2. UVA-M-DRAFT-2-
the transmission capacity across the Atlantic expanded by a factor of 194
. Carriers had built a
massive national and global network - by some estimates, an astonishing 500-fold increase in
capacity.
What was the financial outcome from all these investments? From year 2000 to 2002, $2
trillion of market value was lost in the telecom sector. The social cost is measured with 500,000
jobs lost for the same period. The final outcomes from the telecom bust are bankruptcies,
corporate deception and fraud. Nearly 80% of the 300 telecom upstarts founded in the second
half of the 1990s already have disappeared. (Exhibit 1 summarized expenditures in the industry
from 1999 to 2002.)
How did the telecom industry get there?
In the early 1980s, following lengthy antitrust action, AT&T was broken up, leaving the
US local telephone market split up among the seven Baby Bells and forcing Ma Bell to compete
in the newly deregulated long-distance market. The next big change to the telecommunications
marketplace was the Telecommunications Act of 1996. Its goal was to increase competition and
promote investment in the most important activity of the country, the information sector. This
part of the economy was then about seven percent of the whole, and comprised five separate
sectors: broadcast, cable, wire, wireless, and satellite. Since the passage of the 1934
Communications Act, these had been legally separate industries; for the most part, none was
permitted to compete with any of the others. Local regulated monopolies were granted with the
promise of guaranteed but not spectacular profits. The 1996 act blew this old world apart. It was
intended to open up the massive local telephone market and to stimulate competition among the
Baby Bells, which could now enter each other’s markets, as well as competition with companies
pioneering new communications technologies, such as wireless telephony and the Internet. The
statute offered the Bells the right to compete in the long-distance market if they first opened their
local wired markets to competitors. In the wake of this legislation, new companies, such as the
Competitive Local-Exchange Carriers (CLECs), emerged and became stock market stars—ICG,
Teligent, and Winstar among them. The 1996 Act also promoted universal access to the Internet
and spurred huge investments by cable, digital subscriber line (DSL), and other technologies
trying to connect customers up to the World Wide Web.
The 1996 Act was designed to promote competition in local markets by eliminating the
financial barriers that previously kept out competitors. Costs were lowered since competitors
could now enter local markets without having to build the complete infrastructure that the
Incumbent Local Exchange Carriers (ILECs) had developed over many years. In the 1980s,
Competitive Access Providers (CAPs) and subsidiaries of cable companies entered the local
markets, but the real competition did not start until 1996. At the end of 2000, 370 CLECs/CAPs
were providing service, compared with 57 CAPs in 1995, the year before the
4
Washington Post July 8, 2002 Peter S. Goodman, Telecom Sector May Find Past Is Its Future.
3. UVA-M-DRAFT-3-
ence
e of the total US economy from 1992 to 2000, even after the bursting of the dot-
om bubble.6
s.
e
on
re was
t,
xcess capacity, lack of investor confidence and capital markets closed to new investment9
.
ocal Exchange Service Market
l
ent
nies,
ts,
panies
gainst long distance carriers, cable
companies, CLECs and other potential competitors.
Telecommunications Act opened up the market to competitors5
. The 1996 Act created new
business opportunities for CLECs and at the same time induced ILECs to upgrade their networks
thereby spurring investments in the telecom industry. The spending was further stimulated by an
effort to accommodate a rapidly growing Internet and broadband access market. The coincid
of new technologies and a procompetitive legal framework caused the information sector to
double its shar
c
To fuel this growth, carriers amassed a staggering amount of debt to build their network
Everyone prepared for the expected surge in traffic once high-speed broadband access becam
widely available. They deployed bandwidth capacity well in excess of current needs. At the
same time, market competition was eroding profits from voice traffic; making it difficult to
establish a sustainable business model for data traffic. The combination of soaring capital
expenditures and declining revenue growth created financial difficulties for carries that spread
across the industry. The eight largest telecom companies collectively owed $191 billion at the
end of 2001,7
and the debt of the telecom companies worldwide was 1 trillion dollars by July
2002.8
The dot-com crash made investors suspicious and they demanded immediate return
investments. Market share became the path to revenue so firms could pay down debt. This
aggressive market share drive resulted in price wars. In light of saturated markets, the
limited revenue to pay down debt and provide return on investment. As a result, the
telecommunications industry today is characterized by accounting scandals, mountains of deb
e
L
Local exchange carriers provide dial tone service, enable customers to call other
subscribers, and provide the means to make long distance calls and access the Internet. The loca
service market was the last monopoly in the telecommunications industry, with the Incumb
Local Exchange Carriers (ILEC), including the seven regional Bell operating compa
controlling over 99 percent of local service revenues as recently as 1995. While the
Telecommunications Act of 1996 established several methods of entry into local marke
nationwide the local exchange market is only slowly opening its doors to competition.
