Table of content

Market- Decline of entertainment- Data phone growth- Market size- Data phone features- Data phone everywhere

Business- Business Model- Mechanism- Advertising integration

Management Team- Management Team

Marketing- Free membership- Monthly membership- Premium membership

Competition- Value proposition- Barriers-to-entry

Finance- Revenue projection- Exit

Q & A- Answers

Live role-playingexperience via mobile phones

Nob Seki, President & CEOSyncWorld, Inc.

(Carnegie Mellon University)

Entertainment in Japan30 million bored young people

Sing KaraokeCatch a movie

125

130

135

140

145

150

155

1998 1999 2000

153

135

CAGR-6%

47

48

49

50

51

52

53

54

1998 1999 2000

53

49

CAGR-4%

But movie & Karaoke customers declining…

Young people are looking for new fun!

Platform for multiplayer entertainment experiences via data phones

Data phones

PlayerPlayer

Our role-play experience include:1. Solving mysteries2. Finding clues3. Working with teammates4. Competing against teams5. Exploring the real world

Data phones growing 48% annually

0

200

400

600

800

2000 2002 2005

Millionusers

Others39%

US8%

Europe26%

J apan26%

Source: eTForecast, except Japan’s subscribers estimated by SyncWorld

Japan uses 26% of all data phones(60 million data phones)

40

225

730

CAGR48%

With data phones costing a penny,all teenagers have one

Hundreds of models are available…

1¢ 1¢ $25

Email

128 bytes: 3/10 ¢

A color photo: 8 ¢

Data phones are always in their hands

On the town Hanging outSubway & trains

Target: teens & young adultswith data phones

Japan: 25 millionGen X&Y users

Tokyo: 10 millionGen X&Y users

Tokyo

New generation cell phone: Data phone

2. Built-in digicam

1. High-speed

8. Harmonized Ring tones

3. Video conference

7. Electronic Payment

9. Digital Music

10. GPS Proximity

4. Email/Schedule

r5. Web

6. Java™

Extremely reliable network(email delivered in 5 sec)

Delivering a scenario viareliable cell phone network

Deliveringmissions

Mission

Solve the mystery of Easter Island

Email network(on mobile)

Reportingkeys

Communicatingwithin the team

Any ideaon thisstatue?

Networks combine content & sponsors

Audience/Consumers

Televisions

Movieprograms

Regularprograms

Moviecontent

Advertisers& Sponsors

Networks

TV

SyncWorld creates a networkfor game scenarios

Audience/Consumers

TVCable

Data phones

Premium scenarios

Monthly scenarios

Network

Advertisers& Sponsors

Gamescenarios

Integrate advertising into scenarios

Plot integration

- Product/ad woven into plot

Regular advertising

- Banners in messages

- Jingles / logos

See CNN.com & solve issue

Mission #2The clue is…

Feelthirsty?

Captain,we are …

Product/ad placement

- Reference to product/ad

- Clues aside product/ad

Vendingmachines Billboards

Marketing stage 1: Free memberships seed the market

Free membership– Access to sample

experiences (teasers)– Free of charge

Reach the first customers = viral marketing

– Media PR (game magazines/websites)

– Free events at college clubs & festivals (52% of colleges in Tokyo)

Marketing stage 2: Monthly memberships develop paying customers

Can you play “the Game” with us?

I’m not a member, but wait a minute.So let’s play!

Select service

Games: 1.SyncWorld 2. …

Welcome!

You play1. free?2. paid?

