisingBecause the iPredikt.it widget is embedded in third party sites, most of the interaction thatparticipants have with iPredikt.it will be limited to those sites. However, if participants wouldlike to see how they rank globally or view the iPredikt.it odds for a particular match up, theywill need to visit the iPredikt.it website.The ads on the website will be a mixture of sports related ads from a banner network andads for online bookmakers. In terms of the traditional banner ads, it is believed that 17 | P a g eVersion 1.9
  • 18. iPredikt.it will be able to garner USD $5 eCPM rates. This is based on the Adify VerticalGauge (AVG) Q2 2010 report which found that median eCPM was $5.29 across all verticalswith a minimum of $2.63 and a maximum of $6.58.Revenue from the online bookmaker ads is based on an affiliate model. Affiliate marketing isa marketing practice in which a business rewards one or more affiliates for each visitor orcustomer brought about by the affiliates own marketing efforts. Online sports books havefantastic affiliate programmes. The top affiliates for one of the largest online bookmaker,Bet365, earn between USD $40,000 and $80,000. Top affiliates have over 100k uniquevisitors/mo.Because affiliate revenue is a function of the number of MAUs, it is assumed that it willfollow the same growth pattern as MAUs Year 1 Year 2 Year 3Banner Ad Revenue $84,000 $238,500 $262,500Affiliate Revenue $406,000 $1,152,750 $1,268,750Total Advertising Revenue 517,125 $1,391,250 $1,531,2504.4.3 ‘Freemium’ servicesIt is estimated that 15% of the MAUs who visit the website will pay for the iPredikt.it Pluspackage. The price is set at $.99.It is further estimated that 1% of the MAUs who visit the website will pay for the iPredikt.itAlert service. Year 1 Year 2 Year 3iPredikt.it Plus Revenue $831,600 $3,148,200 $4,331,250iPredikt.it Alert Revenue $2,089,500 $5,932,688 $6,529,688Total Advertising Revenue $3,411,100 $10,472,138 $12,392,188 18 | P a g eVersion 1.9
  • 19. 5.0 Development and Production5.1 Development StatusThe iPredikt.it application has been in development for 3 months. It was decided that thefirst major milestone would be to produce a minimum viable product that was limited infunctionality yet robust enough to be able to determine proof of concept. This minimumviable product is now referred to as the ‘beta version’ and was launched on 11 November.5.1.2 Beta VersionThe beta version has the following characteristics.Website ● Homepage - Professionally designed logo with a notice in the body of the page that says ‘iPredikt.it is currently beta testing. If you are the owner of a sports related site and would like to help us test, please click here to sign up.’ ● Sign up form - form that prospective partners will need to fill out in order to participate in the beta test. ● Blog - basic business blog used to keep partners and interested parties up to speed with current developments. ● No end user functionalityPartner Functionality ● Partner sign up - The ability for a website owner to register for the service and automatically generate a unique embed code. By having a unique embed code all of the predictions that are announced via the various social networks will have a link back to the site where the prediction was made. ● Choose the range of sports - Some websites may wish to limit the sport menu tree to a particular sport such as football, or to a league such as the NFL or even to a specific team such as the Denver Broncos. The beta version will give partners the flexibility to choose the range of sports that will be available in their respective menu trees.End User Functionality ● Log in via Facebook ● Be presented with a menu tree that displays a list of upcoming events. Events will be limited to Soccer (English Premier League), Football (NFL and NCAA) and Basketball (NBA and NCAA). ● The ability to predict the final score of a selected event. ● Once the prediction is made it is announced to the persons Facebook wall page. ● Results - The ability for the end user to see how he/she ranks against other people from the same community (domain) based on the actual results and a predetermined algorithm.Back end Functionality ● Results - the ability to show which events have a prediction against them and then the ability to easily input the actual results (final score) into the database. 19 | P a g eVersion 1.9