Competitive Local-Exchange Carriers (CLEC) made big strides over the past few years, but they
still account for only a small fraction of overall revenues. The regional Bell operating com
have done a great job in competing more efficiently a
5
2002 Telecommunications Market Review and Forecast, TIA (Telecommunications Industry Association).
6
The McKinsey Quarterly, 2001 Number 4, Weathering Telecom’s Dark and Stormy Night, Interview with Reed
ing to Precursor Group, a Washington research firm.
ttee on July 31, 2002.
Hundt.
7
Accord
8
Michael Powell, Testimony to the Senate Commerce Commi
9
Michael Powell, Testimony to the Senate Commerce Committee on July 31, 2002.
4. UVA-M-DRAFT-4-
at
sides CLECs, long distance providers like AT&T and the regional
ell operating companies, there are approximately 1,300 independent incumbent local exchange
carriers
the
th
elephone lines in the United States. For the first time in decades, the number of
lephone lines served by local phone companies declined. These companies were losing
ustomers from the increasing number of homes switching from their wired telephones to mobile
f their
ce charges became as low as 15 cents per minute and
rther cuts in prices could not generate incremental growth in long distance calling volume.
Betwee
e
flat fee
r a fixed amount of minutes. Wireless became a less expensive alternative. This had an
immed
Many carriers couldn’t compete at this price level and went out of business. Prices were
mply too low for long distance service to be profitable. In response, carriers raised rates in
002, although these higher rates may be hidden in ancillary charges.
Through a number of mergers these former Baby Bells have been able to exercise a gre
deal of market power. SBC Communications and Verizon alone control access to two-thirds of
local access lines in the U.S.A. The CLECs had only 8.5 percent of the 194 million end-user
lines at the end of 2000. Be
B
, many of which offer service in rural areas and are subject to much less government
regulation than the Bells.
By the end of 2001, the Local Exchange Services market had not felt the downturn in
telecom industry. The market was still growing steadily at the beginning of this decade wi
growth of 7.3% in 2000 and 6.8% in 2001. For decades there was a steady 3% growth in the
number of t
te
c
phones. 10
The Interexchange (long distance) Market
The long distance service spending had declined -0.1% in 2000 and -2.9% in 2001. The
catalyst for this change began in the 1980s when competing carriers improved the quality o
services, making it difficult for AT&T and other leading carriers to charge a premium for
superior quality; thus, the prices of long-distance have dropped significantly. Initially, declining
prices stimulated the overall market, and market growth was more than sufficient to offset
declining margins. Between 1985 and 1990, the number of interstate switched access minutes
rose by 84%. By the mid-90s long distan
fu
n 1990 and 1995 the growth was 31%. In late 90s toll service spending growth slowed
further even with the strong economy.
Compounding the problem, wireless carriers introduced one-rate regional and nationwid
calling plans for their wireless customers in 1999. With one-rate plans, subscribers pay a
fo
iate effect on the wireline long distance volume. In 2000 volume rose only 2.7%, and in
2001 it fell by -2.4%, the first decrease in volume since the breakup of AT&T in 1984.
si
2
10
The Washington Post, Sept. 14, 2002, “Telecom Slump Continues”.
5. UVA-M-DRAFT-5-
ommensurate with investments. At the same time, carriers have deployed equipment in
anticipa
rs today.
LECs exiting the market in mass, the ILECs cut back on spending without fear that they could
se market share. It became clear that the network could support more traffic than was available
twork equipment in advance of demand was no longer warranted. In
ddition, as firms filed bankruptcy, millions of dollars of equipment entered the used market.
on
pent
ntributed excess capacity.
his, combined with the economic downturn, led to a decrease in equipment spending in 2001.
ith the slowdown in the purchase of new equipment, companies shifted their spending to
existing equipment, professional services to make the best use of their
stalled base and on integrating equipment from different vendors.
Equipment and Facilities
The carriers decreased their spending on telecommunications equipment by 13.8% in
2001. In previous years the growth was spectacular culminating in an advance of 23.8% in 2000.
The revenue growth from voice had slowed and data traffic had not yet generated revenue
c
tion of demand that is yet to materialize. Insufficient revenues to pay down debt and
provide return on investment are the root cause of the financial problems of many carrie
These problems and the excess capacity forced carriers to decrease their investments in 2001.