Sign up for paid service?($2.5/month)1.yes 2.no

Press

Press

Press

Monthly Membership– New scenarios monthly– $2.50 monthly fee– Sponsored scenarios– Easy, instant enrollment

Marketing stage 3: Premium annual memberships increase commitment

Premium Membership– Premium pay-per-play scenarios– $25 annual fee– Group enrollment discount

… to find a birthday treasure box

Explore Tokyo …

Value proposition for partners

Phone makersget

demand for newtechnologies

Advertisersget

ideal consumersfor advertising

Mobile carriersget

increased datatransactions

Scenario providers get

“one-stop” servicein real settings

Potential partners show high interest

NTT DoCoMo“In my opinion, this game concept really works and is

attractive” – Norihiko Hirose, VP, Business Development, DoCoMo USA

Dwango (game content company)“The idea of this game sounds familiar, but nobody has

implemented real-world games combined with real-world props, materials and advertising” – Hideki Mori, EVP, Development, Dwango

MJ (consumer marketing firm)“We researched a similar marketing approach with

favorable consumer reactions, but SyncWorld’s approach is better because it’s scalable” – Taka Kitamura, Director & Co-founder, Marketing Junction

Ideal team for this business must haveexpertise in six areas …

EntertainmentMedia/ad

experienceConsumer marketing

TechnologyStrong

networkingBusiness acumen

Management Team fits this business

Entertainment Media/ad experience Consumer marketing

Technology Strong networking Business acumen

Nob: Co-founded an Internet-based entertainment community A.N.D. in 1993

Nob: Designed & developed the business model of Nikkei’s site ITPro

Kaori: Experienced consumer product at Japan Tobacco.

Leading marketing project for a Ford SUV

Nob: Graduated in engineering

Covered in high-tech industries

Nob: Served as magazine editor in Tokyo & Silicon Valley since 1994

Nob & Kaori: MBA candidates at CMU.

Completed the Entre. course at London Business School (LBS)

Nob, co-founder & CEOKaori, co-founder & VP Marketing

Experienced advisors in key areasfully support management team

Entertainment Media/ad experience Consumer marketing

Technology Strong networking Business acumen

“Cyber Elite” selected by Time Magazine

Founder & CEO of a high-tech incubator Neoteny

Based in Silicon Valley & professor at Cornell

Author of High Tech Start Up

Co-founder of a marketing firm MJ

15 year experience in consumer marketing

Taka Kitamura

John Nesheim

Joi Ito

Four familiar barriers to entry

Reputation rating (eBay)

Friend network (AOL Instant Messenger)

Customer database

Partnerships (TV networks)

Technology platform (PlayStation)

Real-world platform (Disneyland)

Integrated network/platform

Social network for young people (Karaoke)

Grass-root, community oriented (Linux)

Branding

Team expertiseRight mix of management & advisors

Four revenue sourcesgenerate $89M in 2007

(20)

0

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60

80

100

2003 2004 2005 2006 2007

US$in Millions

Operating Income

25% ($25M)Advertising

18% ($16M)Outsourcing

20% ($18M)Commissions

37% ($33M)Registration& play fees

34x projected return to early investors

Stage 1Early adopters

Stage 2Paying customers

2002 2003

Stage 3Long-term commitment

OrganizationInfrastructure

Round A (Aug/02): $2.5M

Projected return: 33.78x

Round B (May/03): $4M

Projected return: 16.89x

MilestonesFree members: 50,000Paid members: 2,500

Exit: Tokyo is an active market

M&A

Trade saleActive investments such as acquisitions– Konami: 4 invests. in 1 year– Microsoft: 6 invests. in 3 years– Electronic Arts: 5 invests. in 3 years

IPOTokyo: heart of game & mobile– 4 game companies & 7 mobile

solution companies went public in the last 6 months

Four components of success

Vast market opportunity

Diversified revenue stream

High barriers-to-entry

The team that fits the business

Q & A: You may want to ask …

Business- Detailed revenue model- IT Platform- Ad scenarios- Site operation & support- Market size & customers

Competition- Price comparison- Strategic positioning- Growth strategy- Int’l expansion

Key data (SyncWorld)- Customer acquisition cost- Expenses- Headcount- Break-even analysis

Key data (customers)- Data cost of players- ROI of 3rd parties- Karaoke decline

Supporting slides follow

Sync a world you want to play ™

Thru partnerships

•Education

•E-guided tours

“I’d like to teach the world to play”

“Just play it”