  • 20. ● Apply an algorithm to the results to rank the users. It is expected that the algorithm will result in a numeric value. Users will be ranked based on this numeric value.Beta testing is now underway and iPredikt.it is using the opportunity to: ● Gauge partner and end user sentiment with the aim to improve the service ● Quantify demand both at the partner and end user level ● Identify potential bugs or glitches in the system ● Measure the network effect - how much additional traffic does it drive to the partner website?5.1.2 Commercial VersionThe first commercial version will be the next minimum viable product that will have thefeatures required to begin generating revenue and will have the following characteristics:iPredikt.it Website - The website during the beta test was minimal and provided onlyenough functionality for partners to join and generate an embed code. The website for thecommercial version will have all of the information and functionality required for users toenjoy the iPredikt.it service to its fullest and to motivate users to subscribe to the “iPredikt.itPlus” package and “iPredikt.it Alert” service.End User Functionality  Increased log in options - in addition to Facebook Connect, users will be able log in via Google, Twitter (OAuth) and Open ID  Prediction announcements - users will be able to choose whether to announce their predictions on Facebook and/or Twitter  More events - the menu tree will have more sporting events from which predictions can be made. Events will be extended to include the following sport categories: Soccer, Football, Basketball, Hockey Baseball, Rugby and Cricket. Events will include all of the leagues found on the menu at http://www.pinnaclesports.com/  Results - The ability for the end user to see how he/she ranks globally based on the actual results and a predetermined algorithm.  “iPredikt.it Plus” package  Ability to view the odds generated by aggregating predictions  Flexible league table comparison - subscribers will be able to see how they rank globally, as well as how they rank within their Facebook friends, Twitter followers and within particular demographic groups such as professional athletes, celebrities, etc.).  “iPredikt.it Alert” - notification service that alerts people when a top ranked member makes a prediction.The time required to develop the commercial version is 3 months. 20 | P a g eVersion 1.9
  • 21. 5.2 Cost of Development5.2.1 Beta versionThe beta version was developed part time over the course of 4 months. It is estimated thatthe cost associated with the development is $22,500 if billed at commercial rates. Logo development $2,500 Widget development $8,500 Template (look and feel) $3,500 Testing and issue fixing $4,000 Results page $4,000 Total $22,5005.2.2 Commercial versionThe time required to develop the previously mentioned functionality for the commercialversion is 3 months. The costs associated with building are found in Section 5.4 Expensesand Capital Requirements below.5.3 Labor RequirementsPersonnel required to go from the beta to the commercial version will be kept to a minimumto ensure that costs are kept low while iPredikt.it is proving commercial viability. iPredikt.itwill have three fulltime developers on staff, which includes Lead Developer and co-founderPhilip Vickers. The two full time developers are current employees of Codenza, the softwaredevelopment firm founded by Vickers. Dodd will also be working full time with focus onbusiness development and overall company management.In addition to the developers, iPredikt.it will use outsourced labour to manage the data entryrequired for event arbitration. Lastly, website development will also be outsourced to aqualified team. 21 | P a g eVersion 1.9
  • 22. 5.4 Expenses and Capital Requirements Month 1 Month 2 Month 3 Feb-11 Mar-11 Apr-11 Office Expenses Rent $1,000 $1,000 $1,000 Internet $100 $100 $100 Phone (landline) $50 $50 $50 Incidentals $150 $150 $150 Total Office Expenses $1,300 $1,300 $1,300 Hosting $500 $500 $500 Professional services $750 $750 $750 Salaries Patrick $4,000 $4,000 $4,500 Lead developer (Phil) $3,500 $3,500 $4,000 Programmer 1 $5,000 $5,000 $5,000 Programmer 2 $5,000 $5,000 $5,000 Programmer 3 Total salaries $17,500 $17,500 $18,500 Outsourced Development Mobile app development iPredikt.it Website $5,000 $5,000 WordPress Plugin Total Outsourced Development $5,000 $5,000 $0 Outsourced Data Input $1,500 $1,500 $1,500 Contingency expenses $2,655 $2,655 $2,255 Corporate Income Tax (28%) $0 $0 $0 Capital Expenditures $10,560 Desks $1,760 Chairs $1,100 Computers $5,200 Monitors $2,500 Total Expenses $39,765 $29,205 $24,805 22 | P a g eVersion 1.9
