Phrasebase Business Plan

Phrasebase Business Plan
Version 2.1 Modification Date: 10/16/07 Author(s): Jeff Hock (jeffhock@phrasebase.com) URL: http://www.phrasebase.com

Revision History
REV 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 2.0 2.1 DATE 5/13/06 8/9/06 9/2/06 9/12/06 9/13/06 9/16/06 9/17/06 9/17/06 9/23/06 9/28/06 10/13/07 10/14/07 AUTHOR Jeff Hock Jeff Hock Jeff Hock Jeff Hock Jeff Hock Jeff Hock Jeff Hock Jeff Hock Jeff Hock Jeff Hock Jeff Hock Jeff Hock DESCRIPTION Initial draft Updated Updated Updated Updated Updated Updated Updated based on feedback Final touches on the first draft Final First Draft Release Major revision / simplication of plan Updated usage of funding requested & ROI

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Table of Contents
1.0 Executive Summary ................................................................................ 3 2.0 Introduction ........................................................................................... 7 3.0 Target Market ....................................................................................... 11 3.1 Market Segmentation ...................................................................... 11 3.2 Target User ................................................................................... 13 4.0 Business Model ..................................................................................... 14 4.1 Revenue Model............................................................................... 14 4.2 Opex Model ................................................................................... 19 4.3 Profitibility ..................................................................................... 21 4.4 Return On Investment..................................................................... 21 5.0 Product Offerings and Prioritization ..................................................... 21 6.0 Marketing Plan...................................................................................... 27 6.1 Messaging / Positioning ................................................................... 27 6.2 Web Content.................................................................................. 27 6.3 PR ................................................................................................ 27 6.4 Direct Marketing ............................................................................. 27 6.5 Advertising .................................................................................... 27 7.0 Resourcing............................................................................................ 27 8.0 Glossary................................................................................................ 28

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1.0 Executive Summary
OPPORTUNITY OVERVIEW As the internet and globalization shrink our world, professionals are moving in droves overseas to emerging growth regions like China, South East Asia, Latin America, the Middle East and Eastern Europe. MNC’s continue to expand their global presence with practically every department engaged in collaboration projects with counterparts abroad. Call centers, support and service centers, even entire IT departments are frequently outsourced overseas. NGO’s and missionaries are expanding abroad, setting up offices of mixed local and expatriate staffing. Overseas military operations focus increasingly on intelligence gathering and peace keeping activities. The dating and marriage scene has brought together couples from all corners of the globe. Families are tracing genealogy lines back to discover and connect with their ancestry. And new aircraft carrying scores more passengers on ever increasing flight routes at cheaper prices has opened up international leisure travel to the middle classes. We are at the beginning of a booming era. The transition from a heterogeneous to homogeneous global society will prove to be the most dramatic change the world undergoes and how we humans live our daily lives. As interdependence on neighboring countries increases, so does the need for communication. And at the epicenter of this global transformation is the fabric that connects all people, thoughts and ideas together, language. SECOND LANGUAGE AQUISITION MARKET The Second Language Acquisition (SLA) market comprises individuals aged 6 and older seeking to learn and acquire a secondary (L2) foreign language that is not their own native (L1) mother tongue language. By all accounts, the SLA market is vast, diverse and fragmented, with comprehensive metrics concerning the overall market not readily available. For sake of this document, a series of disparate niche statistics and forecasts have been accumulated and assembled together to create tangible estimations of the overall market. The SLA market can be divided into 4 segments with Total Available Market (TAM) projections as follows: 1. Portable Devices – Handhelds, mobiles, Blackberries™, wireless devices, electronic dictionaries. 2. Printed Material – Books, tapes, video, CD’s DVD’s, Podcast, Vodcast and web based lessons. 3. Software Applications – Computer software and interactive web applications for learning. 4. Live Teaching – Instructor led classroom teaching or private tutoring either in person or ICT based.

SLA Market Segments Portable Devices Printed Material Software Applications Live Teaching SLA Total Market Size

2008 TAM $1,000m $4,000m $1,000m $6,000m $12,000m

2009 TAM $1,250m $4,300m $1,250m $7,000 $13,800m

2010 TAM $1,700m $4,700m $1,700m $8,000m $16,100m

Some of the key metrics used in estimating the total and market segment sizes of the SLA industry: In the UK, the Department of Education and Employment estimated that British English language products were worth $1,400m USD as of 1988. An additional $1,200m USD was added to the figure when counting expenditures of English learners coming to the UK to study English (source: The Value of Education and Training Exports to the UK Economy - Department of Education and Employment).

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It is estimated that over 1 billion people are currently learning English world wide. According to the British council, as of the year 2,000 there were 750 million English as foreign language speakers. In addition, there were 375 million English as Second Language speakers. In 2003, Beijing made a gross profit of 700 million Yuan ($85m USD) by providing English language training courses to nearly 200,000 people. ($423 USD per person). Casio analyzed the 2004 market in Japan for domestic electronic dictionaries and determined market size to be approximately 3,350,000 units ( Approx $500m USD priced at $100 each) Sources from the Eastern English Services say that it has set up four schools in Beijing. Each has brought in 500,000 Yuan ($60,483 USD) monthly, (60*4*12 = $960m USD/yr) while the Wall Street English language schools charge trainees more than 20,000 Yuan ($2,419 USD) each for one term. An international English training school in Zhongshan China offers training to children aged 3 to 12. The cost of teaching materials for one person can reach up to a staggering 7,800 Yuan ($943 USD). In Asia, a 2002 report estimated that $550m USD was spent on English Language Teaching materials (source: Association of Educational Publishers). The majority of these expenditures were in Japan ($350m USD). However, South Korea also plays a large role in these figures. In the USA, 1,102,261 adults enrolled in ESL programs in 2000 that received funding through the U.S. Department of Education, Office of Vocational and Adult Education (OVAE). (State-administered Adult Education Program 2000 Enrollment, U.S. Department of Education, Office of Vocational and Adult Education). This number represents 38% of the overall national adult education enrollment of 2,891,895 learners for that year. Adult basic education (ABE) and adult secondary education (ASE, the other components of federally-funded adult education, represented 37% and 25% respectively. University and college students, as well as the many adults served in programs not receiving federal funding, are not included in this number. University and College student enrollment for all languages in 2000 was approximately 1,200,000 students. This number is projected to be 1,500,000 for 2007. Government funded Adult ESL programs in the US during 2000 had enrollment of 1,102,261 individuals. Enrollment in non-government funded programs and programs of languages other than English probably brought this number up to 1,500,000 total adults enrolled in SLA programs during 2000. From these numbers, it’s safe to conclude that there are currently just fewer than 5 million people enrolled in language learning programs throughout the US. Combining industry observations, national immigration statistics and Language Travel Magazine's own Status statistics, we can reveal that the estimate for the total ELT (English Learning and Training) market in native English speaking countries was worth over US$7.5 billion in 2002 in terms of total student expenditure. Ambient Insights sizes the current market for Mobile Learning products and services in the US at $460m USD. The analysts say the market is growing at a five-year compound annual growth rate (CAGR) of 27.3% and will reach $1.5 billion USD by 2011. Recent estimates by Grin and Sfreddo (1996) indicate that public spending on second, third and fourth language instruction in Switzerland accounts for some 10% of total public spending on education, amounting to approximately 0.5 % of GDP (gross domestic product). Language learning software vendor, Rosetta Stone, one of the leaders in the US made the Inc. 500 list for 2007 posting 350% growth and revenue of $64m USD in 2005. In 2005, international air travel markets grew almost twice as fast as domestic markets propelled by double-digit growth increases in Latin America and the Pacific Regions. By 2017, growth in international travel via regional carriers will nearly triple, from 130 to 300 million passengers per year. (source: www.faa.gov/data_statistics/aviation/aerospace_forecasts/2007-2017)

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Projections for the web-based e-learning industry predict an annual 27% growth in the next four years, reaching an estimate of 21 billion dollars in 2009. (www.elearningreports.com/news.php?id=99). One of the fastest growing activities in the industry is the introduction of web-based instructor broadcasting. New Horizons Computer Learning Centers reported a 70% growth in the demand for this kind of solutions, in the first quarter of 2005 only. (www.elearningreports.com/news.php?id=99). Factors driving SLA market growth: The world-wide transformation from disparate local production based economies to one global interconnected inter-dependent knowledge based economy. In the new era of business, growth and productivity is dependent on a highly educated workforce engaged in international commerce, collaboration and cooperation. The convergence of a knowledge based economy combined with the internationalization of business operations puts communication at the center. Learners want short, focused, media-based “chunks” of content; they also want to leverage social networks and other forms of informal learning. (http://trends.masie.com) All aspects encompassing globalization including increasing global economic interdependence including factors such as international competition and cooperation. The continued education, or lifelong learning market as it’s often called, is now dubbed the “earning and learning” market. It has been experiencing massive growth and exponential future growth predicted as state sponsored and institutional level programs can’t keep up with demand wile corporate training programs are accelerating to attract and maintain the most educated employees. Internet Communication Technology, e-learning and m-learning allow for the accommodation of specific language learner needs such as pace, mode, place and time of study, both enabling and facilitating continued education and lifelong learning.