Business modelFour revenue sources

•Promotional fees•Advertising fees

4: Sponsors Advertisers

•Customization fees•Outsourcing fees

3: CorporateCustomers

•Subscription fees•Play fees

1: Individual customers

Monthly member

Premium member

Create scenarios

Exploit our infrastructure

•Play fee commissions

2: Scenario providers

SyncWorld’s IT platform helps game experiences and marketing

Scenario ServerGame

Database

CRM system GAME system

Customer Database

ScenarioProviders

VARsResellers

Endusers

Game scenarios

TricoderWebChat

SyncWorld Platform

Billing

Marketing (CRM)

Ads management

Running scenarios

Managing client devices

Individual/team results

Peer feedback

Acquired skills

Platform (2) Site Operation supports players at front-end and back-end

Call Center

Customer Supports

Game Masters

?

Players

Facilitators

Navigate players

Check sites

Front-end back-end

Target: teens & young adultsData phone & portable game users

Japan: 5 millionGen X&Y potential users

.80 million (17%)by 2007

.25 million (16%)by 2007

Tokyo: 2 millionGen X&Y potential users

SyncWorld games are a bargain

$0

$5

$10

$15

$20

$25

Monthlygame

Premiumgame

Karaoke Movie

$6.2

$19.8 $19.4

$14.4

Data transmission cost is insignificant

Monthly game

On-site game Karaoke *1 Movie

Total cost per month

$6.2 $19.8 *2

$27.8 *3

$19.4 $15.0

Typical duration 1 hour 2 hours 2 hours 2 hours

One time play fee - $16$24

$19.4 $15

Monthly subscription

$2.5 $2.0 - -

Data cost $1.0 $1.8Play frequency 4 1 1 1

Messages from/to host

24¢ (12 msgs)5¢ (6 msgs)

48¢ (24 msgs)10¢ (12 msgs)

Messages b/w team 19¢ (24 msgs)5¢ (6 msgs)

38¢ (48 msgs)10¢ (12 msgs)

Pictures 24¢ (3 pics)24¢ (3 pics)

40¢ (5 pics)40¢ (5 pics)

*1 Ginza Big Echo, weekend *2 In-house game *3 3rd party game

Free members account for 17%, paid for 16% of targeted customers

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900Ja

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Monthly members

Free members

Premium members

Assumptions

•Free members follow DoCoMo’si-mode adoption curve

•2% - 20% switch to paid membership

•20% renew premiummembership first time

People in thousands

Target teens & young adults:5 million in Japan & 2 million in Tokyo

Data phone users

… 20.1% of them are active mobile phone game players

Source: Telecommunications Carriers Association, NTT DoCoMo, and CESA 2001 Survey

50.4% are teens & young adults …

50 million in Japan

5 million targeted users in Japan

20 million in Tokyo

2 million targeted users in Tokyo

Positioning: Through Niche followed by expansion like Netscape

Game Social Entertainment

Game console•PlayStation•GameCube

Low

High

Arcade game•Driving game•Experiencing

Amusement Park•Disney World

•Universal Studio

Gathering•Party

•Karaoke

Exposure to other people

Portable game•GAMEBOY

•PocketStation

SyncWorld

Theatre•Movies•Plays

Growth strategyExpand applications to other industries

Education/training companies– “edutainment” experiences for children– Training experiences for employees

Travel/tour companies– Electronic guided tour experiences

Social/dating network companies– Dating arranging experiences for singles

SyncWorld– Focus on game experiences– Host the outsourcing service

Growth strategy: Expand partnerships that start their own experiences

Various scenarios– Ad-driven to professional scenarios– Education, training, tour-guide, etc

Various occasions– PDAs, portable PCs, arcade games– Instant message (chat), TV, radio, etc

Various locations– Municipals, local communities, etc– International deployment

Expand advertising partnerships

Net-kiosks at convenience stores– Every store has a couple of the

kiosks– More than 15,000 stores in Tokyo– Selling music, tickets, print-out, etc

We increase visiting customers

Ad posting

Weave ads into plots Get ads before posted

Scenario generation– Generate stories &

plots based upon advertising

Advertisers

Scenario delivery

•Active reading

•Photo capturing

Decoding & messaging

Processing new events

Japan: Heart of new entertainmentthat the world does enjoy

Cartoons Karaoke Electronic games

Data phones?

