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ORDER and DELIVERY CLOUD for BASIC GOODs and SERVICEs

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I believe the idea is still very viable and even easier to launch since local mobile device (smartphone and tablet) penetration is high and it is almost given for free by many operators bundled to their basic data/voice or broadband service. In 2009, biggest barrier I had was the device itself and all of its associated costs, which bloated the total investment amount and made me return back to corporate life. The model is very applicable in Middle East region and cost vs profit does not show linearity (scenario would be different in EU or US market but show similarity in Latin America market) if cloud only services model is preferred due to lack of device cost so it should be, revising the model would be rather trivial... In case edge device model is preferred, IoT connectivity model can be used, further simplifying device connectivity.

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ORDER and DELIVERY CLOUD for BASIC GOODs and SERVICEs

  1. 1. mtilia, CONFIDENTIAL ORDER and DELIVERY CLOUD for BASIC GOODs and SERVICEs Quick and simple way to provide basic services and goods to households and businesses in a scalable, repeatable and cost effective way Mehmet Çetin 15-Aug-10
  2. 2. mtilia, confidential 2010 2 | P a g e
  3. 3. mtilia, confidential 2010 3 | P a g e Table of Contents Executive Summary ....................................................................................... 5 Business Opportunity...................................................................................... 7 Overview.................................................................................................... 7 Benefits ..................................................................................................... 9 For Consumer:......................................................................................... 9 For Basic Goods and Services Providers....................................................... 9 For Banks and Financial Institutions............................................................ 9 For Telecom Operators.............................................................................. 9 For Advertisers....................................................................................... 10 How System Works ................................................................................... 10 Examples .............................................................................................. 11 Dedicated Device versus Web Only Presence or Smart Phone Application ...... 12 Technical Infrastructure ............................................................................. 14 Marketing and Sales Strategy ........................................................................ 14 Phased Approach for Signing in Good and Service Providers ........................... 16 Team, Resources and IP ............................................................................... 17 Sales ....................................................................................................... 17 Legal ....................................................................................................... 17 Finance.................................................................................................... 17 Operational and Administrative ................................................................... 17 Technical.................................................................................................. 17 Project Management.................................................................................. 17 Intellectual Property .................................................................................. 18 Operations .................................................................................................. 18 Business .................................................................................................. 18 Technical.................................................................................................. 18 Financial Forecast ........................................................................................ 19 Summary ................................................................................................. 19 Assumptions............................................................................................. 19 Cash Flow Summary.................................................................................. 20 Household Spending Survey Template ......................................................... 22
  4. 4. mtilia, confidential 2010 4 | P a g e Household Spending Forecast and Revenue Forecast ........................................ 23 Device Manufacturing Costs Estimation........................................................... 24 Competition ................................................................................................ 25 Concept Designs for Stationary Device............................................................ 26 References .................................................................................................. 31 Table of Figures Fig.1 Simple Reach to Frequently Consumed Product and Services ..................... 10 Fig.2 Order Flow Examples ............................................................................ 12 Fig.3 Device Roadmap Example ..................................................................... 13 Fig.4 Revenue Comparison; 100K Vs 1Mio installed base .................................. 20 Fig.5 100K installed base Rev. Vs OPEX (loss model)........................................ 21 Fig.6 1Mio installed base Rev. Vs OPEX (fully subsidized) .................................. 21 Fig.7 Household Spending Estimation ............................................................. 23 Fig.8 Concept Design Model E2 [façade, back isometric and side]....................... 26 Fig.9 Concept Design Model E [façade isometric] ............................................. 27 Fig.10 Concept Design Model E [back isometric] .............................................. 27 Fig.11 Concept Design Model G [façade and back isometric].............................. 28 Fig.12 Concept Design Model G2 [façade, back isometric and side] .................... 28 Fig.13 Concept Design Model F [façade isometric]............................................ 29 Fig.14 Concept Design Model F [back isometric]............................................... 29 Fig.15 Concept Design Model D [façade, back isometric and side] ...................... 30 Fig.16 Concept Design Model H [façade isometric and side]............................... 30
  5. 5. mtilia, confidential 2010 5 | P a g e Executive Summary One of the least understood developments in today‟s telecom and Internet world is the transformation of broadband beyond Internet connectivity. This may seem curious, since everybody wants it and there is an enormous surge in demand from households and offices. Research and analyst reports indicate the gap between the readily available technology and moving beyond internet connectivity lies in the lack of a viable business model or solution. Further, enough research points towards providing a single or limited purpose connected device is one of the direct approaches for services stickiness. Our solution addresses this gap and has the potential to both change the economic dynamics and become the reference model for the future. We believe there are several ingredients necessary to take the next step with a successful business model: • Broadband availability • Consumer readiness and habits (are they used to making purchases by phone, internet or other remote channels and how frequently?) • Service and goods provider readiness and habits (variety, coverage, willingness to accept and deliver ¨micro orders¨) • Critical mass of consumer (population fitting criteria) • A simple and efficient platform that can bring consumers and vendors together (in very simple terms a ¨toll bridge¨ for vendor and consumer) In our opinion, unlike most of the world, all these ingredients are present in Turkey. Our solution and business model provides the glue which brings it all together. Countries in Western Europe or the United States have the infrastructure and technology, and sometimes even the population critical mass but lack micro delivery and service habits of Turkey. Turkey on the other hand has all the ingredients, especially in highly populated areas of large cities. We have our local ¨bakkal¨ where we do micro purchases, we have our drinking water suppliers, our dry cleaners pick-up and return clothes from our homes, even fast food chains like McDonalds and Burger King do home delivery, our local supermarket chains like Migros and Carrefour Express delivers home and so on. The telecom infrastructure is available, local consumer and vendor habits are in line, critical mass for both consumer and vendors is present. We are able to provide the bridge which connects consumer to vendor with our solution.