THE SLA BUSINESS OPPORTUNITY Advancements in Internet Communication Technologies (ICT) have led to a broader and more diverse set of language learning tools that can complement academic studies, facilitate and enhance self-study or provide for real-time distant learning. The means and methods of language acquisition, learning and enhancement are changing rapidly. In today’s era of ubiquitous computing, traditional classroom and tutoring approaches that require both student and teacher to meet in the same place at the same time for several sessions over a long period of time are giving way to internet enabled communication technologies that allow live teacher to student or peer to peer language learning activities to transpire any time and any place. The internet now serves as both a platform and distribution channel for language learning materials traditionally published in hardcopy form. Books, magazines, tapes and videos are giving way to websites, blogs, podcasts and vodcasts. And hard coded chip based electronic dictionaries are yielding to USB capable PDA’s, mobile phones and Blackberry™ devices opened entirely new channels of learning anytime and anywhere such as m-learning, (mobile-learning). Traditional language learning companies are slow to embrace these new technologies as their entire business operations are built around the traditional platform. Phrasebase.com seeks to exploits the new era of flexibility ICT based tools provide by delivering a new breed of language learning tools and services the internet savvy base of language learners. Our goal and challenge is to maximize the effectiveness, relevance and enjoyment of our customer’s efforts to acquire a new language and also offer live virtual classroom based learning without losing the humanity and motivation that traditional face to face teacher to student relationships provide.

PHRASEBASE OVERVIEW As a well established website with great momentum, Phrasebase.com is deeply entrenched as the premeire online destination for foreign language learning and the largest language learning social network online. Phrasebase today

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consists of four strong pillars of content; e-phrasebook translations, country information, language information and a social network of active members engaged in forum discussions in effort to help each other learn new languages. With existing momentum, continually increasing traffic flows and deep member loyalty, Phrasebase is in prime position to implement powerful multimedia tools and products that will facilitate truly dynamic language learning and reinvent what it means to be a foreign language learning solutions provider.

THE PHRASEBASE OPPORTUNITY Phrasebase.com is in a unique position to immediately capitalize on the growing $12 billion USD SLA market by leapfrogging traditional language learning products to instead focus directly on generating ICT based language learning products and servies. As a 6 year old SLA destination portal, Phrasebase is widely known as the internet’s leading social network of language enthusiasts and an emerging platform for ICT based language learning. The community is comprised of teachers, students and language exchange partners engaged in sharing culture and language. The rest of the website is an information and resource hub of all things language, geography and culture. Phrasebase is in a unique position to capitalize on the SLA market beacuse: Phrasebase.com has a well established word-of-mouth cult-like following, a social network consisting of 110,000 active language teachers, students and exchange partners, eager to share their language and participate. During peak hours, the Phrasebase website may have 50 members and 200 guests online. Phrasebase.com website is firmly entrenched into the fabric of the internet, woven into search engines, discussion boards and blogs. It’s one of the top portal destinations for language enthusiasts. As new tools, features and applications are deployed, Phrasebase will not have to spend resources on advertising. Phrasebase.com has great traffic momentum drawing close to 200,000 unique visitors a month (6,600 per day) and nearly 1,000,000 page views a month. These numbers that will grow significantly as this busines plan is executed and new tools, services and products become available. Phrasebase.com does not have a legacy of outdated language material or the negative stigma that is associated to many of our competitors who are pushing antiquated material using “Learn in 30 days!” marketing pitches. Our member base recognizes Phrasebase as being genuinely interested in being a peer to peer community of people eager to help one another learn language. Phrasebase.com has been recently re-architected to scale from 100,000 to well over 1,000,000 members, from 6,600 unique visitors a day to 100,000 unique visitors a day and from 3500 to 250,000 phrasebook words and phrases translated into over 80 languages. Server hardware has also been upgraded to support the huge traffic flows that will accompany this new content traffic. Phrasebase has never sold traditional language learning material such as Books, Tapes or CD’s. So it is starting out with a clean slate and an existing reputation as the premier P2P language learning community that will soon deliver ICT based language learning content. Our existing members, both teachers and students, love the direction we are heading and can’t wait for the kind of products, tools and services we will soon be deploying.

THE PHRASEBASE RISK REWARD ASSESSMENT The Phrasebase opportunity presents very large upside with very little risk: Funding is not required for advertising or promotional purposes since the Phrasebase.com website already has strong word of mouth presence, tremendous member loyalty and continual flows of new traffic. Overhead expenses are very low. Both offices in Thailand and India are run from home residences. Work outsourced to India is done on a contract basis. All other work performed by language translators and the website owner is done for free on a verbal agreement to eventually share in the revenue. Website foundation work is completed and built to scale so all investment capital will be put directly into productizing the existing content and creating new immediately sellable tools, applications and services.

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The upside potential is tremendous. Typical “sales to visitor” conversion rates for legitimate web businesses runs at around .1%; meaning, 1 sale is generated for every 1000 unique visitors. For the sake of erring on the side of prudence, all revenue projections in the Phrasebase business plan have been calculated with a .01% conversion rate; 1 sale for every 10,000 unique visitors (which is much lower than we anticipate).

2.0 Introduction
Secondary Language Acquisition (SLA) is a $12B USD annual market with compound annual growth rates (CAGR) of approximately 15%. The market is divided into the following four segments: 1. 2. 3. 4. Portable Devices: 10% of the overall SLA market share. Printed Material: 30% of the overall SLA market share. Software Applications: 10% of the overall SLA market share. Live Teaching: 50% of the overall SLA market share.

There are three key trends happening right now that will fuel future growth in the SLA market: Increased Foreign Language Leaning Demand: Internet driven Globalization is breaking down borders and offering greater flexibility concerning where people live and work. It necessitates increased business travel and expatriate postings, fosters greater leisure travel and encourages mixed culture relationships and interaction with those abroad fueling a need & desire to learn languages. Transition to a Communication & Knowledge Based Economy: A sweeping transition from country and regionally based economy silos to a single global economy based on knowledge and communication positions foreign language skills at the pivotal center. Foreign language skills are quickly becoming a requisite for a knowledge based workforce. ICT Enables and Drives E-Learning Growth: Advancements in ICT are both enabling and encouraging the long distance learning and lifelong education markets. Technologies such as VoIP, e-learning, mlearning and streaming multimedia are at the forefront of this trend offering flexibility regarding how, where and when individuals learn.

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In addition to the three macro market trends listed above, there is one primary trend occurring within each of the SLA market segments. These submarkets trend can summarized as “a movement away from traditional printed language learning material towards more flexible ICT based content”. Specifically, here is how this trend manifests:

SLA Market Segments Portable Devices

Traditional E-Dictionaries, Talking Dictionaries, PDA’s, Speech Recognition PDA’s

ICT Based Mobile Phones, Blackberries™ and Wireless Devices

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Printed Material

Books, Tapes, Videos, CD’s, DVD’s, Magazines

Blogs, Wikis, Podcasts, Vodcasts and streaming multimedia content Web Portals, Forums, Web Applications, Social Networks Live webcam based classrooms, VoIP

