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SyncWorld Business Plan

This is the slide shown in the business plan competition in Austin in 2002

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SyncWorld Business Plan

  1. 1. Table of content <ul><li>Market </li></ul><ul><li>Decline of entertainment </li></ul><ul><li>Data phone growth </li></ul><ul><li>Market size </li></ul><ul><li>Data phone features </li></ul><ul><li>Data phone everywhere </li></ul><ul><li>Business </li></ul><ul><li>Business Model </li></ul><ul><li>Mechanism </li></ul><ul><li>Advertising integration </li></ul><ul><li>Management Team </li></ul><ul><li>Management Team </li></ul><ul><li>Marketing </li></ul><ul><li>Free membership </li></ul><ul><li>Monthly membership </li></ul><ul><li>Premium membership </li></ul><ul><li>Competition </li></ul><ul><li>Value proposition </li></ul><ul><li>Barriers-to-entry </li></ul><ul><li>Finance </li></ul><ul><li>Revenue projection </li></ul><ul><li>Exit </li></ul><ul><li>Q & A </li></ul><ul><li>Answers </li></ul>
  2. 2. Live role-playing experience via mobile phones Nob Seki, President & CEO SyncWorld, Inc. (Carnegie Mellon University)
  3. 3. Entertainment in Japan 30 million bored young people But movie & Karaoke customers declining… Young people are looking for new fun! Sing Karaoke Catch a movie 153 135 CAGR -6% 53 49 CAGR -4%
  4. 4. Platform for multiplayer entertainment experiences via data phones Data phones Player Player <ul><li>Our role-play experience include: </li></ul><ul><li>Solving mysteries </li></ul><ul><li>Finding clues </li></ul><ul><li>Working with teammates </li></ul><ul><li>Competing against teams </li></ul><ul><li>Exploring the real world </li></ul>
  5. 5. Data phones growing 48% annually Million users Source: eTForecast, except Japan’s subscribers estimated by SyncWorld Japan uses 26% of all data phones (60 million data phones) 40 225 730 CAGR 48%
  6. 6. With data phones costing a penny, all teenagers have one Hundreds of models are available… 1¢ 1¢ $25 Email 128 bytes: 3/10 ¢ A color photo: 8 ¢
  7. 7. Data phones are always in their hands On the town Hanging out Subway & trains
  8. 8. Target: teens & young adults with data phones Japan: 25 million Gen X&Y users Tokyo: 10 million Gen X&Y users Tokyo
  9. 9. New generation cell phone: Data phone 1. High-speed 8. Harmonized Ring tones 2. Built-in digicam 3. Video conference 7. Electronic Payment 9. Digital Music 10. GPS Proximity 4. Email/ Scheduler 5. Web 6. Java™ Extremely reliable network (email delivered in 5 sec)
  10. 10. Delivering a scenario via reliable cell phone network  Delivering missions  Reporting keys  Communicating within the team Mission Solve the mystery of Easter Island Email network (on mobile) Any idea on this statue?
