beginnings of personalization

Trusted Consumer Intelligence
Executive Business Plan

The future of personalization

Concept

Personalization is an undelivered promise from the internet revolution.  Responding to this need, Innovai is creating the first trusted consumer intelligence service. This service is a trusted 3^rd party available to all marketing channels for truly one-to-one interactions with the consumer.  It uses proprietary statistical and artificial intelligence based datamining solutions to derive information from consumer purchasing histories across distributed sources, filtering and focusing all marketing interactions.  This cutting-edge technology enables improved recommendation capabilities to proprietary merchant channels as well as bulls-eye targeting through existing marketing providers. With better technology and more data about the consumer, our trusted consumer intelligence service will dramatically improve marketing across all channels, changing it to become a continuous and intelligent conversation with each individual consumer.

To have a sustainable competitive advantage and execute through the initial hurdles, it is crucial to create the latest proprietary recommendation and predictive technologies, build the platform to market this capability, and continue to commit resources to improve and innovate these assets for next generation technology.  Innovai is creating this improved proprietary data mining technology, helping businesses search through their existing consumer purchase data for recommendations of future purchases.  Current players operating in the personalization market have been slow to move to new forms of delivery of their technologies, and alter their present business model.  However, as previously noted, there is a growing demand for businesses of all types and sizes to have access to the latest state-of-the art personalization capabilities as a service, allowing merchants to continuously improve their relationship with the consumer.  Fulfilling this need is the first step in Innovai’s plan.

However, Innovai has a greater vision for the future.  Its emerging technology capability targets access to a large number of independent merchant repositories.  With the consumers' permission, purchase information across merchants are combined together, enabling a unified prediction capability that benefits both the consumer and participating businesses. In turn, Innovai is creating the first personalized “google” of marketing.  Its proprietary technology,  SmartPredict, focuses on this vision through features that automatically help it learn and improve its predictive functions as more data becomes available.  Combining SmartPredict with datawarehousing infrastructure our  “trusted consumer intelligence” is provided to parties owning the advertising distribution channels such as internet service providers, cellular providers, and direct marketing players.  The consumer indirectly benefits from this service because he/she receives more accurate recommendations on proprietary merchant channels and more relevant offers across existing marketing channels.

Opportunity

Although both pure Internet and traditional retail companies have embraced the web and soon the wireless web as a sales channel, personalization technologies are not being used at the same level of sophistication as they can be created.  Among the reasons for this discrepancy is that much of the technology is overpriced and its integration cost expensive.  Further, personalization as it applies to advertising, specifically for one-to-one marketing is an undelivered capability.  However, many technologies have now converged to create a window of opportunity to deliver these features together in a seamless manner through a new type of service.

Both the personalization and advertising markets are set to grow dramatically.  According to Datamonitor, the global personalization market will grow from the present $500m to $2.1 billion by 2006.  Datamonitor emphasizes that personalization technologies dramatically enhance the understanding a business has of its customers while improving their experience online. These capabilities will become an increasingly crucial competitive differentiator across all channels of communication and distribution with the customer.  Additionally, Jupiter Media Metrix predicts that although online ad spending in the United States will increase only 5 percent this year, it will rebound and grow at a compound rate of 22 percent over the next five years—reaching a total of more than $15 billion by 2006.  At the same time, Jupiter also forecasts, that spending on digital marketing initiatives such as coupons, promotions, and e-mail will surpass spending on advertising, reaching more than $19 billions during the same time period.    Through sustained pursuit, merchant adoption, and commitment to engineering unique enabling technology, Innovai will seize the opportunity from both these markets to create the first trusted consumer intelligence service.

Technology

Innovai's proprietary SmartPredict Technology powers this vision with cutting-edge predictive capabilities.  Combining statistical and artificial intelligence based approaches, the technology is on the path of creating a trusted consumer intelligence for intelligent marketing.  Our proprietary technology will work together with our own datawarehousing capabilities to deliver on the long-term proposition.

Our SmartPredict Technology allows predictions of consumer response to any type of marketing offer.  Its features include making recommendations on items that a given consumer is likely purchase and predicting which consumers would most likely be interested in a product, service, or marketing offer.   SmartPredict can mine distributed merchants' consumer databases to discover the latest product and consumer correlations.  Through it a merchant gains the ability to engage a consumer in a more personal manner during the sales and marketing process, offering and highlighting products which this particular individual is most likely to purchase. As our technology makes use of all available data, it continually adapts, improves, and becomes increasingly accurate as more data is available.  Both the features of recommending products for a consumer and the targeting of a product to the most likely consumers are part our current SmartPredict version.

Currently being developed, is the ability to effectively combine and normalize data from multiple sources to power  inter-merchant data mining.  This will result in better predictive capability through both the increased volume and variety of data.  In order to accurately process data from these different sources, an Advanced Classification System (ACS) is being developed.  In addition, with the ability to combine and normalize data from multiple sources using ACS,  SmartPredict will enable inter-business datamining to produce more accurate results.  This will result in even greater predictive capability through both the increased volume and variety of data. The goal of ACS is to enable the automatic categorization and association of products based upon their descriptions, attributes, availability, and consumer appeal. Prediction of market demand for unreleased products, as well the accurate targeting of newly released products is then enabled.  Combining it with it identity mechanisms working with marketing channels, SmartPredict enables a one-to-one targeting service to reach consumers individually with the advertising that they will be most interested in.    Patents are pending on methods and components encompassing our technologies.