Software Applications

Desktop Software

Live Teaching

Classrooms

While the competition struggles to convert their material, business models and operations to embrace the ICT platform, Phrasebase starts out fresh, focused exclusively on ICT based tools and content, and views the publishing of traditional printed material as a downstream biproduct. The Phrasebase strategy is to exploit the massive growth in the movement from traditional formats to ICT based tools while riding the SLA market’s overall growth. For each of the SLA market segments, Phrasebase will utilize investment capital to create ICT based tools and applications as follows: 1. Portable Devices: Deliver the Phrasebase e-phrasebook content to ICT based mobile and wireless devices through a 3rd party mobile content provider per licensing arrangements. 2. Printed Material: Create all content on ICT based platforms allowing for easy publishing to traditional formats through 3rd party sources like www.lulu.com, generated printed material, CD’s, DVD’s, etc. 3. Software Applications: Phrasebase social network, discussion forum and e-phrasebook will exist in the ICT environment; the e-phrasebook will be published to traditional format as installed desktop software. 4. Live Teaching: The creation of sophisticated ICT based virtual AV classrooms allowing teachers to conduct classes, private tutoring of students or language exchange partner sessions between social network members. With an initial investment of $350,000 USD seed capital going towards the development of ICT based tools, services and applications, we project that 100% of the investment will be earned back by the end of the second year while the business sustains 130% sustainable thereafter.
PHRASEBASE BUSINESS NEEDS

Phrasebase is in the business of revolutionizing language learning by delivering customers what they want; smaller more digestible digital chunks of learning material, some of which will be created leveraging the collective wisdom of our social network community. In order to capitalize on this opportunity, Phrasebase is seeking $350,000 USD of seed capital to develop a line of immediately sellable digital language learning products, tools and services. The seed capital will be spent on the following 4 endeavors. ROI is discussed in section 4.4. $75,000 – Revamp the community forum section and turn it into an AJAX based full featured social network similar to facebook, myspace and friendster, but with functionality geared towards language enthusiasts. $75,000 – Complete the E-phrasebook Words and Phrases section that consist of 50,000 words/phrases translated into 90 languages along with script spelling and alpha-phonetic spelling of each item and both male and female audio and video files of each. This comes to 4.5 million words and phrases with audio/video pronunciation. $100,000 – Produce a comprehensive series of 75 ten minute long scripted immersive game-style (video/animation) language learning lessons for each of the 90 languages we support. (6,750 total lessons total). Architected and created collectively by the Phrasebase team leveraging our e-phrasebook content. $100,000 – Create a full featured webcam based virtual classroom allowing teachers to connect with a classroom of students, tutors to connect with students one on one, and language exchange partners to meet one on one. Application will including calendar for scheduling, rating system, payment collection system.

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ABOUT PHRASEBASE Phrasebase (www.phrasebase.com) is a leading language learning destination portal and social network of over 100,000 teachers, students and language exchange partners all sharing language, culture and discussion. Phrasebase.com website draws close to 200,000 unique visitors a month (6,600 per day) and just under 1,000,000 page views a month. At the foundation of Phrasebase is an electronic phrasebook (e-phrasebook) containing alpha-phonetic spelling and foreign script spelling of each phrase along with an audio and video file capturing its pronunciation. The Phrasebase e-phrasebook is dynamic, capturing all phrase clicks, searches and listening activities while also allowing users to vote on the usefulness of phrases. It allows for an intelligent variety of display and sorting options of the phrase content into individually more meaningful formats than traditional category structures. The e-phrasebook currently has 3500 phrases translated into over 30 languages. These numbers are expected to grow to 250,000 phrases translated into 80 languages within the next 4 years for a total of 20 million phrases. The database structure has already been re-architected to support these numbers. Supplementing the e-phrasebook of the Phrasebase website is an extensive database of detailed facts, statistics and information concerning over 280 countries and 750 human languages of the world. All data can be displayed in a variety of fashions in order to generate charts, comparisons and statistical derivations. Effort is underway to localize all of this content into each of the 80 languages Phrasebase supports. This content helps educate the community and continues to draw a steady flow of traffic. The fourth existing component of Phrasebase is an enthusiastic social network of language teachers, students and exchange partners passionate about discussing, teaching, sharing and learning new cultures and language. The community numbers nearly 100,000 active members from over 180 countries and over 80 native languages. The forum is maintained and moderated by an unpaid team of language administrators and forum moderators. The discussion aspect of the forum contains over 150,000 posts with 150,000 more archived and ranges in topic of language lessons to cultural intricacies.

HOW PHRASEBASE BEGAN Phrasebase.com started in 1998 as an intelligent online phrasebook supporting thousands of common, useful and everyday phrases including the alpha-phonetic spelling of foreign script languages and sound files accompanying each phrase to assist the learner with pronunciation. The concept began as it’s founder Jeff Hock moved to Japan on business assignment and set out to self teach himself Japanese. Without any formal training, classes or tutoring, Jeff became conversational in a matter of months and proficient in just over a year. His method was to relentlessly write down and memorizing useful phrases whenever he found himself in ordinary situations required to communicate them. As a result of this process, Jeff made a series of discoveries relating to the process of language learning. Most crucial was that his self created phrasebooks accomplished more than merely capturing translations, they also captured the chronological order in which phrases were most critically learned. A pattern emerged where the earliest captured phrases proved most essential while later captured phrases tended to be more complex and tended to communicate more abstract thoughts utilized in deeper conversations. THE PHRASEBASE APPROACH Studies show that most native language speakers only use a repitoire of 3000 words. But which words? When learning a new language, wouldn’t it be ideal to focus on learning just these 3000 words, allowing you to attain a conversational level in as short of time possible. The Phrasebase system allows students to do just this. When Jeff posted his hand written phrasebooks online, he also included the order in which he learned each phrase. As an experiement to see how his order differed from public interest, he allowed visitors to vote on how they saw the usefulness of each phrase, phrase views, audio file dowloads, search queries are all tracked and recorded. The order of the public’s priority of phrase importance proved to be similar to Jeff’s personal ordering. A variety of display options allowing the users to view these orders and modify them to their personal interests is the most impacting and effective means of phrase memorization which is a foundation to Second Language Acquisition. The Phrasebase e-phrasebook is now the most intelligent customizable online e-phrasebook in the world. Another discovery Jeff made was that the focusing on phrases is by nature, far more effective than focusing on vocabulary. Words need to be assembled together when communicating a thought, so an extra set of grammar and

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sentence structure rules training is required before words can be utilized in any meaningful way. Phrases on the other hand are self contained neatly packaged objects that can stand on their own. In addition, focusing on phrase memorization will allow students to acquire the granular detailed knowledge of word vocabulary, grammar and sentence structure automatically, as a natural by-product inhereted from phrase memorization. Given that it takes little if any extra effort to memorize a phrase versus a word, phrase memorization is clearly the best path. Many more discoveries were made and are planned for rollout in all the Phrasebase product lines. Phrasebase has reversed engineered the language learning process and developed a better mousetrap by focusing on the process of language learning rather than the academics of a language. PHRASEBASE CORE VALUES Having wasted hundreds of dollars on books, tapes and CD’s by companies supposedly in the business of helping people learn foreign languages, Jeff came to the same conclusion that many of the existing Phrasebase members have made; Traditional language learning companies are not in the business of helping people learn language, they are in the business of selling romantic dreams of charming locals and mpressing friends with James Bond fluency. When you are stuck in a cab with the meter ticking and need to tell the driver to “go straight”, there’s nothing romantic about that. That is where the rubber meets the road in language learning. Students not only want to learn how to say these key messages, they want to be told which messages are key. A phrase such as “I would like 10kg of grapes please” is obviously not critical, yet this exact phrase exists in the first chapter of a very popular book. In today’s world of transparency and internet word of mouth, traditional products that promise dreams but fall short in delivering are a dying breed soon to be exposed and driven out of business. On the other hand, this opens a window of opportunity to companies who can get it right and deliver on practical realistic claims without the need for expensive marketing budgets. Phrasebase stands for these values and strives to deliver results in helping people learn languages rather than putting all our time and energy into hyped marketing pitches.

3.0 Target Market
Phrasebase’s target market is a segment of the Adult Education sector called Second Language Acquisition (SLA). Phrasebase differs from the competition’s “one to many” business models by having implemented a P2P “many to many” business model. Phrasebase achieves buiness growth by embracing the spirit of the web 2.0, capturing both the teacher and learner ends of the market and facilitating long distance relationships between them.

3.1 Market Segmentation
The $12b USD Second Language Acquisition market is divided into the following four segments whereas percent share indicates the share percentage of the overall SLA market. Also listed is the Compounded Annnual Growth Rate estimates of the traditional product based market versus the emerging ICT based market. Lastly, a combined weighted CAGR. This document’s revenue projections utilize the Traditional CAGR numbers to stay conservative.

