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theLOCALfolks.com
Table of Contents
"theLOCALfolks.com" intends to provide local neighborhood and city content, local advertising and local events on the Internet. The Company focus is on interactive local content and local merchants that will advertise directly to customers in their neighborhood, city, county and state. The Company provides local and independent community content and service to over 100,000 U.S. communities accessible via the Internet. The creation of interactive, grassroots local content is the foundation of the free services and community guides provided to consumers by the Company. The Company’s mission is to bring consumers and businesses together online and offline to communicate, collaborate, interact, contribute and transact locally through the Company’s online communities. According to a June, 1999 study by The Kelsey Group and ConStat, Inc., Americans spend 80% of their time and disposable income on products and services within 25 miles of their home. The study further comments that the Internet is now the third most popular advertising and promotion medium for local markets, after the yellow pages and newspapers. Small business owners understand the need to advertise within their own local area in order to develop and maintain customer relations. Small businesses (generally defined as having less than 100 employees and generating less than $5 million in annual revenue) represent over 99% of all employers, yet employ only 53% of the private workforce. However, only 21% of small businesses are connected to the Internet on a regular basis, only 9% have their own ‘functional’ website and less than 5% conduct sales online. There are over 23 million small business within the United States. Less than a year after Internet advertising revenues broke the billion dollar mark per quarter in the United States; it is fast approaching the two billion dollar per quarter mark as revenues for the first quarter of 2000 hit $1.953 billion. The Internet Advertising Bureau's (IAB) Internet Ad Revenue Report, conducted independently by PricewaterhouseCoopers, also reported that revenues for the first quarter grew 9.9 per cent over the fourth quarter of 1999, and 182 per cent over the comparative first quarter of 1999. According to the report, the categories which lead online spending during the first quarter were consumer-related (31%), financial services (15%), computing (15%), new media (12%) and business services (10%). The report also found that the overwhelming number of revenue transactions, (94 %) continue to be cash-based. Although annual advertising revenue projections range from $8 billion to $15 billion from 2002 to 2003, the fact that Internet advertising is rising and on the verge of becoming the most popular way to promote products or services is evident. Even though the Company will aggressively market and pursue Internet users and small businesses within the highly competitive national markets (12,000 communities representing 20% of the population), the Company plans to focus on the remaining communities which claim 80% of the population. The markets for the Company's services have been developing for the past year and are continuing to rapidly evolve; characterized by a number of entrants that have introduced or plan to introduce competing services with limited interaction with the local user. The success of the Company's services will depend on the willingness of local businesses to purchase personalized business advertisements. The Company believes that it’s services will be suited to a broad base of business customers since the advertisements will be to local consumers surfing the Internet to find information and events on specific subjects; such as garage sales, festivals and school events in their specific geographic area, either local, county or state. The Company believes the challenge of proving advertising value to a broad range of small businesses, which may not have significant experience with online services, will be addressed with an aggressive marketing campaign to refer and keep users on the web site and with technical marketing savvy which will enable new customers to create, design and implement their own marketing and advertising strategies quickly and easily. The Company’s goal is to make the Internet useful for both users and local businesses by providing interactive and organized local content. Due to the increased volume of Internet advertising and the awareness of Internet productivity, vast numbers of small and medium-sized businesses will begin advertising on the Internet. There will be an increased confidence and ability for advertisers to use the Internet as a highly targeted branding, marketing and direct response tool. The World Wide Web currently offers no local advertising outlet, which is why the Company is proud to introduce theLOCALfolks.com; the next step for the new Internet. The Company has entered into an agreement with 1stUp.com, a subsidiary of CMGI, Inc., a recognized leader in the Internet industry. The agreement was developed to provide national private label free Internet access to consumers and businesses, branded with theLOCALfolks.com logo. The Company aggressively sought out this agreement to deliver free service through national retail distribution and vertical market partnerships, as a means to connect users to the Internet and direct them to theLOCALfolks.com home page. Currently, more than 8 million U.S. Internet users log on through a cost-free access subscriber. Over the next three years, the market will grow to 16 million users, estimates Youssef Squali, an analyst with ING Barings in New York. Of the numerous Virtual ISPs, BlueLight.com and freeinternet.com have had considerable success. Both of these web-sites have successfully marketed their services, providing free national Internet access, to 15%-20% of consumers who received a CD to install the free Internet software, either by mail or at a retail outlet. Each of these sites boasts registered users in excess of 3 million in less than one year. These numbers are staggering, however, they solidify the Company’s concept that consumers will use free Internet access for their most common, everyday services: email, chats and searches. Users will utilize, and continue to return to theLOCALfolks.com web-site because approximately 50% of the content is interactive, i.e., provided by users. Consumers and merchants will post (enter) information for events such as: garage sales, fundraising, city and county events, performing arts, dance, school sporting events, church events and luncheons, business meetings and investment capital, etc. The Company will promote a local Internet which provides users pertinent, interactive information for users by users while promoting brand-name recognition for local merchants that otherwise are bypassed by the disorganized vastness of the world-wide-web. The Company has designed and plans to complete