  6. 6. mtilia, confidential 2010 6 | P a g e A simple and reliable environment for service creation, delivery and consumption – a self evolving ecosystem – will ensure; • Stickiness for underlying connectivity and access oriented services • Allow us to toll pass through business • Control customer relationship • Win consumers‟ mindshare and loyalty • Provide personalized advertisements, products and services • Leverage household spending data Our business model, explained in more detail in the following pages, relies on providing a simple and efficient end-user experience, tolling pass through traffic from subscribed services and goods providers. Although we estimate break-even with small volume of active users in highly populated areas such as Atasehir, the real opportunity lies in expanding the installed base quickly to the tens of thousands and more. We will try to explain in the following pages the difference between our solution and business model compared to the more traditional internet models. We look forward to discuss the solution and collaboration opportunities in more detail at your convenience Sincerely, Mehmet Çetin
  7. 7. mtilia, confidential 2010 7 | P a g e Business Opportunity Overview As mentioned in the executive summary, one of the least understood developments in today‟s telecom and Internet world is the transformation of broadband beyond connectivity. This may seem curious, since everybody wants it and there is an enormous surge in demand from households and offices. Further, enough research points towards providing single or limited purpose connected devices is one of the direct approaches for services stickiness. To address this gap we are developing a cloud service, bridging consumers and providers for purchasing basic goods and services. This will allow us to tap into vast potential of the next generation broadband usage. Utilizing existing mature Internet / telecommunication technologies and infrastructure, we will be able to simplify consumers‟ lives. With a focus on bringing simple, easy to use and efficient consumer reach for enterprises of all sizes, we will enable and facilitate the expansion of their offerings and geographic coverage in a sustainable way. Our solution opens doors for financial institutions, telecom, Internet and alternative operators to harvest the potential of this market. The business model is based on tolling pass through traffic from subscribed services and goods providers. Breakeven point can be reached with a relatively small installed base, and will yield a healthy IRR. The solution is scalable, self sustainable, has low operational costs and provides higher returns as the installed base grows. We predict increased usage adoption will be the result of a single or limited purpose device coupled with a simple user interface, greatly increasing the addressable market to non computer or smart phone owners. Although our solution and business model does not rely on providing such a device; being faster and simpler to use compared to versatile and conventional devices, such as; a personal computer, a smart phone would yield higher adoption, usage and coverage beyond owners of such devices. It is obvious from advertisements and marketing spending of major telecom operators today that their focus is still on providing faster and better connectivity. While such improvements in broadband availability are positive, the lack of “killer” applications and/or services is a major issue to catch and retain customer loyalty.