SLA Market Segments Portable Devices Printed Material Software Applications Live Teaching

% Share of SLA 10% = $1b USD 30% = $4b USD 10% = $1b USD 50% = $6b USD

Traditional CAGR 10% 8% 15% 10%

ICT based CAGR 40% 50% 35% 75%

Weighted CAGR 20% 20% 20% 15%

*Note: Videopod and Ipod Printed Material could have been listed under portable devices. Likewise, Blackberry™ and Mobile phones could have been listed under Printed Material. The reason they were seperated they way they are has to do with how the material is consumed. Printed Material is readily consumable content, whereas the

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content syndicated to mobile phones or Blackberries isn’t “off the shelf” consumable, it would require a lot of formatting and distribution logic to be worked out in advance. A more comprehensive view of the various market segments is as follows:

SLA Segments Portable Devices

Market Details $1.0b USD Market: 10% of the total SLA market and 10% CAGR Market Trend: There is a trend in the portable device industry to move away from fixed chip products in favor of wireless, always-connected devices like the Blackberry™ or a mobile phone. Another movement is towards creating fixed chip devices with memory to allow dynamic changes in the devices content via USB port. Traditional Products: E-Dictionaries, Talking Dictionaries, PDA’s, Speech Recognition PDA’s Traditional Competition: Manufacturers of fixed chip e-dictionary and translator devices.
www.casio.com/products/Calculators_%26_Dictionaries/Dictionaries/ www.franklin.com/handhelds/dictionaries

ICT Based Products: Mobile Phones, Blackberries and Wireless Devices ICT Based Competition: Manufacturers of updateable dynamic e-dictionary and translator devices.
www.phraselator.com www.ectaco.com www.langtolang.com/store_h.php

Printed Material

$4.0b USD Market: 30% of the total SLA market and 8% CAGR Market Trend: The movement is from hardcopy printed format material to digital electronic material that offers more flexibility and can be moved around to different mediums. The electronic format also allows for user participation and community generated content. Traditional Products: Books, Tapes, Videos, Magazines Traditional Competition:
www.randomhouse.com/livinglanguage www.berlitzpublishing.com www.pimsleurapproach.com

ICT Based Products: Blogs, Wikis, Podcasts, Vodcasts and streaming multimedia content ICT Based Competition:
www.japanesepod101.com www.chinesepod.com www.language-exchanges.org

Software

$1.0b USD Market: 10% of the total SLA market and 15% CAGR

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Market Trend: The movement is away from boxed software sold over the counter or dowloaded online and then installed on ones computer and run as an executable program toward simply running the program through the internet via a subscription fee or some other monetization process. Traditional Products: Desktop Software Traditional Competition:
www.rosettastone.com www.transparent.com

ICT Based Products: Web Portals, Forums, Web Applications, Social Networks, E-Phrasebooks ICT Based Competition:
www.auralog.com www.sanako.com www.tacticallanguage.com www.internetpolyglot.com www.lang2lang.com www.smartphrase.com

Live Teaching

$6.0b USD Market: 50% of the total SLA market and 10% CAGR Market Trend: As bandwidths increase and broadband becomes ubiquitous, (VoIP) voice over IP protocal that allows telephone calls over the internet and various streaming media compression technologies such as Flash Communication Server MX allows for real time audio/video broadcasts. Both of these technologies enable real time live teaching and tutoring over the internet, true long distance learning. Traditional Products: Classroom teaching, Live one on one Tutoring Traditional Competition:
www.nova.ne.jp/english/corporation/index.html www.ef.com www.ceran.com

ICT Based Products: Live webcam based classrooms, VoIP VideoPods ICT Based Competition:
www.englishtown.com www.globalenglish.com www.ivideochat.com

3.2 Target User
The target Phrasebase user is an English native speaker seeking to learn a foreign language. Between the ages of 13 and 58 and split equally between male and female. The architypical Phrasebase user or current member is someone with a strong interest in foreign countries, cultures and people, they will have had some international exposure whether that involves business or leisure travel abroad or dating / married to an individual with a different native language or pen pals with those from other countries. Typically, this person is very academic, culturally aware, seeks to understand the world we live in and reach out to different ethnic groups to foster peace and goodwill. This person tends to live by simple non-materialistic means and is more interested in accumulating

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knowledge, understanding and friendships rather than material wealth. They will tend to value relationships more than status, be highly educated, thoughtful, honest, genuine and feel a sense of duty to help others. You can see statistics regarding the Phrasebase members and country demographics here: www.phrasebase.com/forum/members-countries-stats.php You can see statistics regarding the Phrasebase members and language demographics here: www.phrasebase.com/forum/members-languages-stats.php Remarkable Member Statistics: www.phrasebase.com/forum/remarkable-members.php There are three primary groups of users, they can be decribed as follows. Individual Learner: The internet has instilled the notion that anything can be learned online, and this is basically correct. This group of people seek to learn a language by absorbing the content and lessons of the Phrasebase website as well as seeking private one on one live personal tutoring or language exchange partnerships. Social Learner: Unlike the self study learners, social learners learn best in environments where they can socialize with others. This includes community forum involvement, pen pal relationships, language exchange partnering and teacher led classrooms where they can interact with other students and contribute to classroom discussions. These students learn best in groups or a variety of one on one relationships. Teachers & Tutors: Teachers specialize in the art of training groups while tutors specialize in one on one training. While most instructors are capable of providing either teaching or tutoring, a different skill is in fact required for both of these environments. Whether an instructor chooses to teach or tutor is largely a decision of personal preference and financial incentive. With the internet, both type of instructors are able to reside in their home country and teach to anyone in any location around the world. This is an incredibly compelling trend as evidenced by the demand at www.englishtown.com. Phrasebase has developed a sister site, www.teacherbase.com, to focus on aggregation of the global language teacher target users. Phrasebase manifests these target users per the following Phrasebase Member purpose attributes: Students: 78% of the Phrasebase membership base. These are Individual and Self Learners. Language Exchange Partners: 17%. These are people who want to teach in exchange for learning. Teachers & Tutors: 5% of the Phrasebase membership base. These are Individual and Self Learners. The Phrasebase products and services will be priced and sold through the following account channels: Individual: Existing Phrasebase Members; Expatriates, backpackers, Business & Leisure Travelers, Teachers. Corporate: Special pricing packages and focused products and services will meet corprate account needs. Government: Military Personnel, State Department, Embassy officials, Dimplomats, CIA. Special pricing. Education: Special pricing packages and focused products and services for schools and universities. Nonprofits: Special pricing packages and focused products and services for Non Profit Organizations.

4.0 Business Model
4.1 Revenue Model
Phrasebase will have 4 primary revenue streams planned as indicated below. All 2008 revenue projections are based on a current Alexa traffic ranking of 65,000. The 2009 projections are based on an Alexa traffic ranking of 32,000. And the 2010 projections are based on an Alexa traffic ranking of 15,000. All monetary projections stem from estimates of traffic to the website measured by an Alexa rating. The lower the Alexa rating, the more traffic a website generates.

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1. Web Advertising: Currently on every page, in a non-intrusive fashion and typically at the bottom of pages, Phrasebase runs a Google ad. The ads are all automatically targeted to the interests of language learners in general or specifically to the contents of the page. 2. E-Phrasebook: At the core of Phrasebase is an e-phrasebook listing thousands of phrases along with audio and video files to help learners with the pronunciation of each phrase. Limited samples of this content and the features to manipulate and control it will be provided free of charge. Full access will be sold as follows: 2a) Subscription fees will be applied to members who want full unlimited access to the online e-phrasebook content and all extended display manipulation capabilities. 2b) Audio CD’s will be made and sold customized to the customers and interest. These CD’s will be produced via a mass customizable manufacturing process per the customers native language and the language they wish to learn, their filter and rating preference, male or female voice and categories to obit, etc.. 2c) Podcasts & Vodcasts can be downloaded per category. At the bottom of each category will be two links for downloading either a podcast of vodcast of the entire category content. 2d) Mobile Phones and wireless devices can access the e-phrasebook content by a subscription fee. The ephrasebook content will be licensed to a content provider who will provide the syndication and distribution means and methods to end users. 3. Immersive Game Lessons: A set of 75 lessons; 25 beginner, 25 intermediate and 25 advanced will be available online with one or two free samplers to get players hooked. Lessons can be bought individually or per a set bundle. 4. Live Audio Video Virtual Classrooms: Language teachers, tutors and exchange partners can connect live online and participate in live, real time language learning sessions. Virtual classrooms will be rented out on an hourly basis. The application will include calandering and scheduling capabilities. Teachers dictate their own price, Students can review and grade them, exchange partners split the cost of the room. Following is a more comprehensive and detailed overview of the products and revenue forcasts: 1. Web Advertising: This revenue will be derived from hosting Google Ads on Phrasebase.com. The total available market (TAM) and forecasts for Phrasebase ad revenue is as follows:

Web Advertising Total Available Market Forecast

2008 $??? $6k*

2009 $??? $12k

2010 $??? $30k

*indicates current revenue for FY 2007. The 2008 ad revenue estimate is based on already actual and realized 2007 ad revenue without any increase in projections just to stay on conservative with all estimations. The 2009 and 2010 projections are based on the Alexa traffic ranking increasing from 65,000 (which yields 6000 unique visitors per day, 2.2m visits per year) to 32,000 (which would yield approximately 19,000 visitors per day, or 7m per year) and then to an Alexa ranking in 2009 at 15,000 (which would yield approximately 40,000 visitors per day, or 15m per year). The Alexa traffic ranking projections are based on the premise that ALL of the new features, functions, tools and applications as specified in this business plan roll out before the end of Q1 07. If all such features launch as planned, then these traffic projections can be considered conservative estimates made on the side of caution.