  11. 11. Networks combine content & sponsors Audience/Consumers Televisions Movie content Advertisers & Sponsors Networks TV Movie programs Regular programs
  12. 12. SyncWorld creates a network for game scenarios Audience/Consumers TV Cable Data phones Network Advertisers & Sponsors Game scenarios Premium scenarios Monthly scenarios
  13. 13. Integrate advertising into scenarios <ul><li> Plot integration </li></ul><ul><ul><li>Product/ad woven into plot </li></ul></ul><ul><li> Regular advertising </li></ul><ul><ul><li>Banners in messages </li></ul></ul><ul><ul><li>Jingles / logos </li></ul></ul>See & solve issue Mission #2 The clue is… Feel thirsty? Captain, we are … <ul><li> Product/ad placement </li></ul><ul><ul><li>Reference to product/ad </li></ul></ul><ul><ul><li>Clues aside product/ad </li></ul></ul>Vending machines Billboards
  14. 14. Marketing stage 1: Free memberships seed the market <ul><li>Free membership </li></ul><ul><li>Access to sample experiences (teasers) </li></ul><ul><li>Free of charge </li></ul><ul><li>Reach the first customers = viral marketing </li></ul><ul><li>Media PR (game magazines/websites) </li></ul><ul><li>Free events at college clubs & festivals (52% of colleges in Tokyo) </li></ul>
  15. 15. Marketing stage 2: Monthly memberships develop paying customers Can you play “the Game” with us? I’m not a member, but wait a minute. So let’s play! <ul><li>Monthly Membership </li></ul><ul><li>New scenarios monthly </li></ul><ul><li>$2.50 monthly fee </li></ul><ul><li>Sponsored scenarios </li></ul><ul><li>Easy, instant enrollment </li></ul>Select service Games: 1.SyncWorld 2. … Welcome! You play 1. free? 2. paid? Sign up for paid service? ($2.5/month) 1.yes Press  Press  Press 
  16. 16. Marketing stage 3: Premium annual memberships increase commitment <ul><li>Premium Membership </li></ul><ul><li>Premium pay-per-play scenarios </li></ul><ul><li>$25 annual fee </li></ul><ul><li>Group enrollment discount </li></ul>… to find a birthday treasure box Explore Tokyo …
  17. 17. Value proposition for partners Phone makers get demand for new technologies Advertisers get ideal consumers for advertising Mobile carriers get increased data transactions Scenario providers get “one-stop” service in real settings
  18. 18. Potential partners show high interest <ul><li>NTT DoCoMo </li></ul><ul><ul><li>“ In my opinion, this game concept really works and is attractive” – Norihiko Hirose, VP, Business Development, DoCoMo USA </li></ul></ul><ul><li>Dwango (game content company) </li></ul><ul><ul><li>“ The idea of this game sounds familiar, but nobody has implemented real-world games combined with real-world props, materials and advertising” – Hideki Mori, EVP, Development, Dwango </li></ul></ul><ul><li>MJ (consumer marketing firm) </li></ul><ul><ul><li>“ We researched a similar marketing approach with favorable consumer reactions, but SyncWorld’s approach is better because it’s scalable” – Taka Kitamura, Director & Co-founder, Marketing Junction </li></ul></ul>
  19. 19. Ideal team for this business must have expertise in six areas … Entertainment Media/ad experience Consumer marketing Technology Strong networking Business acumen
  20. 20. Management Team fits this business Entertainment Media/ad experience Consumer marketing Technology Strong networking Business acumen Nob: Co-founded an Internet-based entertainment community A.N.D. in 1993 Nob: Designed & developed the business model of Nikkei’s site ITPro Kaori: Experienced consumer product at Japan Tobacco. Leading marketing project for a Ford SUV Nob: Graduated in engineering Covered in high-tech industries Nob: Served as magazine editor in Tokyo & Silicon Valley since 1994 Nob & Kaori: MBA candidates at CMU. Completed the Entre. course at London Business School (LBS) Nob, co-founder & CEO Kaori, co-founder & VP Marketing