  • 23. 6.0 Sales and Marketing6.1 StrategyiPredikt.it has two fundamental goals on which the sales and marketing strategy is based: 1. Attract as many participants as possible who then make frequent predictions across a wide variety of sporting events. 2. Create a market environment such that it creates barriers to entry that discourage new entrants and severely disrupts the competition.The strategy to realise these goals is simple, straight forward and effective. To attractmillions of participants, iPredikt.it will make it easy for the tens of thousands of fan sites,forums, blogs and online newspapers to embed the iPredikt.it widget into their website atno charge. Getting the iPredikt.it widget in front of millions of sports fans at the placesonline where they currently visit is much preferred over trying to attract those fans to onesingle website.By offering the service for free, competitors such as UPICKEM will be forced to rethink theirentire business model – no longer will they be able to charge these sites $850 per month.Furthermore, iPredikt.it will offer the widest and deepest range of sporting events on whichparticipants can lodge a prediction. This will include all of the major sports and many of themore obscure events as well. If there is an event on which bookmakers are taking bets, it willbe included in the iPredikt.it menu tree.Lastly iPredikt.it encourages participants to announce their predictions to their network offriends. The message that gets posted also solicits the opinion from those who read the postthereby creating a network effect. This means that one prediction can be the catalyst forthousands of other predictions.iPredikt.it partners will also benefit because each prediction notification contains a link tothe website where the prediction was made which drives traffic to partners’ websites. Thisprovides the added incentive for partners to actively promote pick the score contests.6.2 PromotionThere are few, if any, reasons why a sports related website would not want to embed theiPredikt.it widget. Therefore, success for iPredikt.it depends on effectively communicatingthe offer to potential partner websites.There are three ways that fan websites will learn about iPredikt.it. The first is direct sales -iPredikt.it contacting them directly informing them of the offer. The second is via advertisingon the widget. 23 | P a g eVersion 1.9
  • 24. “Powered by iPredikt.it” will be present on every screen in the embedded widget and willlink directly to the iPredikt.it website.The third method is via social search. Each prediction that is announced over the socialnetworks will carry with it the names of each team mentioned in the prediction preceded bythe hashtag (#). The following is an example of a prediction announcement:I predict the score will be Steelers 24 Saints 14. What do you think? #Steelers #Saints#iPredikt.itHashtags were originally a way for Twitter users to categorise their tweets. However theyhave gained acceptance across other social networks such as Facebook and Google+. Withall of the anticipated predictions being made, it is expected that iPredikt.it will come up veryhigh in sport related social search.It is anticipated that initial success will be dependent on securing ~10-20 prominent partnerwebsites after which time word of mouth amplified by the network effect will be sufficientto realise growth projections. 24 | P a g eVersion 1.9
  • 25. 7.0 ManagementThe Company’s management philosophy is based on responsibility and mutual respect. TheCompany operates in an environment and structure that encourages productivity andrespect for customers and fellow employees. Its goal is to create an environment where: • Creativity can flourish; • Generating new ideas and products is well rewarded; • Management is structured around expertise rather than chains of command; and • Mutual respect and sharing of knowledge are encouraged.7.1 Officers and Key Employees7.1.1 Patrick Dodd, 44: Managing Director and Co-founderPatrick Dodd received his MBA from Thunderbird, The American Graduate School ofInternational Management (Glendale, Arizona), in 1995. Since that time Dodd has worked inmanagement positions in the US and Europe primarily in a marketing function. Dodd alsohas entrepreneurial experience including opening two successful restaurants in Kiev,cofounding a company that built the first java based peer-to-peer betting exchange, (whichfailed miserably) and cofounding a software development firm in Kiev that provided offshoresoftware development services primarily to US based clientele. Since arriving in New Zealandin February 2010, Dodd has been providing consulting services to small and medium sizedbusinesses via Reson8 Consulting a boutique marketing consultancy that focuses on digitalstrategy.7.1.2 Philip VIckers, 40: Lead Developer and Co-FounderPhilip Vickers received his BSc in Computer Science from Auckland University in 1997. Sincegraduating, Vickers has worked in software development for 15 years – 6 of those years asan Enterprise Java developer in the corporate environment.In 2004, Vickers founded Codenza, which started out as a business that developeddistributed peer-to-peer desktop search software but then pivoted and changed its businessmodel to providing website development and web technology development services.Vickers professional areas of expertise include: • Software architecture • Project management • Software development • Business managementVickers is a keen technologist and is always interested in exploring innovative solutions toproblems, and utilizing the latest in technology.7.2 OwnershipiPredikt.it is a limited company registered New Zealand. Ownership of the company isdivided equally between both founders – Dodd and Vickers. 25 | P a g eVersion 1.9