development of local community web-sites and sell advertising space at low monthly fees in each geographic area (city, county or state) nationwide. Each time a consumer visits their local web-site, local advertisements will be displayed on the Internet page, thus directing their spending dollars to local merchants. This approach will address the number one problem of Internet transactions, faceless worldwide commerce with little or no support and poor return policies. “theLOCALfolks.com” not only promotes Internet commerce and communication, but encourages the brick and mortar businesses to get online and join the netcentric iGeneration. In order to facilitate national exposure from retail CD distribution and strategic partnerships, the Company must think outside the normal course of business operations and develop relationships with content providers to distribute information to theLOCALfolks.com consumers. The Company has obtained statistical information on both demographic and geographic from a number of departments of the U.S. Government, including the U.S. Geological Survey and the U.S. Department of Standards and Technology. The information contained within these databases, and others, contains significant data about each state, county, outlying incorporated area (ex. Guam) and populated geographic area. The database of the largest 1,000 cities contains over 200 demographic and statistical categories. The next largest 11,000 cities, combined with the previous 1,000 cities, populate 20% of the U.S. citizens (50 million people), and include 35 demographic and statistical categories. This information has been obtained and is included within the Folklore section of theLOCALfolks.com web-site. The Company is currently in negotiations with geoTouch, Inc., to provide interactive mapping and driving directions to theLOCALfolks.com consumers, as well as a familiar graphic format business listing. Along with the standard map and directions usually seen on a professional web-site, geoTouch’s technology delivers an interactive map by area, based on zip code, rather than a text listing of search criteria. For example, when a browser enters the Auto Center section of the Company’s web-site, then chooses Service & Repair, a map of all auto service and repair businesses, based on Standard Industrial Classification Code (SIC), will appear for that zip code. All businesses for that section, which advertise with the Company, will have a distinguishing color or mark that alerts the consumer that additional information is available at the advertiser’s web-site. The Company plans to acquire the use of a national database of over 16 million U.S. businesses. Most small businesses receive no benefit from the Internet because the Internet has no geographic boundaries. For example, on any search engine, a consumer can search for a way to buy flowers. Most likely, the result will be a web page for B2C (business to consumer) commerce anywhere in the country or the world. Using the Company’s service, the web surfer, in this example, will be directed to a web page that not only lists flower markets in their geographic area (city or county), but will see categorically targeted advertisements for flower shops (possibly with a discount for ordering on-line). According to NPD Online Research, over 65% of Internet users printed at least one coupon in 1999. By February, 2000, nearly 81% of consumers were aware online coupons existed. E-Coupons is a rapidly growing industry, which allows consumers to search and ‘clip’ coupons for products and services they would normally use and provides businesses with a way to reach consumers to market their products and services. “73% of online buyers say their preferred way of learning about new products is email offered by online merchants”, according to a study by FloNetwork, Inc., a leading online emarketing firm. The study goes on to state that, “6 in 10 buyers said permission-based email was how they usually prefer to find out about new products, services and promotions offered by merchants…two times higher than banner ads and eleven times higher than magazines and television combined”. The Company intends to categorically target ads to the consumer, based on demographic, geographic and user input information. Local businesses will have the option of placing coupons on their web-site for download or printing if they desire to do so. Consumers, within a business’ advertising area, will be notified of new coupons and promotions via permission based email. This notification email is the most effective marketing tool available today. Local consumers receiving comprehensive, immediate and accurate information about new products and services via the Internet about local businesses is simply not available on the Internet today. The Company will generate revenue from a number of sources. As the Company markets and brands it’s logo nationally, there will be an escalation of revenue, coinciding with name recognition and retail distribution of CDs. The primary source of revenue will be the sale of banner ads on theLOCALfolks.com web-site. These banner ads, unique from all other banner ads on the Internet due to the vertical design and 10% larger size, link directly to a business web-site designed and developed by theLOCALfolks.com. Within each community, the cost for this banner ad, along with the web-site, hosting, coupon, Internet access and e-commerce, is a total of $35 per month. Additional communities can be purchased for a volume discount. When a business purchases a banner ad, they will be charged for one year in advance, a total of $420. The Company prefers to invest in customer service and support instead of collections for month-to-month clientele. 1stUp.com has experienced 15% of their partner’s consumers have chosen to pay for the Internet service in lieu of the tool bar advertisement. In the event a consumer, which initiates service from theLOCALfolks.com or it’s marketing efforts, decides to pay for service to remove the tool bar advertisement, the consumer will pay $19.95 per month for the service; theLOCALfolks.com will receive $3 per month per user. Another source of revenue will be advertisements on the retail CD distribution promoting theLOCALfolks.com’s free Internet service. The Company believes national advertisers will pay for the 10 second to 30 second opportunity to place an advertisement in front of a consumer as their computer is installing the free Internet service. The Company further believes that multiple national businesses could place advertisements on the aforementioned CDs, generating substantial revenue for the Company. Other sources of revenue include affiliate programs, webcasting membership and Union Services (see Future Growth). The Company believes that it will gain a 10% share of the small business market within 5 years with the addition of experienced, quality personnel and adequate funding to develop, execute and manage a national marketing and sales campaign.