The wave of bankruptcies of Competitive Local-Exchange Carriers (CLEC) in 2001
exacerbated the problems of equipment makers. CLECs were major buyers of network
equipment in 1998-2000 when they attempted to position themselves to capture the business data
market. Their spending put pressure on Incumbent Local Exchange Carriers (ILEC) and they
also accelerated their investment plans in the late 90s. In 2001 all this came to an end. With
C
lo
and further spending on ne
a
The Enterprise Market
In addition to telecom providers, most businesses are heavy internal users of telecom
services and products. This market consists of voice and data equipment spending, spending
professional services in support of that equipment, broadband, unified messaging,
videoconferencing and audioconferencing services. A total of $296.8 billion was spent on these
categories in 2001, up 12.4% from 2000. Most of it was spent on services: $198.8 billion versus
$98 billion spent on equipment. At the same time growth in equipment spending was much
slower than spending in services: 1.2% versus 19.1%. In previous years, corporations had s
heavily on equipment in order to enhance their productivity. Concerns over Y2K also spurred
investment in telecommunications equipment by corporations that co
T
W
maintenance and repair
in
The Wireless Market
6. UVA-M-DRAFT-6-
reach
total of 177.4 million. Wireless communication spending grew by 17.1% on top of a
spectac rs
of
tly
t of new PCS services.
less communications market is made up of many services including cellular
nalogue and digital), Personal Communications Services (PCS), Specialized Mobile Radio
(SMR)
ow wireless is being considered for broadband Internet access. While third generation
G) wireless standards were being developed, interim technologies (2.5G) have been introduced
mark available on a limited basis through wireless
andsets and handheld personal digital assistants (PDAs). The incoming 3G is expected to make
wireles
nt
itions resulted in
nger sale cycles for new customers as budgets and new initiatives were heavily scrutinized.
, and several of Telezoo clients canceled contracts in light of their own financial
ifficulties. These cancellations also impacted the company’s cash position. Consequently, the
compan ent
The telecom bust less affected the wireless market than the other segments of the telecom
industry. It continued to expand in 2001, with wireless subscribers increasing by 13.5% to
a
ular growth of 35.8% in 2000. Spending was boosted by the addition of new subscribe
as well as by increased spending per subscriber. The latter was made possible by introduction
new services. Spending on new equipment by wireless carriers has a remarkably different
trajectory from the overall spending on telecommunications equipment. It declined significan
in 1999, and then jumped by 71% in 2001 as a result of the rollou
The wire
(a
, paging, mobile satellite, mobile data and Local Multipoint Distribution Systems
(LMDS). Cellular and PCS are two alternative technologies that provide generally the same
services and account for the lion’s share of the wireless market.
Wireless communications has become an integral part of the lifestyles of both consumers and
business users.
N
(3
to et. These technologies made Internet access
h
s a viable alternative to DSL and cable, and spur growth in the wireless market.
Telezoo
Telezoo in the midst of the telecom bust
The Telezoo business model was based on a revenue stream from suppliers of equipme
and services. Telezoo competed for specific marketing dollars as a part of the total marketing
budget. The downturn in the telecommunications sector led to tighter marketing budgets and
general reticence by potential customers. For example, many possible prospects for 2001 had
cited inability to move forward in subscribing to Telezoo services until later in the year as a
result of economic constraints or budgetary uncertainty. The soft economic cond
lo
Sales were slow
d
y remained vulnerable from a cash standpoint, as customers requested extended paym
terms and the average days outstanding of Accounts Receivable continued to increase. Despite
these dire economic conditions, the revenue of the company increased in 2001.
Key partners
7. UVA-M-DRAFT-7-
twork which included WallStreetandTech.com, InsuranceTech.com
nd BankTech.com; EMAP Communications’ Total Telecom; PBI Media’s TelecomWeb
Networ
sia, and
le,
Murville identified key partners and forged partnerships that proved to be crucial in
reaching more buyers of telecommunications and networking equipment and services in a cost
effective way (see Exhibit 2 for demographics of buyers). Telezoo had strategic relationships
with several trade media properties including CMP’s Network Computing, InternetWeek, and
The Financial Technology Ne
a
k; and Advanstar Communications’ TelecomPlanet website and its affiliated telecom and
networking publications including America's Network, Telecom Asia, Wireless A
Euronet. Through the Telezoo website and these partnerships, Telezoo’s member suppliers
could reach over 1 million enterprises and carrier buyers per month. Telezoo’s partners promoted
Telezoo and its customers on a revenue sharing basis. They only obtained revenue if Telezoo
had received cash from customers. The partners’ sales forces also sold Telezoo subscriptions and
received sales commissions.
Telezoo ran scheduled product spotlights on each of its partners’ websites. For examp
bi-weekly at Telezoo’s partners’ websites www.networkcomputing.com and at
www.internetweek.com, IT professionals were introduced to a detailed feature-by-feature, side-
by-side comparison of the technical specs of four vendors of a particular product, e.g. Firewalls.