  8. 8. mtilia, confidential 2010 8 | P a g e In our opinion, the company that manages to launch such services and acquire a solid installed base first, will not only be able to make very good returns on their investment but will also become the market maker. If done correctly and early enough, there is a good possibility that this company will “own” the market, much like Google does in internet search and advertising. A cloud of alternative services beyond faster, better and available connectivity will become a major differentiator; an environment for such service creation, delivery and consumption – a self evolving ecosystem – will ensure not only stickiness for underlying connectivity and access oriented services but will also allow us to;  Toll pass through business,  Control customer relationship,  Win further consumers‟ mindshare and loyalty  Leverage household spending data For the services and goods providers the model allows an efficient and direct way to reach consumers while providing the necessary base to expand their businesses both in terms of geographic coverage and offering portfolio. Basic goods and services provided by the solution may span simple and frequent products to more complex services.  Simple and frequently used goods and services:  Bottled water  Fast food  Groceries  Calling/reserving a taxi  Dry cleaning  Car wash  More complex and/or less frequently used goods and services  Maintenance/repair services (white goods, personal computer),  Plumber  Electrician  Dog walker  Baby sitter  Shopper assistant / assisted shopping  Banking  Utilities  E-Government While the cloud services can be reached via alternative methods such as personal computers or smart phones; market surveys suggest single or limited purpose
  9. 9. mtilia, confidential 2010 9 | P a g e device (a smart frame or a tablet device) would increase the frequency of consumption while providing additional value. One of the most valuable aspects of such a device, apart from the ease of use is the increased barriers of entry for possible competition. Controlling the medium for consumer access, together with a large installed base, will lead vendors of goods and services to desire having a presence in the model. However, this will work best if the route to consumer with such devices is not fragmented. Thus a good lead time on competition and acquiring a large installed base is the key in achieving the real potential of the solution. Benefits The benefits are multifold and have the potential to create multi win scenarios For Consumer: For end users there is clear value for quick finding and simple ordering consolidated set of goods and services offerings via web presence, as a widget application or bundled with an accompanying device. For Basic Goods and Services Providers For providers the effectiveness of this approach comes from basic comparison of effectiveness of magnets and flyers versus a speed dial that bridges buyer and seller at the convenience and comfort of each hence allowing efficient way to reach, serve and provides the opportunity for coverage and reach expansion. For Banks and Financial Institutions The vast amount of household spending information can be leveraged as: • Part of credit risk analysis in small and medium enterprise (SME) loans and provide guidance for SMEs within the sector • Allow financial organization to develop personalized offerings to attract and retain consumers. • When coupled with micro finance backend, revenue from large sums of transactions provides returns with low OPEX, a key factor in generating micro finance revenues. • ATM like user interface allows wider usage of Internet banking services and personalized reach for retail banking offerings to their clients. For Telecom Operators Depending on strategy, services bundled via mobile or stationary devices can enable establishing a foot print within homes or can be leveraged in ensuring and strengthening already existing foot print.
  10. 10. mtilia, confidential 2010 10 | P a g e The system utilizes existing voice and data infrastructure, which already exist both in fixed line and mobile telecommunication operators hence eliminating the need for such investment. Integration with existing billing infrastructure would enable single billing. While expected volume of transaction will be high, consumers‟ transaction amounts would be within the limits set by telecommunications regulatory authority (BTK), eliminating telecom taxing for non telecom related services consumption. For Advertisers The solution provides targeted and contextual advertisements delivery at the time of ordering, greatly increasing impact for FMCG products and opportunity for horizontal and vertical competition. How System Works System has been designed to be intuitive for non computer literates. This ensures wide adoption, usage; eliminating learning curve; lowering resistance for offering consumption. Edge device or UI running on consumer equipment (PC or smart phone or purpose device) operates with simple menus and leverages voice communication when necessary hence it resembles an intercom or a speaker phone with a touch enabled display. Overall, solution utilizes Internet to bridge consumers and sellers, utilizing existing and mature technologies. On consumer side edge connectivity can be summarized as a large intercom system connecting both parties either via simple menu system (where appropriate) and via voice (when necessary and preferred). On goods and services provider side; solution leverages currently used technologies; whether it is a call center, an ecommerce portal or a mobile and fixed line telephone to receive orders. Fig.1 Simple Reach to Frequently Consumed Product and Services