International expansion depends upon countries’ readiness

Infrastructure Consumers Corporate

Asia Europe North America

Customer acquisition cost: $50 to 30Average CLV = $890

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Jul

Customer acquisition cost (weighted average)

Customer Lifetime Value (CLV)

Premium member: $1,200Monthly member: $ 270Average of the mix: $ 890

Monthly expenses

Monthly expensesR&D, S&M, Customer Support & GA

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R&D

Sales & Marketing

Customer Support

Administration

Monthly payroll

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Sales & Marketing

Customer Support

Administration

US$

Headcount: R&D and S&M

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Sales & Marketing

Customer Support

Headcount

Administration

Value proposition to mass mediaHelp them reach the audience

TV programs (CBS, etc)– Live shows by the audience

– “Survival in the city”

Online providers (AOL, MSN)– Live chat from game players

Advantages against partners

Independence of

infrastructure

Expertise in media &

advertising

Two-way relationship w/consumers

On-site

staffoperation

Expertise in the latest

technology

Adagencies

Mobilecarriers

Gamepublishers

Mobile carrier revenues moving to data services worldwide

100,000

120,000

140,000

160,000

180,000

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40,000

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US$ in millions

1998 1999 2000 2001 2002 2003 2004 2005

Service/ApplicationDriven

Data

Voice

Source: ARC Group

3rd parties get 192% ROI in creating a game to SyncWorld …

Game working rate: 90% 80% 70%

317%

ROI192%

104%

$0.0

$0.2

$0.4

$0.6

$0.8

$1.0

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$1.4

$1.6

$1.8

Better Base Worse

US$in Millions

R&D

Marketing

Profit

60 corporate customers in 2007Mostly through sales channels

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2002 2003 2004 2005 2006 2007

Direct sales

Thru sales channels

Assumptions

•Sales commissions: 100% of sales of the first month

Premium scenarios are played constantly

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100,000

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350,000

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450,000

J an

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Players of Premium scenarios

Premium members

Assumptions

•Each site holds up to 7,680 players

•If the working rate > 80%, a new site is added.

Break-even in 12 monthsPremium members generate $790/year

Base case

Aug/03 (12 months)

Profit (Loss)$ (000)

Totalpayingusers

Worse case

Jan/04 (17 months)

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(400)

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Annual net profit

@Premium: $790 (86%)@Monthly: $180 (60%)

Monthly: 1,930Premium: 3,860

Monthly: 18,894Premium: 0

Cumulative cash positive in 36 monthsreaches $43 million by 2007

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Aug/2005 (36 months)

Cash flow gets positive in 13 months6 month cyclic business

(2)

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6 month weighted average

Cash flow from operations

PositiveSep/2003 (13 months)

Cash position is sensitive to6 month cyclic business

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US$in Millions

Server renewal

Server extension

Game scenario sales are seasonalAssume similar pattern to real data

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Real data of 2000 game sales

Target: teens & young adultsData phone & portable game users

Japan: 5 millionGen X&Y potential users

.80 million (17%)by 2007

.25 million (16%)by 2007

Tokyo: 2 millionGen X&Y potential users

Portable games dominate market

Source: CESA, game devices sold in units in Japan and North America, 2000

47%53% Portables

PlayStation2PlayStationNintendo64Dreamcast

Japan

PlayStation

PlayStation2

Nintendo64

Dreamcast

49%51%

PortablesPlayStation2PlayStationNintendo64Dreamcast

U.S.

not only in Japan but also U.S.

Karaoke: Decline not due to recession

Karaoke stores

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70

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

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Karaoke visitors

Recession started