The promotion on Network Computing was branded as CompareIT. The product categories
were compared in rotation according to the editorial calendars of Network Computing. Durin
the two week period each comparison featured at the website was cross-promote
g
d to maximize
ser interest and responsiveness. Specific cross-promotional opportunities included weekly e-
ewsletter promotions and print magazine advertising of comparison topics and vendors. For
Computing CompareIT promotion, there was one
ention in NWC Print and two mentions in the NWC newsletter. In addition, each comparison
was arc
u
n
example, for every two-week long Network
m
hived in the CompareIT Product Round-up section of NWC for 12 months. Total cross-
promotion awareness opportunities per CompareIT were a minimum of 560,000. In addition,
Telezoo promoted clients’ brand and products on its primary website, www.Telezoo.com, to
supplement and extend the effectiveness of all integrated marketing campaigns.
Refining the value proposition to sellers
During 2001 Murville spent much time refining Telezoo’s value proposition to suppliers
of telecommunications and networking equipment and services. The core of this proposition was
to increase brand awareness and consideration rates, and generate qualified leads for suppliers
(see Exhibit 3 for definitions of metrics). Her mantra became Telezoo.com can reduce new
custom et
t received a 10x return on its investment in just three months. For
every dollar Qwest paid in Telezoo subscription fees, it received ten dollars of incremental
revenue from first time customers. In addition, Telezoo helped Altigen reach its target IT buyers
at one-tenth of the cost of an equivalent direct mail campaign. By streamlining and integrating
er acquisition costs and should be considered as part of any comprehensive go-to-mark
strategy. For example, Qwes
8. UVA-M-DRAFT-8-
the critical phases of the telecom and networking marketing and procurement processes, sellers
be more profitable, and buyers can make higher quality decisions, faster.
following table summarizes the various services included in a standard and in an
extended offer to suppliers.
can
The
9. UVA-M-DRAFT-9-
ITEM
STANDARD EXPANDED
Interactive Catalog Presence for all product lines Entire Year Entire Year
Spo months 12 monthsnsorship within Solution Center at product level 3
Partner Promotions 1 4
Logo on Telezoo homepage 1 month 1 month
List ding of all white papers Included Include
Hyperlink back to vendor website Included Included
Side by side comparison on Telezoo homepage 1 4
Entry of product catalog Included Included
Qualified Lead distribution and management* Entire Year Entire Year
Semi-annual Market Intelligence (ROI) Report N/A 2
Source:
Additio ons.
s tools
with its s
process lify
the lead
isco Systems:
Low priced firewalls to high priced optical switches-millions of dollars of
Telezoo Internal Document May 2002
nal services could include targeted email campaigns and additional partner promoti
By integrating its Request for Proposal (RFP) and Request for Quote (RFQ) sale
marketing tools, Telezoo seamlessly guided prospective customers through the sale
to the lead generation phase. Telezoo’s team of project consultants would then qua
s and route them to suppliers’ designated points of contact.
What can a customer really get from all these services (see Exhibit 4 for a market
intelligence (ROI) report that summarizes the results of a four-month long contract)?
Manager Worldwide Marketing Operations, C
Telezoo is unique in many ways....We really conducted a test of Telezoo prior to
joining. We were impressed with the quantity and quality of leads that we
received. Not that there was a particularly big volume, but EVERY LEAD
COUNTS.
We also think it is great that Telezoo covers the range of products from A-Z…
equipment, all indexed by good categories.
10. UVA-M-DRAFT-10-
they got interested. Cisco is now using their
inside telesales as the first point of contact for leads. If there is a potential deal,
European only - not global- and their catalog systems were far too complicated.
ool and a sales tool. At first, it
was a challenge to communicate the Telezoo value proposition to our sales team.
omplex products.
. Via Telezoo, if we can close $250,000 worth of new
revenue that we would not otherwise get, this will have been very valuable, and
we will invest further in Telezoo.11
Some analysts believed that Telezoo was positioned to take advantage of the downturn in
the eco o rather
e
ng
We had unallocated funds that we used for Telezoo. It was critical to get Sales’
interest. After they saw the leads,
they route it to the correct office.