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2. E-Phrasebook Content Sales: The revenue here will be derived from selling the phrasebase e-phrasebook content per a variety of channels is broken up into 4 different sub-sections all described below.

2A) Subscription TAM Forecast

2008 $4,000m $6k

2009 $4,300m $28k

2010 $4,700m $75k

Forecasts are calculated that 1 out of 10,000 unique visitors will sign up and subscribe. 2008 Estimates are based on current Phrasebase traffic while 2009 and 2010 estimates are based on the growth projections as measured by Alexa and described above. The average yearly subscription price is $30 USD, ($2.50 per month). Prices will be set per user’s native language; so for example, Japanese customers will pay more than Vietnamese customers. $30 USD per year is the median weighted revenue target. Customers can purchase their subscription at either a yearly or monthly rate. A subscription will allow them full access to all the advanced features of the Phrasebase E-phrasebook consisting of audio and video files to show pronunciation of each phrase, automatic emailing of daily quizzes or phrase of the day, storage of their “favorites” enabling them to build their own custom phrasebooks, automated batch printing of their custom phrasebooks, smart display, filtering, etc. As the features and capabilities of their subscription advance, these prices will increase each year. Projections do not include repeat customers, those who paid the previous year and are renewing. 2008: .0001 * 2.2m = 220 customer subscriptions * $30 USD = $6,600 USD 2009: .0001 * 7m = 700 customer subscriptions * $40 USD = $28,000 USD 2010: .0001 * 15m = 1,500 customer subscriptions * $50 USD = $75,000 USD

2B) Audio CD’s TAM Forecast

2008 $4,000m $4k

2009 $4,300m $21k

2010 $4,700m $60k

Forecasts are calculated that 1 out of 10,000 unique visitors will sign up and subscribe. These CD’s are audio only and meant to be listed to in the car, while exercising, sleeping, on flights, etc... It is meant to aid passive learning of a language by repetition of phrase translations. The CD will contain a track for each category. On each track, the phrase will be said in the native customer’s language followed by it being repeated in the target language he wishes to learn followed by a pause to allow him to absorb it and or repeat it out loud. Customer will have some basic ability to customize this CD to their liking, for example, choosing male or female voice, choosing whether they want the pause in between phrase translations or another repeat of the translated version, etc.. As the production and sales of these CD’s progress, the ability to create highly customizable CD’s becomes an option for Phrasebase to extend growth and sales of CD’s. For example, customers can get more granular in their ability to customize the contents of the CD, which categories they do or

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don't want, how they want the phrases ordered, control over filtering of phrases, etc. Mass customization of phrasebook CD’s is the ultimate goal, but not reflected in these revenue projections. An average CD price has been set at $20 USD and grows to $40; again, prices will slide according to customer’s native language. These prices reflect net revenue after deducting COGS such as burning, shipping, tax, etc... (Not taking into account web hosting/server/bandwidth charges). The increase in price partially reflects improved operations and partial increase in price. 2008: .0001 * 2.2m = 220 CD purchases * $20 USD = $4,400 USD 2009: .0001 * 7m = 700 CD purchases * $30 USD = $21,000 USD 2010: .0001 * 15m = 1,500 CD purchases * $40 USD = $60,000 USD

2C) Podcasts & Vodcasts TAM Forecast

2008 $4,000m $1k

2009 $4,300m $8k

2010 $4,700m $22k

Podcasts and Vodcasts per each e-phrasebook category will be available as a free download, but only to subscribed members. At the bottom of each category will be a button to download the podcast or vodcast of all phrases within that category. If the visitor is not a subscribed member, a message will tell them they need to pay a 1 year subscription in order to take advantage of this feature. This will help boost subscription rates by an additional 10% above current subscription revenue projections. 2008: 10% of $6,600 = $660 USD 2009: 10% of $28,000 = $2,800 USD 2010: 10% of $75,000 = $7,500 USD Podcast and Vodcasts will be downloadable for free to subscribed members, but will contain a noncompetitive embedded audio or video advertisement (perhaps travel related). Each embedded ad will generate 50 cents USD of ad revenue per download. It is estimated that 20% then 30% then 40% of subscribed members will download an average of 50 podcast & vodcasts per year. There will be approximately 300 podcasts and 300 vodcasts to choose from and these will remain relatively constant throughout the years. 2008: 220 subscribers * .2 = 44 members downloading 50 casts each * .5 = $1,100 USD 2009: 700 subscribers * .3 = 210 members downloading 50 casts each * .5 = $5,250 USD 2010: 1,500 subscribers * .4 = 600 members downloading 50 casts each * .5 = $15,000 USD 2008: $660 USD + $1,100 USD = $1,760 USD 2009: $2,800 USD + $5,250 USD = $8,050 USD 2010: $7,500 USD + $15,000 USD = $22,500 USD

3D) Mobile Phones TAM Forecast

2008 $4,000m $0k

2009 $4,300m $33k

2010 $4,700m $26k

Phrasebase E-phrasebook access via mobile phones or wireless devices is a future product. Bulk licensing of the e-phrasebook content to a mobile content provider is an optional future business development activity not central to the Phrasebase business model. While potentially lucrative, we have speculated on very low and conservatively.

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4. Immersive Game Language Learning Lessons: The revenue here will be derived from game content generated by the Phrasebase language administrators. Phraebase alows the administrators to create and upload video segments and mix them in with documents, images and audio to create impacting 7-15 minute long immersive language learning lessons.

Immerive Game Lessons TAM Forecast

2008 $6,000m $15k

2009 $7,000 $47k

2010 $8,000m $101k

Projections account for sales of lessons created in previous years in order to simplify. Lesson Creation and Consumption Projections: 2008: .0001 * 2.2m = 220 teachers creating 30 lessons each = 6,600 lessons. Phrasebase collects an average of .75 cents per lesson sold. Estimated each lesson sold an average of 3 times = 19,800 lessons sold total * .75 = $14,850 Total Revenue from lessons at an average price point of $1.50 each = $29,700 (.0005 of 2.2m visitors = 1,100 customers purchase of 18 lessons each) 2009: .0001 * 7m = 700 teachers creating 30 lessons each = 21,000 lessons. Phrasebase collects an average of .75 cents per lesson sold. Estimated each lesson sold an average of 3 times = 63,000 lessons sold total * .75 = $47,250 Total Revenue from lessons at an average price point of $1.50 each = $94,500 (.0005 of 7m visitors = 3,500 customers purchase of 18 lessons each) 2010: .0001 * 15m = 1,500 teachers creating 30 lessons each = 45,000 lessons. Phrasebase collects an average of .75 cents per lesson sold. Estimated each lesson sold an average of 3 times = 135,000 lessons sold total * .75 = $101,250 Total Revenue from lessons at an average price point of $1.50 each = $202,500 (.0005 of 15m visitors = 7,500 customers purchase of 18 lessons each)

4. Live Audio Video Virtual Classroom: The revenue here will be derived from selling time allotments of the virtual classroom to teachers and tutors. Students pay the instructor for live online lessons; Phrasebase keeps a percentage of this revenue for processing the e-commerce transaction and another percentage for usage of the online virtual classroom.