  11. 11. mtilia, confidential 2010 11 | P a g e Examples Ordering Bottled Water 1. Consumer chooses (touches or clicks) bottled water order menu 2. Consumer chooses the vendor 3. Water order requests reaches provider (national call center, web order site or individual resellers‟ mobile/fixed line phone as an SMS) 4. Provider responses via predefined method (SMS or response over web application) 5. Confirmation that the order is received is sent back via predefined method (email, SMS, etc) back to consumer Calling a Taxi or Requesting Private Chauffeur 1. Consumer chooses a taxi station serving her area 2. Consumer initiates a call to taxi station and requests a taxi – depending on taxi availability tells her location or identifies it via a single touch 3. Taxi station responds and either dispatches the taxi towards consumer or rejects according to availability Calling White Good Maintenance Services or Customer Support 1. Consumer chooses the vendor and product category accordingly 2. Depending on integration: a. Either request is sent to vendor and confirmation is sent back to consumer and vendor reaches consumer via predefined method (phone, email) b. Or a call to vendors‟ call center is initiated and system acts like a speakerphone Ordering Fast Food 1. Direct Approach: a. Consumer chooses a fast food restaurant she would like to order food from b. Consumer browses restaurant‟s menu and selects items accordingly and populates her basket c. Chooses finalize to place her order d. Order and delivery address is received by the restaurant and when accepted (via an SMS or email) a confirmation is dispatched to consumer via preset preferred method (such as SMS, email) 2. Indirect approach; leveraging existing Internet based food aggregator service provider a. Consumer chooses her favorite food from aggregators menu, choose restaurant serving her geographic location and places her order as she would from aggregators web site or widget application
  12. 12. mtilia, confidential 2010 12 | P a g e b. A confirmation is sent back to consumer once the aggregator confirms the order Although simple touch/click driven menu system is the preferred method where possible and practical; in order to accommodate existing usage habits in every scenario, the system has the option to function like an intercom/speakerphone where menu driven ordering is not possible or not the preferred way to bridge consumer with resellers and providers such as in case of ordering groceries from local grocery store. Fig.2 Order Flow Examples Dedicated Device versus Web Only Presence or Smart Phone Application Although additional device offering is not a must; there are competitive and value advantages in offering a single purpose or limited purpose device, which shares same underlying hardware and software technology, targeted for different user segments; allowing low cost of ownership, increasing received value, which in return enable reaching wider user base and therefore services consumption
  13. 13. mtilia, confidential 2010 13 | P a g e  Device provided at cost or via a loss model offers more value to end user at a fraction of the cost of any comparable device (device supporting top most Internet usage trends1 ; social network access, music/video listening/watching, messaging (email, SMS2 , voice2 , IM) and provides glance- able information (weather, news, traffic, transportation schedules, etc)  Expandable platform allowing consumption of additional services such as banking, municipal/eGov, sports betting, retail catalog browsing/shopping, price search services and local forum access, etc. where additional advertisement and transaction based revenues can be captured  Dedicated device provides tight control over services and products offered and tougher barrier for entry for competition compare to expose via application on smart phones and Internet only presence strategies alone  Quick boot, simple UI, light weight and long battery life, always ready and connected compare to PC (netbook, notebook)  Larger screen and fraction of the cost of smart phones while sharing most of features such as capacitive multi touch screen, high speed low power CPU in similar design and form factors  Smartphone penetration although is in a rising trend in world wide mobile handset market, still has low overall install base and fragmented hardware/software configuration which hinders developing and maintaining same application for each alternative platform (top local GSM operator suggests they have sold total of 400k Apple‟s iPhone in 3 years; around 1% penetration within the 34million subscriber base they currently have) Fig.3 Device Roadmap Example •Mid sized LCD •Touch UI •Voice capable GSM radio •Out of box functionality •OTA management and remote updates Stationary Home Device •Small to mid size screens •Touch UI •Battery powered •Location and inertia aware •OTA management Handheld Device •Targeted UIs and designs for vertical segments; elders, kids, tourists, corporate users •Public displays for advertisement and „follow me‟ function Additional Targeted Devices
  14. 14. mtilia, confidential 2010 14 | P a g e Technical Infrastructure The solution leverages mature and existing technologies utilizing web services and VOIP technologies. Whether VOIP telephony services used can be standalone or part of fixed line or mobile telecommunication operator and whether it utilizes wireless broadband (WIFI) or GSM based connectivity (2G, 3G) will depend on partner business priorities. Leveraging an already existing infrastructure will lower initial investments requirements and operational costs. The solution assumes some kind of broadband access at target consumer home. Marketing and Sales Strategy Nowadays Internet access is a necessity rather than nice to have feature in our daily lives. Enterprises of all sizes are trying to find better and more efficient ways to reach us in order to sell their services and products. This is not an easy task since we have limited time, attention span and space. The same holds true for all types of enterprises;  Large companies with big advertisement budgets flood the Internet and traditional media with their commercials; catching consumers‟ attention and differentiating their products and