This document is published under the gnu free document license
Hugbubble is small scale with very low costs, allowing us to pass on cost savings to our customers. The company has many years of experience in the Internet industry and already possesses the broad range of skills required to develop this service. We understand the market and are intimate with the mindset of the intended target market segment.
The software stack in our product contains a large portion of open source code. This could potentially be used by a competitor in a similar way to our product. To mitigate this we are focusing solely on the virtualized version of the service for year one, thereby speeding up our time to market.
We are also concerned that the Hugbubble brand is more closely associated with Web Application Development rather than an online privacy service. For this reason we have chosen to provide the service under a new brand which will be allied to Hugbubble. To promote this new service we will be pursuing an aggressive advertising campaign. Please see the promotion section of this document for further information.
Large under-developed market with measured growth.
As yet, all competitors are focusing on much larger customers and have substantially larger operating costs.
Due to the open source nature of the software stack, it could be copied in time. However Hugbubble intend to take advantage of the fact that we will be first vendor in our target market segment, allowing us to capture the public imagination. In response to this potential threat, we have focused primary development on this virtual version of the server rather than the bespoke hardware version envisaged at our initial concept stage.
4. Marketing Strategy
Since ease of use is one of our unique selling points, Hugbubble will spend the next two months refining the user experience before we go to market. We will then be ready to launch one month prior to the traditional spike in online shopping for the Christmas market. Concurrently during this period we will be running several social media campaigns to seed the market. We plan to be the household name for online privacy by the end of 2011.
As this is a new service that Hugbubble is introducing, we consider ourselves to be in a start-up position – but having the realistic expectations of a company working in the Internet industry for the last ten years. As mentioned earlier, our operating costs are essentially insignificant. However the research and development period required to streamline and perfect the user signup process, plus the development of the Facebook application and viral video campaign (see Promotion section) is factored into our figures below. Since all development will be completed in-house, salaries are the only costs involved. The figure for owner's drawings is $1,000 per month for year one and $1,500 per month for year two.
Please note that the following figures are ex VAT. For a complete balance sheet including VAT, please see Appendix 1. Our business model is based on subscription to the service for a small yearly fee. The maximum cost to Hugbubble to maintain a user is $1.35 per month. However the true cost to Hugbubble is based on the usage of the customer, therefore when a user creates less traffic on the network, our costs for that customer are reduced. We plan to offer the service for $25.00 per year. This will yield a minimum profit of $8.80 per customer, per year; therefore a conservative sales target of 3,640 units in year one (based on a seasonally adjusted monthly growth in sales), will provide a comfortable net profit of $29,020.
Since our model is based on a subscription, zero new customers in year two would still provide profit; however our social media campaign will be reaching critical mass during year two and we plan to double our sales during this period. This will give a total profit for year two of $70,860.
A year three projection is unrealistic due to the fact that our fixed costs per customer are tied very much to the pace of technological change. We confidently predict that these operating costs will fall by as much as 50% in the middle to longer term, based on Moore's Law of computing power and the continual reduction in bandwidth and data storage costs for cloud computing solutions.
Development is nearing completion and has been funded by the personal savings of Daniel Griffin. The project is projected to become profitable after the very first sale, therefore no break-even analysis is required under ideal conditions. However, assuming the worst case scenario of 50% sales as described in our sensitivity analysis, the business will become profitable during it's forth month of trading. Given that the service is self perpetuating and entirely automatic, Hugbubble will have time to focus on web development projects, therefore we consider this figure to be acceptable. Please see Appendix 1 for figures describing this scenario.
Service / Product
The service we are offering is a virtual private proxy to the Internet. It exists in a virtual space on the Internet and runs only when demands are made of it. The user is guided through setting up a connection on their laptop and is then free to connect to the Internet from any public network with the peace of mind that all of their traffic across that network is encrypted. It is in essence a virtual private network but without the overheads of dedicated hardware and IT administration staff to maintain it.
Key competitive advantages
Comparison with closest competitors.
Hugbubble's marketing will focus on the ease of use of our product compared to large scale virtual private network (VPN) offerings. We will also stress the extremely low cost due to the lack of any IT staff requirements for the customer.
In the short term the product offering will not change, however in the medium to longer term we plan to introduce a bespoke hardware version of the service, which the customer can locate inside their own network (i.e. connected to a home broadband connection, etc). There will be a research and development period required before the release of this product to perfect and streamline a technique known as dynamic domain name system addressing, that is, to make the device contactable from outside of the users own network, while still ensuring tight security.
Fortunately the financial risk exposure to Hugbubble is minimal. The cost of maintaining an account is zero until such time as the account holder begins to use our service.
Technologically, the exposure to risk is larger, since it is technically feasible to produce a similar service with the right expertise. We expect that our competitors’ reaction to our product will be minimal since we are competing in entirely different market segments. However complacency is a poor strategy and we will be aiming to firmly fix our service in the minds of the target market segment through a blended advertising mix.
We plan to offer the service for $25.00 per year. This price is based on the projected cost per new account, plus profit. Although the total price to the consumer appears low in comparison to enterprise scale business offerings, it is based on our understanding that this is a new service which will need to be appealing to customers who have done without it until now in order to maximize the number of sales conversions. This is essentially a market penetration strategy, which will allow us to build solid relationships with as many customers as possible. This large user base will be extremely useful for targeted upselling of future projects.