At this point, Telezoo is our only 3rd party lead generation source. Others are all
internal, plus outbound direct marketing and email.
e-Business Development Manager, Siemens AG Information and Communication Networks
(ICN):
We chose Telezoo because we wanted to increase our revenues and our brand
awareness globally. We considered two other marketplaces, but they were
We have reduced our print advertising and brochure budgets, but independently
of Telezoo. We see Telezoo as both a marketing t
They were concerned with 1) the impact on their sales commissions, and 2) the
ability of Telezoo to showcase highly complex systems to their target buyers. Over
time, we successfully demonstrated to our sales force that 1) by using Telezoo,
their commissions will increase, and 2) that Telezoo does an excellent job of
presenting the key technical specifications of highly c
Our relationship with Telezoo can be viewed as a pilot project. We are, however,
very confident that we will obtain value from our investment in Telezoo. As
simply a marketing tool, Telezoo has considerable value. For example, banner
advertising is very expensive
nomy, “because it’s much less expensive for suppliers to use a service like Telezo
than to pump money into other channel programs.”12
In 2002 Telezoo released a new product for suppliers. For telecom and networking
suppliers who were frustrated with the complexity and cost of the existing Customer
Relationships Management (CRM) applications, Telezoo’s new Lead Management System
(LMS) provided only the most critical functionality with the simplest user interface. Unlik
general purpose CRM software, LMS was designed especially for telecom and networki
11
Siemens was provided with qualified leads from Telezoo but they were not converted into sales. After a trial
period, Siemens canceled its business relationship with Telezoo.
12
The Washington Post, December 7, 2001, “Net exchange’s sales up in 2001”, by Cynthia L. Webb.
11. UVA-M-DRAFT-11-
oice that
ould be used to manage all sales leads.
d
Business Intelligence Reports was to deliver timely information to improve
e quality and quantity of clients’ decisions. Analysis of the visitor sessions logged at Telezoo
provide us
sideration rates.
d
their
ck
Telezoo had over 3 years of normalized technical data aggregation and 2 million
conside o
It had
P,
s
professionals, was completely web-based and eliminated the need for expensive training,
installation or maintenance. LMS was promoted as sales force automation tool of ch
c
In addition, because Telezoo had a comprehensive telecom and networking product an
service database and tracked the visits of hundreds of thousands of IT buyer to its site annually,
Telezoo was able to provide uniquely valuable industry market intelligence research reports. The
objective of Telezoo
th
d insight regarding consideration rates of major networking and telecom vendors vers
competitors per product and how these consideration rates changed month by month as new
products were introduced; how entire product categories were gaining or losing mind share
amongst critical target buyers; and how suppliers should be allocating/re-allocating limited
marketing and product development resources based on actual con
Murville expected that Business Intelligence Reports, Lead Management System an
Microsites would be sold in late second half of 2002 and become significant contributors in
2003, 2004 (see Exhibit 5 for Telezoo revenue model).
Telecommunications and networking suppliers could also use Telezoo to leverage
investments in other channels by offloading them of functions such as education and lead
generation. Telezoo could perform these activities cost-effectively, thus freeing up the time and
energy of other channels so they can focus on high-end strategic opportunities (see Exhibit 7:
Telezoo improves productivity of each marketing channel).
Assuming that additional resources were obtained, Telezoo planned to offer marketing strategy
recommendations regarding optimal use of channels and marketing resources. Telezoo would be
able to work with clients to identify clear, quantifiable targets for each sales channel and tra
their progress against the forecast.
Results
ration events that could translate into $30 Billion of potential purchases. On the Telezo
website, one could find 188 product category templates and 3,500 product and service specs
from 400 vendors. Telezoo has achieved an unparalleled market intelligence aggregation.
proprietary technology, patent-pending system and tools, facilitated commerce platform (RF
RFQ), data normalization engine, and a Lead Management System (LMS). The company ha
established partnerships with the leading trade infomediaries worldwide to achieve global
distribution to over 1,000,000 IT buyers each month. Murville believed that with these
achievements Telezoo had raised serious entry barriers for competition. She considered
companies like Telcobuy.com and Computer Data Warehouse to have a different product mix
12. UVA-M-DRAFT-12-
rmoil, Telezoo did not have any
irect competitors. In fact, in mid-2002, suppliers were allocating their reduced budgets to
lemarketing services (to generate leads) more than any other marketing activity.
From January 2001 to July 2002 Telezoo had on average 32,791 unique visitors per
onth. Each month 218 new potential buyers had been registered on Telezoo’s website. The
umber of unique visitors per month in 2001 jumped by 259% compared to year 2000. Telezoo
ad 50 accounts out of the top 1000 telecom companies, and added about 12 reference accounts
its customer list.
In 2001, bookings (subscriptions) from suppliers of telecom equipment and services
creased more than 10 times to $1,800,000, but under GAAP only a portion of them was
cognized as revenue. The average subscription fee also increased from $4,000 to about $40,
00 per year. Subscriptions constituted 97% of Telezoo revenues, transaction fees 1%, and
dvertising and other revenues accounted for the remaining 2%.