Live AV Virtual Classrooms TAM Forecast

2008 $6,000m $4k

2009 $7,000 $14k

2010 $8,000m $30k

A virtual classroom will exist for each of the 80 languages Phrasebase supports. Language Exchange Partners can use the virtual classroom for free to connect and share language, schedule meetings and appointments, etc. Subscribed members only can take advantage of this. 2008: .0001 * 2.2m = 220 users spend $20 each year connecting = $4,400 USD 2009: .0001 * 7m = 700 users spend $20 each year connecting = $14,000 USD 2010: .0001 * 15m = 1,500 teachers users spend $20 each year connecting = $30,000 USD

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Revenue Projections Summary: The total revenue opportunity derived from all sources above can be summarized as follows:

Product Line 1) Web Advertising 2A) E-Phrasebook Subscriptions 2B) E-Phrasebook Audio CDs 2C) E-Phrasebook Pod&Vodcasts 2D) E-Phrasebook Mobile Phones 3) Immersive Game Lessons 4) Live Virtual Classrooms TOTALS

‘08 TAM ??? $1,700m $1,700m $1,700m $1,700m $1,700m $8,000m $ 16,500m

2008 $6k $6k $4k $1k $0k $15k $4k $ 36k

2009 $12k $28k $21k $8k $33k $47k $14k $ 163k

2010 $30k $75k $60k $22k $66k $101k $30k $ 384k

4.2 Opex Model
To be done

4.3 Profitability
To be done

4.4 Return On Investment
Details of the return on initial investment of the $350,000 USD seed capital is as follows: $75,000 – Spent in FY07 & FY08 to revamp the community forum section and convert it into an AJAX based full featured social network similar to facebook, myspace and friendster, but with functionality catered to language enthusiasts.

Revamp Community Forum into a Social Network Initial Investment 2008 Projected revenue from ad revenue plus premium subscription membership fees 2009 Projected revenue from ad revenue plus premium subscription membership fees 2010 Projected revenue from ad revenue plus premium subscription membership fees 3 Year Net Gain on Initial Investment

ROI ($75,000) $12,000 $40,000 $105,000 $ 82,000

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$75,000 – Spent within FY07 & FY08 to complete the E-phrasebook Words and Phrases section that consist of 50,000 words/phrases translated into 90 languages along with script spelling and alpha-phonetic spelling of each item and both male and female audio and video files of each. This comes to 4.5 million words and phrases with audio and video depicting pronunciation.

Complete the E-Phrasebook Words and Phrases Initial Investment 2008 Projected revenue from audio CD’s, Podcast/Vodcasts & Mobile Phone syndication 2009 Projected revenue from audio CD’s, Podcast/Vodcasts & Mobile Phone syndication 2010 Projected revenue from audio CD’s, Podcast/Vodcasts & Mobile Phone syndication 3 Year Net Gain on Initial Investment

ROI ($75,000) $5,000 $62,000 $148,000 $ 140,000

$100,000 – Spent within FY08 to produce a comprehensive series of 75 ten minute long scripted immersive gamestyle (video/animation) language learning lessons for each of the 90 languages we support. (6,750 total lessons total). Architected and created collectively by the Phrasebase team leveraging our e-phrasebook content.

Creation of Game-Style Immersive Language Learning Lessons Initial Investment 2008 Projected revenue from the lessons 2009 Projected revenue from the lessons 2010 Projected revenue from the lessons 3 Year Net Gain on Initial Investment

ROI ($100,000) $15,000 $47,000 $101,000 $ 63,000

$100,000 – Spent within FY08 to create a full featured webcam based virtual classroom allowing teachers to connect with a classroom of students, tutors to connect with students one on one, and language exchange partners to meet one on one. Application will including calendar for scheduling, rating system, payment collection system.

Create Webcam Based Virtual Language Learning Classroom Application Initial Investment 2008 Projected revenue from classroom usage fees 2009 Projected revenue from classroom usage fees 2010 Projected revenue from classroom usage fees 3 Year Net Gain on Initial Investment

ROI ($100,000) $4,000 $14,000 $30,000 ($ 52,000)

$350,000 – Total Seed Capital Invested in FY08. $583,000 – Total Return on Investment in the first 3 years. $233,000 – Total 3 year profit from initial investment.

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5.0 Product Offerings and Prioritization
At the core of Phrasebase are four pillars of educational content that will remain largely free for use and participation by the public. They are, 1) The electronic phrasebook (with very limited functionality), 2) The country statistics and information, 3) The language statistics and information. 4) The Social Network basic membership allowing for discussion, matchmaking and meeting of other language enthusiasts. The first two pillars, the language and country information sections which will be entirely localized into 80 languages and remain free for public consumption. The third educational content pillar is the e-phrasebook. It will contain a vast array features and capabilities far beyond what static hardcopy phrasebooks can offer. These extended features and functions will be sold via the subscription, thus upgrading a members account from basic to premium. Work on the e-phrasebook is still required to implement the full range of features and capabilities. The 4th pillar is the social network community of language enthusiasts. Some re-work of this section of the website is needed in order to convert it from a successful web 1.0 portal/discussion forum into a web 2.0 social network taking advantage of today’s new technology wigets with Friendster or Facebook style features. Of these 4 pillars of educational content, only the E-phrasebook will productized and monetized. While a very simplistic sampling of the e-phrasebook will remain free, the bulk of it will be productized and sold. The Phrasebase website has already been designed to incorporate three additional capabilities that will sit on top of these 4 pillars of educational content. 1) E-commerce section for retail products such as PDA devices and Webcams. 2) Rich Multimedia Language Lessons and 3) Live Audio Video Virtual Classrooms enabling teachers, tutors, students and language exchange partners to meet up and engage in llive learning sessions. In summary, there will be 4 Phrasebase products, they are as follows: 1.) 2.) 3.) 4.) Web Advertising from the Four Pillars of Educational Content and Social Network. Phrasebase E-Phrasebook content sold through various product methods and means. Rich Multimedia Immersive Game Language Learning Lessons. Live Audio Video Virtual Classroom Application.

Here is a more detailed comprehensive overview of all sections and product lines: 1.) Web Advertising from the Four Pillars of Educational Content Social Network & Forum, E-Phrasebook Samplings, Detailed Country info and Detailed Language Info GOALS/OBJECTIVES The primary aim of these content pillars is to elicit a continually increasing flow of traffic and a base of registered members, both of which can be converted to paying customers. We want to capture everyone online searching for detailed information involving countries, languages, phrase translations, meaning of foreign words and phrases, pen pals, and discussions about all and any imaginable topic involving countries, languages and cultures. FEATURES - Free Samplings of the E-Phrasebook with limited capabilities. Enough to allow visitors to use as a basic reference, but not enough to use as a regular tool in their efforts to learn a new language. - Free Country Statistics, Facts and Information. A comprehensive database driven section devoted to listing every imaginable fact and statistic about every country on the planet and allowing for intelligent comparisons, charts, graphs and statistical derivations for all such data. - Free Language Statistics, Facts and Information. A comprehensive database driven section devoted to listing every imaginable fact and statistic about every human spoken language on the planet and allowing for intelligent comparisons, charts, graphs and statistical derivations for all such data. - Free Basic Forum Membership to engage in discussion and meet other language enthusiasts.

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TO DO - The Country and Language information pages is already completed and continually updated on a quarterly basis as such information changes. Efforts are being made to localize all of this content into the 80 languages Phrasebase supports as a means to capture a greater non-english speaking audience. For example, Currently, a google search on “detailed facts and information about China” will list phrasebase on the first results page. In fact, you can do this for practically any language or country and Phrasebase is near the top of the results. Once all this content is localised into 80 languages and absorbed into the search engines, we’ll also capture the audience seeking similar questions in their native language. - Polishing touches need to be put on the e-phrasebook. But the bulk of it, the architecture and functionality is completed. - The Forum needs to be overhauled and transformed from a web 1.0 forum/discussion board into a web 2.0 fully capable social network similar to perhaps www.zaadz.com