In comparison to our nearest competitors (who are offering enterprise scale solutions), our prices are well placed. A typical consumer VPN is priced from 80 to 200 dollars per user, per year.
Since our intended target market segment is regular computer users, with a large exposure to social media, the product will be sold entirely online, however we will be leveraging many tried and trusted online marketing techniques to drive visitors to the site (see Promotion section). Our service will be supplied under standard terms of trade, (see Appendix 3). The site will be based on the open source Magento shopping cart system and payment will be facilitated via Sage's SagePay payment gateway. Setup and integration of these services will be performed by Hugbubble staff and will not incur any costs other than time.
The service will be loosely connected to the Hugbubble brand to leverage its reputation and emphasise our many years of experience, however it will have its own identity, website, logo, etc. with a strong focus on security. Launch will be a slow and steady viral campaign using a combination of social media, a video campaign and Facebook application, (to be produced in-house).
Primarily, we will employ vigilant Search Engine Optimization (SEO), however we will also begin a viral marketing campaign on Youtube and other video sites to raise brand awareness. The video campaign will be released under the GPL 3 license so as to encourage remix and redistribution amongst its viewers, but will have embedded branding wherever possible.
Our research has shown (Appendix 2) that most of our target market segment are frequent users of social networks, therefore Facebook and similar sites will be essential in raising awareness of our service. We will be developing a Facebook application in-house, which will essentially use scare tactics in an effort to educate the public of the dangers of leaked personal information and identity theft. It is well understood that Facebook exposes large amounts of private data. We will be designing a Facebook application which displays this information to the user and explains how it could be used against them. This application will be heavily branded to drive traffic to our own site.
We also intend to pursue a Google Adwords campaign, the keywords for which have yet to be chosen. We will proceed with this portion of the promotion only after the viral campaign has been given enough time to seed a large enough user base – a period which we estimate should take one to two months, based on projections of meme's through social networks.
5. Organisation / Management
The business owners are Daniel Griffin and Emmett Flynn, each of whom hold one ordinary share. No other shares have been issued. Daniel Griffin is the company secretary and is in effect operating the business alone. The company president is Emmett Flynn however Emmett’s involvement in the company operations is minimal and for the last several years he has been a board member on paper only. Both of the director’s curriculum vitae can be found in Appendix 4. Daniel Griffin has been responsible for all development work to date. He will also be taking care of the product launch and final administrative details required before offering the service to new customers.
MyNetLock.com is an entirely automated service and therefore requires no further staff input after it has been launched. In the distant long term we anticipate a requirement for helpdesk staff, but that requirement is beyond the scope of this document.
6. Production and Operations
MyNetLock.com is a software service which runs entirely online within the Amazon Web Services environment. No physical premises are required after launch. During the initial development stage however all programming work with be carried out at the registered office of Hugbubble Ltd. which is also Daniel Griffin's home address.
Hugbubble currently owns all equipment required to develop this service. The service will run “in the cloud”, i.e. within a virtual machine, which is itself running within the Amazon Web Services EC2 environment.
The service is to be delivered via the www.mynetlock.com website. All source code for this site will be W3C compliant code and will be validated as such. The service itself will run within the Amazon Web Service (AWS) EC2 environment, which has a guaranteed “up-time” of more than 99%. Amazon's availability guarantee will be advertised on the My Net Lock website. We have already created an AWS account and have begun our initial tests. Amazon's terms of trade are 30 days credit.
All web traffic between the customer’s machine and their private proxy server will be encrypted using a securely encrypted connection (Transport Layer Security v 1.0).
The proxy server itself is based on a standard Amazon Machine Image and has been validated both by Amazon and the Amazon Developer community.
7. Costings and Finance
Our research has shown that at least 75% of internet users have some privacy concerns, however only 29% of those have a very strong interest in the service. This same group are also known to be frequent users of social networks. We will therefore be targeting those 29% at our initial launch with a viral marketing campaign. Once this campaign has gained momentum, the marketing strategy can be broadened to target the remaining 46%.
Although this group is potentially 29% of the current 1.8 Billion internet users, we have opted for a conservative prediction of our sales figures, starting with 120 sales in the first month of year one. Based on the general rules of viral marketing, but tempered with real expectation for uptake, we see this figure rising to an average of 250 sales per month until the pre-Christmas spike in online sales, during which time we predict a climb to 400 new accounts per month. In year two we predict a similar pattern of sales figures but with the volumes at least doubled.
Our only costs to maintain the service are incurred from the hosting company (Amazon Web Service). This cost is calculated on a per megabyte (MB) basis. Given that most home user broadband account are limited to 10 gigabytes (GB) per month, we have taken 10GB as a typical user requirement for our service. This allows us to calculate our costs per user, per month, which comes to $1.35.
Amazon Web Service's terms of credit are 30 days before payment is required. Since MyNetLock is an on demand service, we will require payment upfront and will not be offering credit to our customers. A very brief research and development period will be required however this will be covered by personal savings. Further advertising or programming will also be carried out in-house by Daniel Griffin and will therefore be financed by director's drawings.
Even though our sales targets are rather low, for completeness we have calculated a sensitivity analysis on the assumption that only 50% of our projected sales are actually realised. In this scenario, the service will still become profitable during the fourth month of business. Please see the balance sheet in Appendix 1 for these figures.
Appendix 1 – GNU Free Documentation License
Version 1.3, 3 November 2008
Copyright (C) 2000, 2001, 2002, 2007, 2008 Free Software Foundation, Inc.
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