Funds were primarily used for headcount to support expanded marketing, business
evelopment and customer support. The non-salary expenses comprised marketing programs to
cquire buyers, sellers and partners and cost of goods sold – hosting services, partner
ommissions, buyer incentive program, and third party content. Even though Murville had kept
xpenses in check and the company had achieved enviable gross margins, expenses still
xceeded significantly revenues. The company seemed close to break even in the middle of
2001. In an attempt to further contain expenses, Telezoo decreased its staff from 19 in mid-2001
to 11 by year end. The last quarter of 2001 delivered record bookings and the largest contract to
date. But the company only achieved breakeven or one quarter, the first quarter 2002, and then
slipped back into the red.. Based on impressive s les in the fourth quarter, and the anticipated
renewal of the 2001 subscriptions, the board believed that the company could beat the market’s
slump. In February 2002, the board debated whether or not to pursue a growth strategy versus a
quick M&A strategy and decided to try to maxim ze ultimate value by continuing to grow
organically. In addition, the recently hired CEO, Giulio Gianturco, resigned. The cash position
of the company which was precarious in 2001 became more so in the first half of 2002. It was
clear that the company needed another round of outside financing in order to keep its operations
going and meet its debt obligations. There were veral alternatives available (see Exhibit 6 for
description of strategic alternatives).
Marie-Louise Murville stared at the towers of Georgetown University right across the
Potomac River while she was contemplating the strategic options Telezoo was facing. She
strongly believed that Telezoo had a valuable pro oth buyers and suppliers of
telecommunications and networking equipment ic
downturn combined with the specific problems in the telecom sector weakened demand for
Telezoo’s services. Murville knew that Telezoo d additional financial resources in
order to sail through the dangerous waters betwe mic recession and the
and market orientation, which in her mind excluded them as competitive threats. Indeed,
Murville believed that after the Internet bust and the telecom tu
d
te
m
n
h
to
in
re
0
a
d
a
c
e
e
f
a
i
se
position to b
and services. Unfortunately, the econom
needed to fin
en the Scylla of the econo
13. UVA-M-DRAFT-13-
Charybdis of the telecom bust. She believed calm waters were reached, the business
model created by Telezoo would prove to be valid. What could she do? Does she have enough
time to ride the dangerous waters and sa e industry be changed forever such
that the business model of early 2000 would be valid in 2003?
that once
il to calm? Will th
14. UVA-M-DRAFT-14-
Exhibit 1
TELEZOO (C)
The Telecommunications Marketplace
The Telecommunica ons and perc e)
Category/Year 19
tions Marketplace ($ Milli entage chang
99 2000 2001 2002*
USA
Equipment and Software
Network Equipment a 38,382. 47,528.00 40,950.00 36,520.00
0.24 (0.14) (0.11)
Voice/Date Equipment 743. 96,834.00 98,022.00 102,890.00
0.08 0.01 0.05
Wireless Capital Expe itures 10,722. 18,360.00 19,500.00 11,500.00
0.71 0.06 (0.41)
Wireless Handsets 7,529. 8,789.00 8,249.00 9,218.00
0.17 (0.06) 0.12
Total 146,376.00 171,511.00 166,721.00 160,128.00
17.20% -2.80% -4%
Transport Services
Local Exchange Serv 109,016.00 117,000.00 125,000.00 133,400.00
0.07 0.07 0.07
Toll Service 108,246. 108,181.00 105,000.00 106,000.00
(0.00) (0.03) 0.01
Wireless Services 45,119.00 59,196.00 72,916.00 87,640.00
0.31 0.23 0.20
Total 2,381. 284,377.00 302,916.00 327,040.00
8.40% 6.50% 8%
Specialized Services
Broadband Int et Access 1,460.00 3,240.00 5,790.00 8,490.00
1.22 0.79 0.47
Unified Messaging 550.00 1,021.00 1,150.00 1,400.00
0.86 0.13 0.22
Videoconferencing Pu 230.00 300.00 400.00 600.00
0.30 0.33 0.50
Audioconferencing Se 1,300.00 1,500.00 1,850.00 2,300.00
0.15 0.23 0.24
Total 3,540.00 6,061.00 9,190.00 12,790.00
0% 51.60% 39.20%
Support Services
Spending on Services in Support of Network Infrastructure Eq 28,347.00 31,301.00
0.14 0.12 0.10
Spending on S ices in Support of Wireless Infrastrucure Equipment 3,728.00 4,747.00 6,001.00 7,429.00
0.27 0.26 0.24
Spending on S ent 116,875.00 138,332.00 164,717.00 192,167.00
0.18 0.19 0.17
Total 142,784.00 168,291.00 199,065.00 230,897.00
17.90% 18.30% 16%
US Total** 544,944.00 618,129.00 662,696.00 712,975.00
13.40% 7.20% 7.60%
International Total 908,531.00 1,044,877.00 1,160,826.00 1,281,868.00
Worlwilde Total 1,453,475.00 1,663,006.13 1,823,522.07 1,994,843.08
* Projections
** Installation charges are included in both equipment and support services but only once in the total
nd Facilities 00
89, 00
00nd
00
ices
00
0026
ern
blic Room Services
rvice Bureau Spending
71.2
uipment 22,181.00 25,212.00
erv
ervices in Support of Voice and Data Communications Equipm
15. UVA-M-DRAFT-15-
Source: “2002 Telecommunications Market Review ” published by the Telecommunications Industry
Association.