  • 26. 8.0 Financials8.1 RisksThe major risk that start-ups face is proof of concept – is there sufficient demand for theservice and will the product work as anticipated. iPredikt.it has mitigated much of this riskby following the minimum viable product development model.The first milestone was releasing a beta product that had just enough functionality to satisfythe following: ● Quantify demand both at the partner and end user level ● Does the product work and to identify potential bugs or glitches in the system ● Gauge partner and end user sentiment with the aim to improve the service ● Measure the network effect - how much additional traffic does it drive to the partner website?Only after the beta testing has justified the financial projections and ensured productstability will iPredikt.it seek investment needed to reach the next milestone – a commercialproduct that has just enough functionality that can be leveraged to provide the previouslymentioned revenue streams.Another risk confronting iPredikt.it is the low barriers to entry caused by having a relativelylow start-up cost. iPredikt.it has helped mitigate this risk through its pricing policy – offeringthe service free of charge to partner websites. As long as rapid adoption of the serviceoccurs, then there will be very little incentive for new entrants to join the market.There still exists the risk that a current competitor such as UPICKEM will begin offering itsservice for free. However, their entire business/revenue model is based on charging thepartner websites a monthly integration fee. Changing this model is not impossible, but isdifficult. Again, as long as rapid adoption of the service occurs, it makes it much moredifficult for competitors to make the necessary changes to the software that are required tomake such a pivot. 26 | P a g eVersion 1.9
  • 27. 8.2 Cash Flow Statement8.2.1 Year 1 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Total Year 1 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Revenues $0 $0 $0 $36,548 $12,183 $12,183 $60,913 $243,650 $487,300 $609,125 $730,950 $1,218,250 $3,411,100 Office Expenses $1,300 $1,300 $1,300 $1,460 $1,460 $1,460 $1,610 $1,610 $1,610 $1,610 $1,610 $1,610 $17,940 Hosting $500 $500 $500 $750 $750 $750 $750 $750 $750 $750 $750 $750 $8,250 Professional services $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $9,000 Salaries $17,500 $17,500 $18,500 $18,500 $22,500 $22,500 $27,500 $30,000 $30,000 $30,000 $30,000 $31,500 $296,000 Outsourced Data Input $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $18,000 Contingency expenses $2,655 $2,655 $2,255 $2,296 $3,363 $3,363 $3,878 $4,128 $4,128 $4,128 $3,461 $3,611 $39,919 Corporate Income Tax $0 $0 $0 $10,233 $3,411 $3,411 $17,056 $68,222 $136,444 $170,555 $204,666 $341,110 $955,108 Net Operating Cash Flow -$24,205 -$24,205 -$24,805 $1,058 -$21,551 -$21,551 $7,869 $136,690 $312,118 $399,832 $488,213 $837,419 $2,066,883 Outsourced Development $5,000 $5,000 $0 $0 $6,666 $6,666 $6,668 $6,668 $6,668 $6,668 $0 $0 $50,004 Capital Expenditures 10560 0 0 0 0 0 0 0 0 0 0 0 $10,560 Net Cash Flow -$39,765 -$29,205 -$24,805 $1,058 -$28,217 -$28,217 $1,201 $130,022 $305,450 $393,164 $488,213 $837,419 $2,006,319 27 | P a g eVersion 1.5
  • 28. 8.2.2 Year 2 Month 13 Month 14 Month 15 Month 16 Month 17 Month 18 Month 19 Month 20 Month 21 Month 22 Month 23 Month 24 Total Year 2 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13Revenues $856,213 $856,213 $263,450 $263,450 $197,588 $131,725 $197,588 $1,317,250 $1,580,700 $1,580,700 $1,580,700 $1,646,563 $10,472,138Office Expenses $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $31,320Hosting $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $9,000Professional services $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,000Salaries $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $42,000 $504,000Outsourced Data Input $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $2,000 $24,000Contingency expenses $4,836 $4,836 $4,836 $4,836 $4,836 $4,836 $4,836 $4,836 $4,836 $4,836 $4,836 $4,836 $58,032Corporate Income Tax $239,740 $239,740 $73,766 $73,766 $55,325 $36,883 $55,325 $368,830 $442,596 $442,596 $442,596 $461,038 $2,932,199Net Operating Cash Flow $563,277 $563,277 $136,488 $136,488 $89,067 $41,646 $89,067 $895,224 $1,084,908 $1,084,908 $1,084,908 $1,132,329 $6,901,587Outsourced Development $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Capital Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 $0Net Cash Flow $563,277 $563,277 $136,488 $136,488 $89,067 $41,646 $89,067 $895,224 $1,084,908 $1,084,908 $1,084,908 $1,132,329 $6,901,587 28 | P a g e Version 1.5