Strategy

Innovai has a clear strategy to execute on the vision and take advantage of our technology assets.  After raising our first round of funding, optimally of $3 million, we plan to hire the required personnel and buy the necessary hardware and software infrastructure to maintain our own datawarehouse.  With these resources we plan to productize our current SmartPredict technology and create the delivery platform to sell our current predictive capabilities as a service.  We will give our product away at first to attract an initial customer base, and then charge additional clients in the future to use our data mining services.  Providing our advanced personalization technology to merchants as a service at a discount to the current competition enables us to quickly gain merchant customers that have not adopted this type of technology because of its cost.  Within a year we plan achieve our first goal which is to secure an initial number of merchants using our personalization technology and having varying types of consumer product purchase histories.

Plans for the next phase are focused more in our goal to become a trusted consumer intelligence provider.  With an additional round of funding we plan to ramp up our technology capability to productize the next generation of SmartPredict.  There would be a new focus, of gaining access to a large consumer base through existing marketing channels and emerging digital “passport” capabilities.  This would enable us to discover trusted targeting information about the consumer based upon the information we derived from their purchasing information across merchants.  This consumer intelligence would enable one-to-one targeting for both marketing campaigns across current communication channels as well as product and service recommendations through proprietary merchant channels.  With a critical consumer base, and growing access to merchant purchasing information, Innovai’s trusted consumer intelligence service would be so effective that a second wave of merchants, advertising channels, and consumers would seek our one-to-one targeting intelligence for marketing. Our roadmap for execution is a clear path to market domination.

Return on Investment

The return from investing on Innovai is immense, as defined by the large market for personalization technologies in addition to long-term vision to improve marketing targeting.  Competitors in the personalization market currently provide overpriced capabilities.  Embracing the web services adoption, Innovai positions itself to quickly provide leading edge analytic and datamining capabilities to merchants.  The risk of this proposition is justified given the lucrative profit generating opportunities from charging both merchants for improved personalization technology and marketing providers for one-to-one consumer targeting through a single delivery infrastructure. 

                The benefits of having personalization technology for merchants, such as retailers has already been studied.  According to a survey of 25 top online merchants by Jupiter Communications, Jupiter found that customization at 24 consumer e-commerce sites boosted new customers by 47% in the first year while revenues rose 52%.  Some of the documented benefits gained from two past business cases are:

·       BMG - BMG Music Service's site transaction volume increased tenfold after introducing a personalization service based ATG's Profile Station software.

·       N2K - Sell-through jumped at least fivefold during an early test at N2K's Music Boulevard, zooming from 2-4% to 10-30%. N2K uses a collaborative filtering system supplied by NetPerceptions.

The enabling personalization software cost in these cases varied greatly. BMG's site development fees rose from $200,000 to $2 million (PC Week).  In contrast, artuframe.com, which uses a NetPerceptions system, reports spending only $100,000.  Amazon.com is another well-known company that owns and uses personalization and recommendation capabilities.  By providing such capabilities as a service, merchants are assured that they will always be up to date with the latest personalization solutions, while minimizing the infrastructure and maintenance costs.  Combining the revenue generated from integration work derived from strategic partnerships currently being pursued with implementation partner, this is by itself is a great business.  

                The greatest opportunity is from the trusted consumer intelligence aspect of the proposition.  Table 1 (below) summarizes our financial projections based on this capability.  In the first year, the service generates little revenue since we provide our personalization technology (SmartPredict) to merchants at a significant discount.   Slowly as we begin charging for this feature, we make more revenue from merchant service fees, ranging from 100k to $1 mill per customer.  As our technology evolves it is applied for consumer targeting based upon inter-business datamining, and a more lucrative business emerges from additional revenue generated from fees charged to marketing channel customers such as internet service providers and direct marketing companies to use our service to enable one-to-one marketing.  Finally at the end of the 5^th year, as we have more merchant customers and have better consumer targeting/intelligence capabilities, we gain momentum attracting a larger array of marketing channels paying us a premium to provide intelligent one-to-one marketing to all of their customers.  Our costs are controlled, since much of the infrastructure is reused, but the added value is in the form of software enabling the intelligence.  In a short period of time, Innovai delivers on the vision of a “trusted consumer intelligence” provider, creating a very lucrative business, and capturing all the monetary rewards derived from enabling one-to-one marketing.

Trusted Consumer Intelligence Metrics	2002	2003	2004	2005	2006
Total Merchant Customers	2	8	20	40	60
Marketing Channel Customers	0	2	5	8	10
Total Participating Consumers (thousands)	0	2000	10,000	50,000	80,000
Expenses (millions)	3	20	30	35	50
Revenue (millions)	0	2	10	81	203
Profit (millions)	(3)	(18)	(20)	46	153

Table 1:  Innovai Financial Projections

Future

The future is bright and full of opportunities for Innovai, as the leading trusted consumer intelligence provider, personalizing the interaction with the consumer across mass-marketing channels and enabling improved recommendation services across proprietary merchant channels.  Developing state of the art technology that will find strategic marketing correlations, we plan to help science better guide the creative aspects of advertising.   Additionally, our technology will mine varying types of data to discover information providing insight into the effectiveness, depth, and efficiency of any marketing campaign—potentially right down to an individual advertisement.  With the growth and success of Innovai, personalization will no longer be accessible to a select few, and will make the visions of one-to-one marketing reality.

The TeamThe Innovai team is an energetic group of individuals planning to change the way marketing is done.