services is a never ending constant battle  Small and medium enterprises, with their more limited budgets can only compete locally or in niche markets for consumer attention  The very small and local player such as grocery stores and restaurants tend to have no budget or just enough to drop flyers and magnets in our mail boxes One of the key ingredients of our solution is to provide a means for even the smallest enterprise, whether it is the local “bakkal”, dry cleaner, taxi or other, a chance to reach our households effectively. We may not be creating a perfectly level field, giving enterprises the means and additional tools like personalized advertisements, but we will be opening doors for smaller players that they did not have before. As such, the marketing and sales strategy will differ based on several factors;  Target customers  Population concentration  Location  Tool(s) used to access solution (dedicated/limited device, smart phone, personal computer)  Target vendors
  15. 15. mtilia, confidential 2010 15 | P a g e  Goods and services offered at the location  Level of integration desired and/or possible by the vendor  Level of technology sophistication of vendor (for example a country wide vendor most likely has a system, whether it be a call center or on-line service for processing customer requests) In concentrated populated areas with already high levels of ordering from home (Atasehir district is a good example), we expect to attract a relatively high number of local vendors along with regional or national players. The key to success and attracting these vendors lies in having a large installed base of consumers through the solution. To achieve this goal we have three alternative approaches, in order of preference these are; 1. A limited or single purpose device would be offered for free to target consumers a. This approach lifts the cost barrier from the consumer and will allow the fastest roll-out and growth in installed base, which in turn will increase demand from vendors to be part of the system b. As the consumption through the device will reach critical mass much faster in this scenario, the revenues and possibly higher margins generated from tolling will in turn allow quick returns on investment c. Even aggregators such as Yemeksepeti3 or vendors with their Internet based on-line ordering aggregation services would be attracted to the large installed base and join the system 2. A limited or single purpose device would be offered at cost or loss, which could be offered in installments or upfront purchase for the consumer a. This approach, although it minimizes investment costs, would have the disadvantage of having to sell the solution to both the consumer and the vendors. There by greatly slowing down the adoption b. The slower start will in turn reduce ROI time as consumption will be much lower at start, reducing tolling revenues and margin 3. A limited or single purpose device would be offered for a profit, either as part of ongoing services contract fee or direct purchase a. This approach has the same disadvantages as offering the device at cost or loss, but increases the difficulties even more b. This approach will most likely limit the adoption and turn it in to a niche service to large real estate compounds and communities In all three above scenarios, a web interface and application widget would also be made available allowing access using personal computers, smart phones and other web enabled devices.
  16. 16. mtilia, confidential 2010 16 | P a g e As can be seen from our interpretation of the scenarios, we believe the device is just an enabler to achieve the desired end of getting consumers and vendors to use the solution. We believe the opportunity lies in being the gateway or market place for consumer and vendor no matter what method they prefer to connect, whether it be a through a phone, PC or our device does not matter. Having our device in enough homes opens the door to become the gateway or market place, attracting more consumers and vendors to join the system. As the ecosystem grows, we expect additional consumers will want join with different means (purpose designed devices, PC, smart phone or other web enabled devices). The main reasons behind wanting to push a dedicated or limited purpose device into as many homes as possible and as fast as possible are;  Such a device will lock in consumers and vendors  Allow a controlled environment for adding services  Lock out conventional Internet competition and force them to join the system when the installed base reaches critical mass  Simpler and ready to use; allowing reach beyond PC and smart phone users Our strategy for a successful launch would be to start with a few basic goods and services that the majority of households in a target area will consume most frequently. For example before launching and announcing the solution, we would aim at getting on board drinking water vendors, large fast food chains, dry cleaners and a few other services in the area which will form the basic services available to consumers. We would then expand and enhance the services available once the solution is launched. In the case an agreement is reached to launch the solution together with a bank, an ATM like user interface of the bank and possibly a payment interface would also be available from start. The device could be available from the beginning with other services such as messaging, weather, photo frame and so on. Phased Approach for Signing in Good and Service Providers Although it is technically possible to launch the solution nationwide, we believe a phased approach focusing on highly populated areas of large cities first will yield faster return on investment and reduce operational launch costs. As the usage grows in target start locations and as nationwide goods and service providers become more available, we will be able to invest in other less populated locations and/or expand to other cities or offer our solution nationwide.