  21. 21. Experienced advisors in key areas fully support management team Entertainment Media/ad experience Consumer marketing Technology Strong networking Business acumen “ Cyber Elite” selected by Time Magazine Founder & CEO of a high-tech incubator Neoteny Based in Silicon Valley & professor at Cornell Author of High Tech Start Up Co-founder of a marketing firm MJ 15 year experience in consumer marketing Taka Kitamura John Nesheim Joi Ito
  22. 22. Four familiar barriers to entry Reputation rating (eBay) Friend network (AOL Instant Messenger)  Customer database Partnerships (TV networks) Technology platform (PlayStation) Real-world platform (Disneyland)  Integrated network/platform Social network for young people (Karaoke) Grass-root, community oriented (Linux)  Branding  Team expertise Right mix of management & advisors
  23. 23. Four revenue sources generate $89M in 2007 US$ in Millions Operating Income 25% ($25M) Advertising 18% ($16M) Outsourcing 20% ($18M) Commissions 37% ($33M) Registration & play fees
  24. 24. 34x projected return to early investors Stage 1 Early adopters Stage 2 Paying customers 2002 2003 Stage 3 Long-term commitment Organization Infrastructure Milestones Free members: 50,000 Paid members: 2,500 Round A (Aug/02): $2.5M Projected return: 33.78x Round B (May/03): $4M Projected return: 16.89x
  25. 25. Exit: Tokyo is an active market  M&A <ul><li> Trade sale </li></ul><ul><li>Active investments such as acquisitions </li></ul><ul><li>Konami: 4 invests. in 1 year </li></ul><ul><li>Microsoft: 6 invests. in 3 years </li></ul><ul><li>Electronic Arts: 5 invests. in 3 years </li></ul><ul><li> IPO </li></ul><ul><li>Tokyo: heart of game & mobile </li></ul><ul><li>4 game companies & 7 mobile solution companies went public in the last 6 months </li></ul>
  26. 26. Four components of success  Vast market opportunity  Diversified revenue stream  High barriers-to-entry  The team that fits the business
  27. 27. Q & A: You may want to ask … <ul><li>Business </li></ul><ul><li>Detailed revenue model </li></ul><ul><li>IT Platform </li></ul><ul><li>Ad scenarios </li></ul><ul><li>Site operation & support </li></ul><ul><li>Market size & customers </li></ul><ul><li>Competition </li></ul><ul><li>Price comparison </li></ul><ul><li>Strategic positioning </li></ul><ul><li>Growth strategy </li></ul><ul><li>Int’l expansion </li></ul><ul><li>Key data (SyncWorld) </li></ul><ul><li>Customer acquisition cost </li></ul><ul><li>Expenses </li></ul><ul><li>Headcount </li></ul><ul><li>Break-even analysis </li></ul><ul><li>Key data (customers) </li></ul><ul><li>Data cost of players </li></ul><ul><li>ROI of 3 rd parties </li></ul><ul><li>Karaoke decline </li></ul>
  28. 28. Supporting slides follow Sync a world you want to play ™
  29. 29. Business model Four revenue sources <ul><li>Thru partnerships </li></ul><ul><li>Education </li></ul><ul><li>E-guided tours </li></ul>Monthly member Premium member Create scenarios Exploit our infrastructure “ I’d like to teach the world to play” “ Just play it” <ul><li>Promotional fees </li></ul><ul><li>Advertising fees </li></ul>4: Sponsors Advertisers <ul><li>Customization fees </li></ul><ul><li>Outsourcing fees </li></ul>3: Corporate Customers <ul><li>Subscription fees </li></ul><ul><li>Play fees </li></ul>1: Individual customers <ul><li>Play fee commissions </li></ul>2: Scenario providers
  30. 30. SyncWorld’s IT platform helps game experiences and marketing Scenario Server Game Database Customer Database Scenario Providers VARs Resellers End users Game scenarios Tricoder Web Chat Billing Marketing (CRM) Ads management Running scenarios Managing client devices Individual/ team results Peer feedback Acquired skills CRM system GAME system SyncWorld Platform
  31. 31. Platform (2) Site Operation supports players at front-end and back-end Call Center Customer Supports Game Masters Players Facilitators Navigate players Check sites Front-end back-end ?