and Forecast
Exhibit 2
TELEZOO (C)
The Telezoo Buyer Profile
Company Size 1000+ 34%
100-999 28 %
Under 100 38 %
Job Function
IT Engineers 34%
SaIes/Consulting/ Purchasing 29 %
Corporate Mgmt., other 20%
Sales & Marketing 17%
Buyers
Enterprise 85%
Carriers 15%
Regions
North America 80%
Asia, Latin America, Europe,
Middle East
20%
Psychographics
Recommend 49%
Review And Approve 21%
Specify 15%
Procure/Buy 15%
Buyer Industry/Vertical Banking/Financial, Service Providers and Carriers,
Business Services & Consulting, Education, Heath Care/
medical, Manufacturing, Telecom, Utilities
Source: Telezoo Internal Document, May 2002
16. UVA-M-DRAFT-16-
Def ics
Exhibit 3
TELEZOO (C)
initions and Comparables for Key Marketing and Sales Metr
Marketing and Sales Metric Definition of Metric Traditional Unit Cost
Awareness Opportunities
Number of times brand name and
product type are presented to
individuals via telezoo, partner
websites, partner newsletters,
partner print magazines
$100 CPM-- Compare to
Cost of and Response Rate
for Print Ads or Banner
Ads
Education: Consideration
Events
Number of times individuals seek
out and view detailed technical
specifications for client's product via
telezoo and partner sites
$100 -- Compare to Cost
of and Response Rate for
Direct Mail
Consideration Rate Of all the Consideration Events in a
specific product category, the
percentage of consideration events
for one specific supplier and how
this percentage changes over time
Compare to Market
Intelligence of Research
Firms' Primary Research
Number of Leads Generated Number of Sales Leads Received
via telezoo's RFP & RFQ process,
qualified by telezoo, and routed to
supplier
Compare to leads
generated by telemarketing
firm @ $200 each
Value of Lead Pipeline
Sum of the estimated dollar values
of the sales leads routed to supplier
Compare to leads
generated by telemarketing
firm @ $200 each
Source: Telezoo Internal Document, October 2001
17. UVA-M-DRAFT-17-
Cisco ROI Analysis—June 1, 2001 to September 30, 2001
Exhibit 4
TELEZOO (C)
Marke es Metric ivered T Traditional
Total Cost
Aware
Profess
(CPM)
C 60,000
Educat
Professionals Considering
Cisco's Detailed Product
Specifi
Consid
14 81,400
Consid C
Inc
20,000
Numbe Comp
lema
18,400
Value o ing to
Orders
min f $1 of marketing
s
$ 12,000
Value o ll
Open)--
Be
etermined
Total: 1,591,800
Cost to Cisco with Telezoo $ 100,000
Cost to
traditio
$
Cisco Cost Savings $
ting and Sal Quantity Del raditional Unit Cost
ness (Number of IT
ionals reached)
ion (Number of IT
1,600,000 $100
and
13,8
PM-- Compare to Cost of $ 1
Response Rate for Print Ads
or Banner Ads
1,3
cations vs. Others')
eration Events
eration Rate
$100 -- Compare to Cost of and
Response Rate for Direct Mail
$
isco's Consideration Rate
reased from 14% to 28%
Com
of R
pare to Market Intelligence
esearch Firms' Primary
Research
$
r of Leads Generated
f Leads Convert
92
te
$12,000
are to leads generated by
rketing firm @ $200 each
$
imum o
ales svia telezoo
f Lead Pipeline (Sti
and
$1 million
pent to acquire $1 of
new customer revenue
To
D
$
Achieve via
nal activities
1,591,800
1,491,800
Source: Telezoo Internal Document, October 2001
18. UVA-M-DRAFT-18-
Customer Revenue Model
Exhibit 5
TELEZOO (C)
Telezoo Revenue Model
Product
Integrated suite of
marketing and lead
generation tools
equipment vend
carriers
Telecom and networking
004
ors and
Annual Subscription fees:
$12,000 to
$264,000 in 2001
Key accounts
$1million in 2
Re
Procurement Tools,