  17. 17. mtilia, confidential 2010 17 | P a g e Team, Resources and IP Our goal is to focus on the business and technology of this venture, looking at ways to expand the available services and maximize the potential of the model with new ideas. During the start up phase when transaction volumes are relatively low, it is likely that a small in-house team will be needed for most operations. As the business grows however, we aim to outsource all non-critical operations and focus the core team on generating new ideas and growing the business. Sales Setting up tolling agreements for service and goods providers is the main goal for the sales resources. The initial target is enrolling goods and service providers that are strategic (nationwide coverage, brand names and localized key vendors; depending on initial go to market strategy). Once a critical mass is reached, we expect that the ecosystem will be able to attract additional vendors and local aggregators (sub services and goods aggregators) by itself due to the consumer reach and data we will be able to provide. Legal This will be an outsourced activity from start. With the main responsibility of establishing and maintaining standard terms and conditions both for internal and external contracts, consultation and IP related activities. Finance This activity will again be outsourced from start. When the business reaches certain revenue targets, a financial officer will be added to the team to guide and manage the outsourced activities. Operational and Administrative Again, an outsourced model from start where possible will be utilized. Technical We are currently using subcontractors during the conceptual design, testing and trials for the majority of non-IP related activities. We intend to continue the same approach during production ready development and operations. The main focus of our in-house developers in later stages will be integration, quality assurance and testing. Project Management A project manager and later a project management office will manage and monitor both business and technology related in house and outsourced activities; ensuring
  18. 18. mtilia, confidential 2010 18 | P a g e success criteria are met on time as well as monitoring and managing SLAs (service level agreements). Intellectual Property In order to protect our IP, a patent application has been submitted to the Turkish Patent Institute (TPE) on 02.09.2009, #2009/06755, it is currently pending approval. Submitted copy of the patent application can be shared if required after signature of an NDA (Non Disclosure Agreement). Operations Business The main focus is enrolling as many providers as possible. Enrollment will be through an online portal but initially field sales team‟s assistance will be necessary to ease the signup process. We envisage that as more providers become part of the cloud, required sign up process for “similar in nature” providers will take less effort and self service signups will be initiated by providers themselves – hence required field sales effort and therefore costs will decrease accordingly. The fees or “toll” that will be collected from vendors will be based on per transaction and/or flat subscription fees. Fee amounts can be percentage of the transaction (preferred model), or a flat fee model based on forecasted volumes and adjusted periodically where preferred model cannot be applied. Technical Technical operations will focus on operations and maintenance of the cloud services. Device related operations will be kept separate; while there will be a small in-house team for development and remote upgrade of consumer devices, the rest of the activities are planned to be outsourced.
  19. 19. mtilia, confidential 2010 19 | P a g e Financial Forecast Summary  Cash flow projections for 100,000 and 1,000,000 install base scenarios have been provided. Although 1,000,000 install base projection suggests a series of incremental install base, please consider it as multiple geographies in parallel  Interest rate risk is set at 25% for first 3 years of operations and 15% thereafter  Device development and manufacturing cost estimations are provided separately Assumptions  The preferred method for call termination where necessary or desired is assumed to be already in place (VOIP/CIF gateway, data and voice infrastructure)  100,000 installed base projections accounts for subsidized device offering – loss model at 50% of cost – target installed base is projected to be reached at the end of year three  Marketing costs are built in as part of field selling costs  Direct sales approach is assumed; channel distribution costs are not forecasted  1,000,000 installed base projection accounts for fully subsidized device; cost free for consumers; target installed base is estimated to be reached before the end of year three  A subscription fee of 1 TL per device per month is forecasted as a cost offset  Wireless broadband connectivity is assumed to be available;  The projection does not take into account additional cost impact on device or required ongoing costs if mobile connectivity is used (i.e. 2G, 3G mobile connectivity costs)  Time and cost estimation for back-end services infrastructure requires evaluation of already existing technologies and investments  Therefore it has not been included within the cash flow projection provided  An estimate can be provided once the solution partners and going forward model is established  Additional possible revenue streams such as targeted advertisement are not included in the projection