As a Virtual ISP, the Company will compete for advertisers and consumers with Internet service providers such as America Online, @Home (Excite) and Yahoo! by providing private label free Internet access. Competing free Internet service providers include: FreeLane (Excite), BlueLight.com (K-Mart), freeinternet.com, Juno and Netzero; however, the Company believes that its’ service will be complimentary to all its’ competitors since its’ service delivers unique content as well as free consumer services. A community web-site competitor, MyCity.com, has marketed it’s products and services nationally through franchised cities across the country. Although they target 50,000 U.S. cities, the content on the web-site is delivered from wire services, newspapers and national data services. The service from MyCity.com requires a business buy a web kit for $40 per month to establish and maintain it’s advertisement on the web page. Also, the business listing is in a cumbersome text format. MyCity.com has taken the route of partnering with national businesses to brand their logo and image in an effort to encourage users to visit their site. Due to shifts in strategy, they have been in development stage for five years to bring their product to market. Another competitor, OneMain.com, is an ISP focusing on smaller market consumers and businesses. The main thrust of their business is in five markets with 700,000 customers. This business does not provide unique content; however, due to their paid, subscribed customer base, sold to Earthlink.com for $308 million ($150 million cash, $158 million Earthlink.com stock) in May, 2000. This is a prime example of a major Internet service provider attempting to penetrate smaller markets. Yet another competitor is UBInet.com, a Virtual ISP with a business model focused upon sales and marketing. Their technical and operational aspects of the business are outsourced to reduce overhead and capital requirements. UBInet.com shares revenue with 1stUp.com by sending users to 1stUp’s MyWay.com content web-site where they provide free services to it’s consumers. UBInet.com sells advertising space on it’s CDs that are distributed regionally in the southeast U.S. and provide free Internet access to it’s consumers. The Internet service behind UBInet.com is 1stUp.com; the same service used by theLOCALfolks.com. Aside from the valuable content the Company provides, UBInet.com is strikingly similar in their business revenue models. The Company is encouraged by their success in raising $2.3 million start-up capital and have announced a private placement of $3 million at $2.00 per share. The striking difference between theLOCALfolks.com and it’s competitors is the completeness of the business model. The Company provides a cross section of popular Internet, newspaper and yellow pages consumer and business services, local advertising and information, new and innovative web pages in one comprehensive package with encompassing revenue sources not always included and available in it’s competitors business models. FUTURE GROWTH The Company anticipates generating a number of additional services and revenue streams in the future. The Company believes that broadband webcasting and pay-per-view events will be a major part of theLOCALfolks.com content within the first 6-12 months. Particular events will be promoted to our membership base, which will give consumers the opportunity to view an event at low subscription fees. Through strategic partnerships and internal resources, the Company believes it’s events such as concerts, musicals, theater and special events will soon be viewed over the Internet. Our webcasting vision will include monthly service fees for online viewing of high school and college events, talent contests and karaoke clubs. The Company believes live iEntertainment will explode on the web over the next two years and theLOCALfolks.com is designed to be a major contributor. Another service the Company will provide that will induce growth is membership services for consumers browsing the web-site. Strategic partnerships will allow the Company to provide auto insurance, health benefits, online banking, general insurance and travel discounts. Not only will this bring users onto the web-site, but instill loyalty in our members, which will in turn develop the best advertising available…word of mouth. INVESTOR
STRATEGY The Company intends to use it’s best efforts in developing the operating plan and budgets. The Company estimates that it will require $10 million in financing over the first eighteen months of operation to develop, market and execute it’s business model. The Company desires to establish a public market for it’s securities within 24 months of original funding. At that time, the Company will pursue additional funding for acquisition, content and infrastructure. The Company and it’s Management are focused and seek additional personnel necessary to manage the rapid, anticipated growth and seek professional legal and financial participation to succeed in fulfillment of outlined objectives. Local content, local business, local consumers…the LOCALfolks.com! It’s just a fun place to be.
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