  32. 32. Target: teens & young adults Data phone & portable game users Japan: 5 million Gen X&Y potential users .80 million (17%) by 2007 .25 million (16%) by 2007 Tokyo: 2 million Gen X&Y potential users
  33. 33. SyncWorld games are a bargain $6.2 $19.8 $19.4 $14.4
  34. 34. Data transmission cost is insignificant *1 Ginza Big Echo, weekend *2 In-house game *3 3 rd party game $15.0 $19.4 $19.8 *2 $27.8 *3 $6.2 Total cost per month 1 - $19.4 2 hours Karaoke *1 1 1 4 Play frequency 2 hours 2 hours 1 hour Typical duration 38¢ (48 msgs) 10¢ (12 msgs) 19¢ (24 msgs) 5¢ (6 msgs) Messages b/w team - $15 Movie 40¢ (5 pics) 40¢ (5 pics) 24¢ (3 pics) 24¢ (3 pics) Pictures 48¢ (24 msgs) 10¢ (12 msgs) 24¢ (12 msgs) 5¢ (6 msgs) Messages from/to host $1.8 $1.0 Data cost $2.0 $2.5 Monthly subscription $16 $24 - One time play fee On-site game Monthly game
  35. 35. Free members account for 17%, paid for 16% of targeted customers Monthly members Free members Premium members <ul><li>Assumptions </li></ul><ul><li>Free members follow DoCoMo’s i-mode adoption curve </li></ul><ul><li>2% - 20% switch to paid membership </li></ul><ul><li>20% renew premium membership first time </li></ul>People in thousands
  36. 36. Target teens & young adults: 5 million in Japan & 2 million in Tokyo Data phone users … 20.1% of them are active mobile phone game players Source: Telecommunications Carriers Association, NTT DoCoMo, and CESA 2001 Survey 50.4% are teens & young adults … 50 million in Japan 5 million targeted users in Japan 20 million in Tokyo 2 million targeted users in Tokyo
  37. 37. Positioning: Through Niche followed by expansion like Netscape Game Social Entertainment <ul><li>Game console </li></ul><ul><li>PlayStation </li></ul><ul><li>GameCube </li></ul>Low High <ul><li>Arcade game </li></ul><ul><li>Driving game </li></ul><ul><li>Experiencing </li></ul><ul><li>Amusement Park </li></ul><ul><li>Disney World </li></ul><ul><li>Universal Studio </li></ul><ul><li>Gathering </li></ul><ul><li>Party </li></ul><ul><li>Karaoke </li></ul>Exposure to other people <ul><li>Portable game </li></ul><ul><li>GAMEBOY </li></ul><ul><li>PocketStation </li></ul>SyncWorld <ul><li>Theatre </li></ul><ul><li>Movies </li></ul><ul><li>Plays </li></ul>
  38. 38. Growth strategy Expand applications to other industries <ul><li> Education/training companies </li></ul><ul><li>“ edutainment” experiences for children </li></ul><ul><li>Training experiences for employees </li></ul><ul><li> Travel/tour companies </li></ul><ul><li>Electronic guided tour experiences </li></ul><ul><li> Social/dating network companies </li></ul><ul><li>Dating arranging experiences for singles </li></ul><ul><li>SyncWorld </li></ul><ul><li>Focus on game experiences </li></ul><ul><li>Host the outsourcing service </li></ul>
  39. 39. Growth strategy: Expand partnerships that start their own experiences <ul><li>Various scenarios </li></ul><ul><ul><li>Ad-driven to professional scenarios </li></ul></ul><ul><ul><li>Education, training, tour-guide, etc </li></ul></ul><ul><li>Various occasions </li></ul><ul><ul><li>PDAs, portable PCs, arcade games </li></ul></ul><ul><ul><li>Instant message (chat), TV, radio, etc </li></ul></ul><ul><li>Various locations </li></ul><ul><ul><li>Municipals, local communities, etc </li></ul></ul><ul><ul><li>International deployment </li></ul></ul>
  40. 40. Expand advertising partnerships <ul><li>Net-kiosks at convenience stores </li></ul><ul><ul><li>Every store has a couple of the kiosks </li></ul></ul><ul><ul><li>More than 15,000 stores in Tokyo </li></ul></ul><ul><ul><li>Selling music, tickets, print-out, etc </li></ul></ul>We increase visiting customers
  41. 41. Weave ads into plots Get ads before posted Ad posting <ul><li>Scenario generation </li></ul><ul><li>Generate stories & plots based upon advertising </li></ul>Advertisers Scenario delivery <ul><li>Active reading </li></ul><ul><li>Photo capturing </li></ul>Decoding & messaging Processing new events
  42. 42. Japan: Heart of new entertainment that the world does enjoy Cartoons Karaoke Electronic games Data phones?