search and
Nor
Comparison engine
epartments, enmalized specs,
Enterprise and c
and Telecom pu
D
arri
rchasing
e
Rebates on
er IT No charg
gineers docum
for tools
ented
purchases
Sa &
networking equipment
Medium and la
enterprise and c
les of telecom
and services businesses glo
rge Transaction fe
arriers
a
es ran
from $200 to $7,000
dateb ll
ging
to
y
Lead
System (LMS)
Management Telecom & networking Built into annual
tion for
leads
r
ads
equipment vendors and
carriers
subscrip
Telezoo
Annual fee fo
non-Telezoo le
Micro Sites Telecom &
uipment
nal
networking
eq
ca
vendors and
ne traderriers, onli
shows, director
businesses, inter
y/catalog
procurement platforms
sic
3
$100,000 for ba
micro site in 200
Business Intelligence
Reports
Telecom & networking
vendors, market research
nsultants,firms, co
publishers, media
$20K /year for one
market segment
$100k/year
average order in
2004
Source: Telezoo Internal Document, April 2002
19. UVA-M-DRAFT-19-
Exhibit 6
TELEZOO (C)
Telezoo Strategic Options
Category / Prospects Strategy
Purchase
Complementary Businesses: New
Mediary, TechTarget
Publishers: IDG, CMP, CNET,
Advanstar
Direct Marketing Services: Harte
Hanks, Sutherland
Market Research Firms: Gartner,
Forrester
Systems Integrators: SAIC, EDS
Software companies: Siebel, i2,
Freemarkets
•
•
• Im
•
•
•
•
•
•
•
Provides Relationships
Content quality and completeness
portance of Directory
•
• Industry S
• Comp
•
•
Processes
•
Ability to drive currency,
accuracy, and depth
Revenue and Margins
tandard
etitive Advantage
Access to Vertical
Unique Technology and
Public Offering
• Requires scale across Public and
Partner marketplaces
• Continued launch of lines of
business against new
opportunity
• Creation of brand
• Leverage business model and
technology into other industries
or complementary product lines:
i.e. software, professional
services, etc.
•
•
•
•
•
•
Revenue Growth
High Margins
Continual process and
efficiency improvements
Scalability of businesses
Broad scope of offerings
Industry Standard
Source: Telezoo Internal Document, April 2002
20. UVA-M-DRAFT-20-
Exhibit 7
TELEZOO (C)
Telezoo improves productivity of each marketing channel
Source: Telezoo Internal Document, July 2002
OLD WAY (without telezoo) Field Sales VARs Telemarketing telezoo DM, Print Total
Average Order Size 30,000$ 25,000$ 20,000$ n/a n/a 26,374$
Number of Orders 667 600 250 n/a n/a 1,517
Revenue from New Customers 20,000,000$ 15,000,000$ 5,000,000$ n/a n/a 40,000,000
Sales and Marketing Spend 19,000,000$ 14,000,000$ 3,500,000$ n/a 3,500,000$ 40,000,000
Cost/Transaction ($) 28,500$ 23,333$ 14,000$ n/a n/a 26,374$
Cost/Transaction (%) 95% 93% 70% n/a n/a 100%
NEW WAY (w/telezoo) Field Sales VARs Telemarketing telezoo DM, Print Total
Average Order Size 40,000$ 25,000$ 20,000$ 40,000$ n/a 30,088$
Number of Orders 500 600 250 63 n/a 1,413
Revenue from New Customers 20,000,000$ 15,000,000$ 5,000,000$ 2,500,000$ n/a 42,500,000
Sales and Marketing Spend 16,000,000$ 11,000,000$ 2,500,000$ 500,000$ 2,000,000$ 30,000,000
Cost/Transaction ($) 32,000$ 18,333$ 10,000$ 8,000$ n/a 21,239$
Cost/Transaction (%) 80% 73% 50% 20% n/a 71%
Improved Performance
Old Way New Way Delta
Increase in New Customer Revenue 40,000,000$ 42,500,000$ 6% Better
e.spire Revenue 310,000,000$ 312,500,000$ 2,500,000$ Better
e.sprire S&M spend 100,000,000$ 90,000,000$ (10,000,000)$ Better
Sales and Marketing % of Revenue 32% 29% -3% Better
Margin 68% 71% 3% Better
2002