  20. 20. mtilia, confidential 2010 20 | P a g e Cash Flow Summary Below scenarios are annualized summary of monthly projections presented in cash flow projection and does include subsidization cost (loss model or full) of single purpose device; alternative scenarios‟ impact can be forecasted in provided spreadsheet. Investment amounts stated in the spreadsheet does not take into account initial development and integration costs and only accounts for ongoing development costs; however one off cost estimations for device hardware and firmware are stated in a separate worksheet. Additionally, according to collaboration strategy and utilization level of already in place infrastructure, if exists, initial investment requirements can be estimated. Summary Cash Flow Scenarios, yearly # of users 1 2 3 4 5 … 100K 1,066,250 TL 2,872,730 TL 2,932,739 TL 2,932,739 TL 2,932,739 TL … 1Mio 12,702,880 TL 22,990,873 TL 63,218,585 TL 63,218,585 TL 63,218,585 TL … Summary Firm Values # of users IRR MIRR NPV Investment 3 year Gross Cash Flow Company Value in 3rd year Simple ROI in 3 years 100K 125% 92% 12,718,452 TL 3,948,599 TL 1,490,807 TL 38,765,350 TL 281% 1Mio 180% 120% 349,087,986 TL 36,740,439 TL 18,391,790 TL 730,643,333 TL 646% Fig.4 Revenue Comparison; 100K Vs 1Mio installed base 30,000,000 TL 20,000,000 TL 10,000,000 TL 0 TL 10,000,000 TL 20,000,000 TL 30,000,000 TL 40,000,000 TL 50,000,000 TL 60,000,000 TL 70,000,000 TL 1 2 3 4 5 100K 1Mio
  21. 21. mtilia, confidential 2010 21 | P a g e Fig.5 100K installed base Rev. Vs OPEX (loss model) Fig.6 1Mio installed base Rev. Vs OPEX (fully subsidized) 0 TL 200,000 TL 400,000 TL 600,000 TL 800,000 TL 1,000,000 TL 1,200,000 TL 1,400,000 TL 1,600,000 TL 1,800,000 TL 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 OPEX Rev 15,000,000 TL 10,000,000 TL 5,000,000 TL 0 TL 5,000,000 TL 10,000,000 TL 15,000,000 TL 20,000,000 TL 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 OPEX Rev
  22. 22. mtilia, confidential 2010 22 | P a g e Household Spending Survey Template Survey template is used in projecting current and future household spending habit and estimating potential revenue capture and addressable market. Initial research has been conducted without a targeted demographic and geographic focus. Preliminary results suggests bottled water, food and grocery spending are frequently used current services while shoe polish, car wash and movie ticket purchasing services would be the top three sought after services if available. Further surveys will target specific geographies. The template is requested to be filled by participants while capturing as much demographical data as possible; size of the family (including pets), ages, gender, work status, etc. Detailed analyses‟ results will be shared as more surveys are conducted. Services Purchase Streams Estimated Transaction per House per YEAR Avg Transaction Value (TL) Bottled Water 0 6 Food 0 20 Event/Movie Ticket 0 35 Dry Cleaner 0 25 Grocery 0 10 Courier, Cargo 0 12 Flower 0 35 Simit 0 3.75 Plumber 0 50 Electrician 0 50 Shoe Polish/Repair 0 20 PC Technician 0 50 Taxi 0 20 Vet 0 75 Car Wash 0 12 Carpet Cleaner 0 75 White Good Repair/Maintenance Services 0 50 Car Servicing 0 150 Kalayci/Bileyici 0 10 Bakery 0 15 Pharmacy 0 10 Personal Storage 0 15 LPG, Butane Cooking Cylinder 0 50 Tailor 0 15 Barber, Hairdresser, Beauty Salon 0 0.5 Hardware Store 0 5 Vacation, Holiday Planner 0 0.5 Recycler 0 0
  23. 23. mtilia, confidential 2010 23 | P a g e Household Spending Forecast and Revenue Forecast mtilia,confidential RevenueLine Estimated Transactionper HouseperYEAR Avg Transaction Value(TL) Fee% CaptureValue (TL) 100,000 1,000,000 BottledWater 44 6 2.50% 6.60TL 660,000TL 6,600,000TL Food 59 20 5.00% 59.00TL 5,900,000TL 59,000,000TL Event/MovieTicket 7 35 5.00% 12.25TL 1,225,000TL 12,250,000TL DryCleaner 12 25 5.00% 15.00TL 1,500,000TL 15,000,000TL Grocery 40 10 2.50% 10.00TL 1,000,000TL 10,000,000TL Courier,Cargo 2 12 3.00% 0.72TL 72,000TL 720,000TL Flower 4 35 6.00% 8.40TL 840,000TL 8,400,000TL Simit 40 3.75 0.10% 0.15TL 15,000TL 150,000TL Plumber 1 50 5.00% 2.50TL 250,000TL 2,500,000TL Electrician 1 50 5.00% 2.50TL 250,000TL 2,500,000TL ShoePolish/Repair 9 20 5.00% 9.00TL 900,000TL 9,000,000TL PCTechnician 0 50 5.00% 0.00TL 0TL 0TL Taxi 15 20 4.00% 12.00TL 1,200,000TL 12,000,000TL Vet 5 75 3.00% 11.25TL 1,125,000TL 11,250,000TL CarWash 10 12 5.00% 6.00TL 600,000TL 6,000,000TL CarpetCleaner 0 75 5.00% 0.00TL 0TL 0TL WhiteGoodRepair/MaintenanceServices 1 50 5.00% 2.50TL 250,000TL 2,500,000TL CarServicing 1 150 5.00% 7.50TL 750,000TL 7,500,000TL Kalayci/Bileyici 0 10 1.00% 0.00TL 0TL 0TL Bakery 30 15 5.00% 22.50TL 2,250,000TL 22,500,000TL TransactionVolumeperHousehold: 281 TotalCapturedValue: 187.87TL 18,787,000TL 187,870,000TL AnnualSubscriptionFee1TL/monthfromsubscribers: 0TL 12,000,000TL AnnualSubscriptionFeeXTL/monthfromserviceproviders: 0TL 0TL AnnualGrossRev: 18,787,000TL 199,870,000TL Customer Fig.7 Household Spending Estimation