2.) E-Phrasebook Electronic Phrasebook Content GOALS/OBJECTIVES The goal is to create the internet’s largest, most powerful democratized electronic phrasebook which can then be productized into a wide array of vanilla or mass customizable product lines. The E-Phrasebook is localized into 80 languages, which yields approximately 6,000 disparate product lines. Foreign language speakers no longer have to go through English to learn a new language; they can learn it directly from their native language to their target language through mass customization. FEATURES - Hundreds of thousands of phrases assigned a rank order of most to least useful. Each phrase spelled in ascii alpha-phonetic as well as foreign language script. Phrase can be clicked on to hear a sound or video of the pronunciation, either male or female voice depending on user preference. - Unlike traditional phrasebooks, allows for a greater more intelligent display, ordering, filtering and categorizing of phrases. - Content can be syndicated to third parties for use, distributed in volume to mobile content providers for a licensing fee, provided to online publisher lulu.com for printing of hardcopy phrasebooks, CD’s. - Words seperated from Phrases. The words database has a picture associated with each word. TO DO - The basic framework is complete and phrases are continually being added, sorted and tagged. Whats needed is to capture, edit and upload all the audio and video clips for each phrase is both male and femal voices and then to establish and execute on a variety of means and ways to leverage and productize the content. - Priority of productizing the E-Phrasebook content: - Subscription access to the online e-phrasebook. - Audio CD’s manufactered and sold from within our outsourced to lulu.com - Podcasts/Vodcasts manufactered and sold from within our outsourced to lulu.com - Application CD’s of the e-phrasebook, would require collaboration with a specialist in making self running CD applications, and to port the e-phrasebook program from online to CD, as well as a system allowing for easy and mass production, as each CD will be customized to the user’s spec. - Phrasebase PDA device. Source a PDA vendor through alibaba.com to custom produce the Phrasebase ephrasebook application into hardcoded chips where different language combinations, filter settings and preferences can be set and syndicated with the Phrasebase website. - Making the content accessible via Mobile Phones and wireless Blackberry devices though a third party content provider. 4.) Rich Multimedia Immersive Game Style Language Learning Lessons

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GOALS/OBJECTIVES TBD FEATURES - TBD TO DO a. TBD

5.) Live Audio Video Virtual Classrooms GOALS/OBJECTIVES To create a Flash based application that can be called a virtual classroom as it allows teachers to meet with students to conduct classes. It allows Tutors to meet with students to conduct one on one sessions and it allows language exchange partners to meet and share languages. FEATURES Features include: - Calandar system allowing teachers to post their class schedules, tutors to post their hours of availability and language exchange partners to set appointments and reserve one of the virtual classrooms. - Teachers and tutors can set their own price points per hour, students purchase time chips that get counted down each minute they are connected. Language exchange partners each get half of a chip deducted while connected, thus splitting the costs of the classroom. - Special capabilities needed for the teacher application, a similar but slightly different set of features is needed for the tutor app, and closely related to that is the Exchange partner classroom app. All are similar and use a time counter to deduct time chips. TO DO - Hire one or two Flash Communication Server and Action Script programmers who can crank out such an application. The details have already been specified as follows: LIVE AUDIO VIDEO VIRTUAL CLASSROOM APPLICATION SPECIFICATIONS: When a language teacher is live on the website, I want to list them to the students as available and ready for teaching. Students visiting the website can then review which teachers are live and online and able to teach. If they find one they like, they can click to connect live. There will be 3 variations of this application, all three similar but slightly different. Application 1) Tutor > Student (one on one sessions) 2) Teacher > Students (One teaching many sessions) and 3) Peer <> Peer language exchange partners (LEP’s) (one-on-one sessions). Here is how these applications should work… 1) 2) It should look and feel like http://www.ivideochat.com/ When a teacher, tutor or LEP visits the website, they can choose to be listed as live and online to all other visitors. When a visitor clicks WHOS ONLINE, it will display 3 categories… a) Teachers Online, b) Tutors Online and c) Language Exchange Partners Online… and then list all of those who are available live and online per each of these 3 sections along with their image and what languages they know or want to learn, and their rating by other students if they are a teacher or tutor. (ME). Teachers, Tutors and LEP’s must first create an account with me in order to be listed, this section, call it the Teachers Account section, will allow them to list all their credentials. They then indicate if they are available for TEACHING, TUTORING or LANGUAGE EXCHANGE. They may select all 3 at once. (ME)

3)

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4)

5) 6) 7)

8) 9)

Each time a Teacher, Tutor or LEP logs online into their teachers account section and indicates they want to be listed as live online and available for teaching or tutoring, I need to run a test to verify both their camera and microphone is working… if they pass the test, then they can be listed, otherwise, it points out the problem to me so I can program the proper actions. (YOU) They also need to be able to click a single still photo from the webcam of themselves and store it so that when students browser who is online, they can see a single snapshot of the teacher. (YOU) When a visitor clicks to connect, it will take them to a payment section, where they first need to pay for TIME CREDIT… I’ll handle all this part (ME). Once they purchase an allotment of time, they can use it however they wish, to connect with Tutors, (about $20 an hour) or teachers (about $10 an hour) or LEP’s (about $3 an hour)… I will have pricing guidelines and minimums, etc, but basically, each person sets their own hourly price. However, once the AV session goes live and the connection is made, payment needs to be deducted every second. (YOU or WE) A timer needs to be made such that if the user can see graphically, LIVE, their money being deducted each minute as they remain connected. It will also show them how long they have been online. If their money drops to zero, it will disconnect them and make them buy more time. (YOU) The application will be simple, a resizable video window for both the teacher and student. An audio indicator, audio volume controller, a text chatboard and a free form sketching board, a timer showing how long the session has been connected and showing the students bank account diminishing in real time. There also needs to be a NOTES page where the teacher or tutor can prepare it beforehand… then use it while the class is in progress, changes the teacher makes to it should be dynamic and update in real time so the class can see.. This should work almost identical to the Notes page as indicated above in the LESSONS CREATION APPLICATION. Here are the variations of all three formats… (YOU) a. TUTOR > STUDENT… Tutor lists as being online, only 1 student can connect at a time. One video window for the tutor and one for the student if he wished to use it. When student is connected, the Tutors listing in the browser will indicate that he/she is currently teaching at the moment and not available. While connected, both tutor and student will have a timer displayed indicating the total time of their connection. The Student’s window, however, will show their bank balance depleting each minute while the tutor’s bank balance is shown increasing. (YOU) b. TEACHER > STUDENTS… Similar to above, but when teaching a class, the Teachers account will indicate that a class is in progress and other students can join in as they wish. Teacher needs to have a “lock the door” feature to not allow new students from joining once a class in progress. They also need a “boot the student” function to remove trouble makers from class. Only one video will be available, that is for the teacher. All students will be able to use the microphone and text and sketch board, there needs to be a display of who is online, a listing of all the students. The teacher needs full ability to mute certain student’s microphones, remove students from the class, etc. Students should have the ability to make private chat messages to the teacher. (YOU) c. Peer to Peer Language Exchange Partnership sessions should have 2 video windows, and behave just like the Tutor > Teacher sessions. But when connected, both users will get money deducted from their accounts as time goes by. (YOU)

Prioritization: The phrasebase product lines will be developed per the following timetable:

Product / Revenue Lines Web Advertising

Priority 0

Notes Already completed and in maintaince mode. Different ad revenue channels have been set up for each language so to show accountability, traffic and revenue generation per section of phrasebase and also per language. Currently, the English version of the phrasebase website generates around $500 USD per month in ad revenue.

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E-Phrasebook Content

1

Q4 2007 The E-Phrasebook content is still work in progress. The database has recently gone through a disruptive set of changes. First was the seperating words and phrases into two seperate sections where as, in general, a word is something that can have an image attached to it to indicate it’s meaning, while a phrase is described as either a word or phrase that conveys one meaning. Second was the seperation of the database into 3 distinct databases.. The first for core phrasebase words and phrases, a second for alternative variations of the core words and phrases and a third database for every imaginable word or phrase possible. Essentially, if a visitors queries it and it’s not found in the first 2 databases, it gets added to the third one automatically. It is critical that all 3 databases and seperation of words from phrases is fully operational before sales can be generated leveraging it’s content and intelligence. Q4 2007 After Phrasebase has surpassed 100,000 registered members and settled on the content of the e-phrasebook phrases, all existing and new members will have very limited usage of the e-phrasebook content. By tracking their IP address, they will be limited to the amount of phrase searches they can perform, the amount of audio files they can here of phrase pronunciation their level of filtering and the order in which phrases can be displayed. These advance features of the e-phrasebook will be available only to members who upgrade their free account to a subscription based account. Prices will be set at around $9 USD per month or $59 USD per year. Prices will adjust automatically depending on the users native language, so for example, English and Japanese native speakers will pay more than Vietnamese and Khmer native speakers, in this way, we make the fee’s inclusive to all people of all backgrounds. Q1 2008 once the subscription method has stableized, we will roll out mass customized CD product versions of the e-phrasebook content. Inclusive with the sale of the CD will be a free one month subscription to the ephrasebook content. (Existing subscribers can pay extra for their CD). Again, prices will slide depending on the customers native language, but will be approximately the price of one years subscription, $59 USD excluding tax and shipping costs. Once the custome gains access to the e-phrasebook, they can then through a series of filtering tools and functions, begin to dictate which phrases they are interested and which they are not. There will be a wizard form walking them through a process for determining how they want their CD structure. In other words, the basic vanilla format will create a new track for each category. Q1 2008 Q2 2008