  • 29. 8.2.3 Year 3 Month 25 Month 26 Month 27 Month 28 Month 29 Month 30 Month 31 Month 32 Month 33 Month 34 Month 35 Month 36 Total Year 3 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14Revenues $920,563 $1,416,250 $920,563 $283,250 $212,438 $141,625 $212,438 $1,416,250 $1,699,500 $1,699,500 $1,699,500 $1,770,313 $12,392,188Office Expenses $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $2,610 $31,320Hosting $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $750 $9,000Professional services $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $12,000Salaries $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $48,500 $582,000Outsourced Data Input $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $2,500 $30,000Contingency expenses $5,536 $5,536 $5,536 $5,536 $5,536 $5,536 $5,536 $5,536 $5,536 $5,536 $5,536 $5,536 $66,432Corporate Income Tax $257,758 $396,550 $257,758 $79,310 $59,483 $39,655 $59,483 $396,550 $475,860 $475,860 $475,860 $495,688 $3,469,813Net Operating Cash Flow $601,909 $958,804 $601,909 $143,044 $92,059 $41,074 $92,059 $958,804 $1,162,744 $1,162,744 $1,162,744 $1,213,729 $8,191,623Outsourced Development $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0Capital Expenditures 0 0 0 0 0 0 0 0 0 0 0 0 $0Net Cash Flow $601,909 $958,804 $601,909 $143,044 $92,059 $41,074 $92,059 $958,804 $1,162,744 $1,162,744 $1,162,744 $1,213,729 $8,191,623 29 | P a g e Version 1.5
  • 30. 8.5 Funding Request and Return The iPredikt.it founders have collectively invested $22,500 in developing the beta version of the service. The founders are now seeking an additional $150,000 in order to build out the application to a point where it has the capability of generating revenue and become a viable business. From the research conducted, start up, pre revenue businesses that have an exciting business idea or business plan, a strong management team in place to execute on the plan and a final product or technology prototype have valuations between $1 million – $2 million. Therefore, an arbitrary valuation of $1.5 million has been set (source). In exchange for an investment of $150,000, iPredikt.it will offer a 10% equity stake in the company. The minimum amount to participate is $25,000. It is expected that this investment will be sufficient to allow iPredikt.it to reach a point in its development where it can generate enough revenues to cover its expenses and future development. The following Statement of Cash Flow illustrates the amount of money required until the business is cash flow positive, how the investment will be utilised and when it will be needed. Projected Cash Flows – Months 1 - 6 Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 TotalRevenues $0 $0 $0 $35,798 $11,933 $11,933 $59,663Office Expenses $1,300 $1,300 $1,300 $1,460 $1,460 $1,460 $8,280Hosting $500 $500 $500 $750 $750 $750 $3,750Professional services $500 $500 $500 $500 $500 $500 $3,000Salaries $17,500 $17,500 $17,500 $17,500 $30,500 $30,500 $131,000Outsourced Data Input $1,500 $1,500 $1,500 $1,500 $1,500 $1,500 $9,000Contingency expenses $2,630 $2,630 $2,130 $2,171 $4,138 $4,138 $17,836Corporate Income Tax $10,233 $3,411 $3,411 $17,056Net Operating Cash Flow -$24,205 -$24,205 -$24,805 $1,058 -$21,551 -$21,551 -$115,259OutsourcedDevelopment $5,000 $5,000 $0 $0 $6,666 $6,666 $23,332Capital Expenditures $10,560 $0 $0 $0 $0 $0 $10,560Net Cash Flow -$39,765 -$29,.205 -$24,805 $1,058 -$28,217 -$28,217 -$149,151 30 | P a g e Version 1.5
  • 31. 8.5.1 Exit StrategyThe online sport industry is extremely profitable and thus hyper competitive. The top playersin the market have all made significant acquisitions over the past 5 years to help themmaintain and grow their share of market. For example News Corp‘s Fox Sports Interactivepurchased Yardbarker, the popular sports opinion site and blog network. Financial terms ofthis deal were not disclosed. Yardbarker had raised over $7.5 million in funding, mostrecently last September (2009). Fox Sports Interactive has made several other digital dealsover the years, including picking up Scout Media for $60 million five years ago, and, morerecently, taking a stake in OpenSports (source).In March 2010 Yahoos! Sports acquired Citizen Sports, a company that owns a series ofpopular sports apps on the iPhone and on social networking sites, including what it says isthe most popular fantasy football app on Facebook. Financial terms of the acquisition werenot released, although AllThingsD’s Kara Swisher put the price at between $40 million and$50 million (source).Because of its ability to build community and drive traffic to partner sites, it is believed thatiPredikt.it will be an ideal acquisition target for any of the major online sports media players.Further, owing to the strong similarities between predicting a score of a match and bettingon the match iPredikt.it would also be a very strong acquisition candidate for an onlinebookmaker. 31 | P a g eVersion 1.5