  24. 24. mtilia, confidential 2010 24 | P a g e Device Manufacturing Cost Estimation Estimation is based on minimum of 25,000 units and includes manufacturing and component costs only. Customer support cost is estimated at @18.5% has been built into cash flow (covering device warranty, replacement, remote customer support services) and is planned to be an outsourced activity. Cost and time impact has to be considered for any change in quantity, form factor, broadband connectivity and additional feature requirements. Components Est. Price 5" TFT LCD: 17.00$ MCU: 12.00$ Cap. Touch: 25.00$ Baseband+Transciever: -$ Misc Components+PCB Manu: 12.00$ Enclosure: 9.00$ Etc.: 4.00$ WIFI: 6.00$ Bluetooth: -$ GPS: -$ Battery: 3.50$ OS License: -$ UI License: -$ TOTAL: 88.50$ Support: -$ Packaging: 0.89$ Logistics, Customs: 20.36$ Unit Cost: 109.74$
  25. 25. mtilia, confidential 2010 25 | P a g e Competition No direct competition in terms of scope and model exists today, however the window of opportunity is rather small as global and local enterprises are looking for ways to leverage the ever increasing Internet usage to reach individuals and SMEs directly, bypassing most of the traditional channels. There are multiple models on how the Internet is being leveraged as an alternative to traditional channels; so far the most successful examples are in personalized and direct advertisement delivery, internet banking and specialized aggregation sites (music and video downloads, food ordering and so on). The most successful internet company today is no secret; Google is the clear leader in online search and advertisement market. As addressable revenue and therefore potential profits flatten, companies like Google are looking into ways to increase their revenues and profits from consumers and local SMEs by leveraging their established channel in new ways. Companies like Google, Amazon and others are gathering both consumer and business data for free with new services. If we look at the Google‟s model and the way they are expanding their services, it is obvious that Google is using its strength to enter new markets. Leveraging the Internet, a direct link with consumers and local SME‟s are established quickly and cost effectively;  Google Places: free navigation, discount coupons, reviews and directory services coupled with fee based subscription for enterprises that want to stand out of the crowd  Google Voice: by providing VOIP services, Google relegates telecom operators (fixed line and mobile) to broadband connectivity provider only and reduces their voice revenues and profits  Google Checkout: offering a payment engine for shoppers and vendors; placing Google in to the middle of every transaction and allows them to collect additional key data about both consumers and vendors With such services Google is trying to become the middle man or “toll bridge” between the consumer and enterprises. Controlling consumer and market data gives them an edge against even traditional institutions like banks or telecom operators. With this kind of data and involvement in local economies it is possible to influence or take advantage of key market trends before others and play match maker to enterprises and consumers, further strengthening Google‟s role in the middle;
  26. 26. mtilia, confidential 2010 26 | P a g e  Controlling the data or business information repository is the key to their strategy While Google has currently focused on capturing a bigger piece of the worldwide advertisement revenues, above described services indicate a more focused move in to areas such as finance, telecommunications and on-line retail. This is no surprise as their core business of on-line advertising is reaching a point where growth is slowing down. Although Google is the most significant global player pursuing this type of strategy, it is not the only one. The battle for consumer loyalty and mind share will be played around information and controlling the channel to the consumer. The question is not if, but when these giants will make a move to take control of the Turkish consumer and market. What we propose is to pre-empt such a move and take such control ourselves. Concept Designs for Stationary Device Below are some the design work undertaken for stationary device. Fig.8 Concept Design Model E2 [façade, back isometric and side]
  27. 27. mtilia, confidential 2010 27 | P a g e Fig.9 Concept Design Model E [façade isometric] Fig.10 Concept Design Model E [back isometric]
  28. 28. mtilia, confidential 2010 28 | P a g e Fig.11 Concept Design Model G [façade and back isometric] Fig.12 Concept Design Model G2 [façade, back isometric and side]
  29. 29. mtilia, confidential 2010 29 | P a g e Fig.13 Concept Design Model F [façade isometric] Fig.14 Concept Design Model F [back isometric]
  30. 30. mtilia, confidential 2010 30 | P a g e Fig.15 Concept Design Model D [façade, back isometric and side] Fig.16 Concept Design Model H [façade isometric and side]
  31. 31. mtilia, confidential 2010 31 | P a g e References 1. According to Mediascope 2010 2. Voice via VOIP, SMS via webSMS 3. Yemeksepeti.com

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