E-Phrasebook Content 1) ONLINE SUBSCRIPTION

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E-Phrasebook Content 2) AUDIO CD PURCHASES

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E-Phrasebook Content 3) PODCASTS / VODCASTS Rich Multimedia Lessons

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Phrasebase Business Plan

Live AV Virtual Classrooms E-Phrasebook Content 4) APPLICATION CD’s E-Phrasebook Content 6) MOBILE DEVICES

6 7 8

Q2 2008 Q3 2008 Q1 2009

PHRASEBASE BUISINESS OPPORTUNITY REQUIREMENTS The applications and enhancements we need to develop are as follows. The e-phrasebook section needs to be “cleaned up”, phrases need to be tagged correctly, filter settings fine tuned, all tracking and managing of user click behavior, date added, search query hits, etc, all need to be re-set to begin fresh again. Cost/Time required = 2 programmers, 3 months. $40k USD. (It would only take 1 month to stablize the e-phrasebook content so work on audio/video recordings could begin.. the other 2 months would be work to add the bells and whistles to how the e-phrasebook functions) The e-phrasebook section needs a sound and video file capturing each phrase pronunciation to be captured, edited, compressed, renamed and uploaded. To do this, a studio needs to be set up either at our office in Thailand or India, language administrators flown in for 3 days of recordings. Our India team then cuts, edits and compresses all raw footage into both online, CD and DVD formats to support all channels. Cost/Time required = First, the content of the e-phrasebook needs to be stablized at around 5000 phrases. This may take 3 full months to complete as part of the work described above. 2 Admins need to be flown out, (1 male 1 female) accomodations and food provided for their 1 week stay. $1k USD per admin * 2 = $2,000 USD for this aspect. The Team in India can process the raw footage / audio to our specs at a cost of $2,000 USD. Total costs are $4k per language.. * 40 languages = $160,000 USD. (the other 40 languages will be done the next year). Total time required, 1 week per language * 40 = 40 weeks (10 months). Admins do not need to be paid to do this work, as they are currently paid in ad revenue for their language. We would make a profit sharing contract with them for their help with this and cover their expenses. Development and deployment of a Rich Multimedia Language Lessons Creation Application. The backend of this tool would be a Flash based tool allowing language teachers to create their own lessons running from 7-15 minutes. Phrasebase would provide a comprehensive outline of what lessons are needed based on traditional language learning course outlines. Interlaced with the lessons will be still images, video, audio, text and whiteboard drawing board to show brush strokes of writing the alphabet and a quiz at the end with a randomly generated questions component built into it and automated scoring. The tool would allow the teacher to put together lessons by adding and editing all these pieces together, set their own price, an outline of what the lesson contains and what the student will learn. The font end would allow students to browse through a listing of lessons, smart searches of lessons, review prices, pay for and consume the lessons any time they come back to the website or via download, rate and review the quality of the lesson for other customers to see, and input their wishes of what type of lessons they would like to see created. A full detailed spec has already been created and such a Flash based tool can be built. To get an operational application developed and launched is approximately a 3 month job for 2 highly skilled Flash Action Script programmers and would cost appoximately $60k USD. Development and deployment of a Live Audio/Video Virtual Classroom Application. Such a tool already exists. Phrasebase currently has a protoype deployed at www.phrasebase.com/english/classroom but the tool needs to become more full featured and tightly integrated into the social network with a calandar system allowing teachers to post times of their classes and greater matchmaking tools allowing tutors to connect with students and language exchange partners to connect with themselves. This application has already been fully spec’ed out and estimates received. To build it out to the capabilities of www.ivideochat.com would take 1 month and $15k USD. To go beyond this and integrate it deeply into the Phrasebase social network would require 2 months and $30k USD. Updating of the social network which is currently largely just forum discussion to a more feature rich web 2.0 social network similar to Friendster or Myspace. This would require 3 months of work by 2 programmers at a cost of around $60k USD.

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Phrasebase Business Plan

Within 12 months and at a total cost of $350k USD, Phrasebase can truly revolutionize the language learning industry and set a new standard of measurement for the effectiveness of language learning products.

6.0 Marketing Plan
6.1 Messaging / Positioning
To be done

6.2 Web Content
To be done

6.3 PR
To be done

6.4 Direct Marketing
To be done

6.5 Advertising
To be done

7.0 Resources
MANAGEMENT Chris Hock is director of product management at Adobe, Inc. (formerly Macromedia). In this role, Mr. Hock is in charge of the Flash video delivery business and led the creation and launch of various video related products at Macromedia including the Flash Communication Server and the Flash Video Streaming Service. Prior to Macromedia, Mr. Hock cofounded RedSpark Inc., an Autodesk venture that provided hosted enterprise collaboration solutions. He also served in numerous senior product management and sales engineering positions at the Autodesk Data Publishing division in territories as diverse as Apac, EMEA, and the Americas. Mr. Hock received his undergraduate degree in physics from the College of Natural Science at Michigan State University and holds a Masters of Business Administration from the University of Michigan. Mr. Hock also sits on the advisory board of video middleware vendor Video Pop, Inc. Jeff Hock is managing director of Quarkis Co. Ltd., a company he founded after recognizing a growing need for the internationalization of website businesses. Mr. Hock steered Quarkis toward providing unique productivity solutions aimed at helping small to medium sized businesses reach and retain a global audience. Mr. Hock brought Quarkis to profitability in just under 3 years, developed a portfolio of successful websites and was nominated for the 2006 Schwab Social Entrepreneur of the Year Award. Prior to Quarkis, Mr. Hock held a variety of international sales and marketing positions with Autodesk Inc.. His last tenure as web operations executive offered him the experience of leading a team to build and deploy Autodesk's 27 enterprise-wide websites throughout Asia. COMPANY PROFILE

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Phrasebase Business Plan

Founded in 2002, Quarkis Company Ltd. has helped some of the world’s fastest growing companies introduce their products and services to an international market by providing innovative translation, localization, globalization and streaming multimedia communication solutions. ABOUT QUARKIS Quarkis (http://www.quarkis.com) is a pioneer in Globalization Solutions. As an internationally recognized web services company, Quarkis specializes in helping small to medium sized businesses expand their online presence by providing innovative solutions aimed at attracting a global audience and retaining multilingual culturally diverse customers. Quarkis provides “best of class” localization, globalization, translation, interpretation and streaming multimedia communication tools and services. Founded in 2002, Quarkis has assisted a wide variety of clients including Furniture Origins, Vis-à-vis.com, Tunefilter.com, Free-Rentals.com, Yerba Buena Information Systems, Homewelcome.com, Andamancove.com, Pointspa.com and Amorngroup.com with the globalization of their online businesses. Phrasebase™ is a social network community of language enthusiasts and a platform for foreign language learning developed and maintained by Quarkis. Phrasebase™ is a trademark of Quarkis Company Ltd. All other marks are the property of their respective holders. Quarkis is a Phuket Thailand based LLC company with a satellite office in Ahmedabad India.

8.0 Glossary
Term TBD AV TAM MNC NGO E-Phrasebook PDA Apac / EMEA Ipod Vodpod Meaning To Be Done Audio Video Total Available Market Multinational Corporations Non-Governmental Organizations Electronic Phrasebook, a phrasebook in digital form Personal Digital Assistant such as an electronic dictionary Asia Pacific Region and Europe Middle East and Africa Region General term used to describe any portable MP3 player device. General term used to describe any portable device used to play compressed video files, typically in MPEG format. Sound file of music or a broadcast. Video file of of a broadcast. Video On Demand Application English as a Second Language Tthe study of how a second language is learned/acquired. Multi-National Corporation Non-Governmental Organization

Podcast Vodcast VOD App ESL SLA MNC NGO

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Phrasebase Business Plan

ICT L1 L2 RLO EFL TEFL CAGR VoIP LCMS USB SkypeCasting

Internet Communication Technologies Native Language, Mother tounge, first language learned Second Language Acquisition Reusable Learning Objects English as a Foreign Language Teaching English as a Foreign Language Compounded Annual Growth Rates Voice Over Internet Protocal, ability to make phone calls over the internet Learning Content Management Systems Universal Serial Bus, a port in all computers allowing hook up with devices Recording a Skype Conversation, saving it as an MP3 and posting online

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