  43. 43. International expansion depends upon countries’ readiness     Infrastructure       Consumers      Corporate Asia Europe North America
  44. 44. Customer acquisition cost: $50 to 30 Average CLV = $890 Customer acquisition cost (weighted average) Customer Lifetime Value (CLV) Premium member: $1,200 Monthly member: $ 270 Average of the mix: $ 890
  45. 45. Monthly expenses
  46. 46. Monthly expenses R&D, S&M, Customer Support & GA R&D Sales & Marketing Customer Support Administration
  47. 47. Monthly payroll R&D Sales & Marketing Customer Support Administration US$
  48. 48. Headcount: R&D and S&M R&D Sales & Marketing Customer Support Headcount Administration
  49. 49. Value proposition to mass media Help them reach the audience <ul><li>TV programs (CBS, etc) </li></ul><ul><ul><li>Live shows by the audience </li></ul></ul><ul><ul><ul><li>“ Survival in the city” </li></ul></ul></ul><ul><li>Online providers (AOL, MSN) </li></ul><ul><ul><li>Live chat from game players </li></ul></ul>
  50. 50. Advantages against partners Ad agencies Mobile carriers Game publishers          On-site staff operation  Expertise in the latest technology    Two-way relationship w/consumers Expertise in media & advertising Independence of infrastructure
  51. 51. Mobile carrier revenues moving to data services worldwide 100,000 120,000 140,000 160,000 180,000 0 20,000 40,000 60,000 80,000 US$ in millions 1998 1999 2000 2001 2002 2003 2004 2005 Service/Application Driven Data Voice Source: ARC Group
  52. 52. 3 rd parties get 192% ROI in creating a game to SyncWorld … Game working rate: 90% 80% 70% 317% ROI 192% 104% US$ in Millions R&D Marketing Profit
  53. 53. 60 corporate customers in 2007 Mostly through sales channels Direct sales Thru sales channels <ul><li>Assumptions </li></ul><ul><li>Sales commissions: 100% of sales of the first month </li></ul>
  54. 54. Premium scenarios are played constantly Players of Premium scenarios Premium members <ul><li>Assumptions </li></ul><ul><li>Each site holds up to 7,680 players </li></ul><ul><li>If the working rate > 80%, a new site is added. </li></ul>
  55. 55. Break-even in 12 months Premium members generate $790/year Base case Aug/03 (12 months) Profit (Loss) $ (000) Total paying users Worse case Jan/04 (17 months) 0 (100) (200) (300) (400) 300 200 100 Annual net profit @Premium: $790 (86%) @Monthly: $180 (60%) Monthly: 1,930 Premium: 3,860 Monthly: 18,894 Premium: 0
  56. 56. Cumulative cash positive in 36 months reaches $43 million by 2007 US$ in Millions Aug/2005 (36 months)
  57. 57. Cash flow gets positive in 13 months 6 month cyclic business US$ in Millions 6 month weighted average Cash flow from operations Positive Sep/2003 (13 months)
  58. 58. Cash position is sensitive to 6 month cyclic business US$ in Millions Server renewal Server extension
  59. 59. Game scenario sales are seasonal Assume similar pattern to real data Real data of 2000 game sales
  60. 60. Target: teens & young adults Data phone & portable game users Japan: 5 million Gen X&Y potential users .80 million (17%) by 2007 .25 million (16%) by 2007 Tokyo: 2 million Gen X&Y potential users
  61. 61. Portable games dominate market Source: CESA, game devices sold in units in Japan and North America, 2000 Portables PlayStation2 PlayStation Nintendo64 Dreamcast Japan not only in Japan but also U.S. PlayStation PlayStation2 Nintendo64 Dreamcast Portables PlayStation2 PlayStation Nintendo64 Dreamcast U.S.
  62. 62. Karaoke: Decline not due to recession Karaoke stores Karaoke visitors Recession started