WO2000041052A2

WO2000041052A2 - Method and system for capitalizing a business and maintaining a customer base and/or revenue base

Info

Publication number: WO2000041052A2
Application number: PCT/US2000/000118
Authority: WO
Inventors: Thomas H. Moore
Original assignee: Moore Thomas H
Priority date: 1999-01-05
Filing date: 2000-01-04
Publication date: 2000-07-13
Also published as: WO2000041052A8; WO2000041052A3

Abstract

A method and system for capitalizing a business entity and developing and stabilizing a customer and/or revenue base. Once a product to be sold by the business is developed by the organizing business, an ownership interest (209) in the organizing business is authorized. Each product (301) is sold to a customer together with a right to purchase a quantity of the authorized ownership interest (303) in the organizing business entity (207). Upon a customer's request, the right (204) is exercised and the organizing business entity issues a preselected quantity of ownership interest. Thereafter, the customer becomes a customer-partner and qualifies to receive ownership benefits (313) in addition to product benefits (309).

Description

METHOD AND SYSTEM FOR CAPITALIZING A BUSINESS AND MAINTAINING A CUSTOMER BASE AND/OR REVENUE BASE

BACKGROUND OF THE INVENTION

1. Field of the Invention. The present invention relates, in general, to methods for operating a business entity, and, more particularly, to a method and system for capitalizing a business entity and developing and stabilizing a customer base and/or revenue base

2. Relevant Background. For any business entity to thrive it must first attain and then maintain a stable customer base This is particularly difficult for startup businesses where they must create the customer base from nothing and grow that base up to a level sufficient to support the business endeavor Traditionally businesses relied on techniques such as product differentiation and advertising to accomplish these tasks As used herein, the term "product" includes both goods and service type products including bundles of goods, services, as well as bundles of goods and services together

Product differentiation means to provide a product that is perceived by the customer base to be marginally superior to competitive products This marginal superiority must be sufficient to draw customers from the competitive product Although offering a marginally superior product remains a sound way to maintain a customer base, it suffers some limitation from the business perspective For example, the business must maintain the superiority over its competitor's products This is difficult or impossible for products such as service products where improvements are readily copied by competitors Further, effective advertising may create an incorrect customer perception that a competitor's product is superior. This enables large, well funded businesses that can afford deep advertising budgets to compete against new market entrants even where the new entrant has superior products. The result of such techniques is often a marketplace with inferior products where the marketplace has such high entry barriers that newcomers with superior products cannot create and maintain sufficient market share to survive.

Another problem for businesses involves generating and maintaining adequate capital (e.g., funds, cash, or other economic resources). Capitalization is a continuing problem for business entities (e.g., corporations, partnerships, and the like). This is particularly true in the case of startup businesses that do not have a proven track record of profits and a stable customer base. Capitalization is even more problematic where the business competes in a market with little differentiation between competitors. In such cases, the market is often divided amongst many competitors so that no one competitor can provide economies of scale that lower costs to that business's customers.

In many markets this division results in lowering profit margins to a point where market participants (i.e., businesses offering products to the market) flounder while the low profit margin creates an entry barrier to new competitors. In such cases, the customer base desires a product provider that can more efficiently provide the product so that the cost to the product consumer is reduced.

Traditionally, each business entity competes to provide a product marginally superior to the products of its competitors. Each entity intends that the margin of superiority is sufficient to gain a sufficient market share so as to afford that business an economy of scale that will allow it to provide its product more efficiently than can its competitors. Unfortunately, many markets do not permit sufficient product differentiation to provide the desired marginal superiority. As a result, end users tend to use multiple product suppliers and may switch between suppliers over time such that economies of scale do not become a benefit to the consumer. In such a circumstance it is apparent that an unstable customer base is disadvantageous to both the business and the end user. Hence, a need exists for a means to differentiate between product providers that also allows the end user to have the best available products at any given time.

Similarly, many products require a sufficient level of end user recognition before the product becomes practicable. For example, a "yellow pages" type business directory works well only when a sufficient number of product end users recognize the particular publication as "the place to go" for business information. Advertisers wish to advertise in a place where they will reach the most customers, and customers wish to use a directory that has the most comprehensive collection of advertisers. This creates a "chicken and egg" problem that raises the entry barriers for new competitors. The entry barrier for new competitors is high because end users are familiar with and tend to continue using the existing product. Also, the cost to customer in this instance is high because of the lack of competition. A need exists for a method and system for lowering entry barriers to markets where superior products require a critical mass of customers to achieve a level of market acceptance that draws a sufficient number of end users to support the business.

A particular problem exists in businesses where the customer (i.e., the purchaser of a product from an organizing business) is different from the end user of a product. Advertising is a particular example of such a business. Advertising is purchased from an advertising agency, media company, or the owner of a business directory publication, for example. In this transaction the advertiser is referred to as the "customer" and the party selling the advertising space is referred to as the "organizing business entity". However, the end user of the advertisement is neither the organizing business entity nor the customer, but instead is a third party consumer that uses the advertisement to aid in product selection. For clarity, the consumer is referred to as the "end user" herein. All of these parties share a desire to reach end users with the customer's message at minimal cost to the customers. These costs are not simply monetary, particularly in the case of the end user. The end user desires to receive advertising that minimizes the time and effort to compare product suppliers thereby enabling the end user to select the best from among the available sources.

SUMMARY OF THE INVENTION

Briefly stated, the present invention involves a method for capitalizing a business entity and developing and stabilizing a customer and/or revenue. Once a product to be sold by the organizing business is developed, an ownership interest in the business is authorized to be sold to the customers of the organizing business. Each product is sold to a customer together with a right to buy a preselected quantity of the authorized ownership interest in the business entity. Upon a customer's request, the right is exercised for the preselected quantity of ownership interest.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 shows a networked computer environment implementing the system, method and devices in accordance with the present invention;

FIG. 2 illustrates basic product components in accordance with an embodiment of the present invention; and

FIG. 3 illustrates in flow diagram form details of a particular embodiment of a method and system in accordance with the present invention. DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

The present invention is particularly described in terms of a business application for creating and stabilizing a customer and revenue base in an electronic business directory service. However, it is contemplated that the teachings of the present invention are more broadly applicable to other businesses facing the challenges of capitalization, customer base stabilization, and revenue base stabilization. An understanding of the present invention is aided by a clear understanding of the following terminology:

"organizing business entity" is the business entity that is using the methods and system in accordance with the present invention to provide a product to a customer base for the purpose of creating a revenue base.

"customer" is the person or entity that purchases the product from the organizing business entity. In the particular examples herein, the customer is typically an advertiser.

"customer-partner" is an entity that, in accordance with the present invention, is a customer as defined above that also holds an ownership interest in the organizing business entity.

"end user" is the person or entity that actually uses the product. In most of the examples herein, the end user is different from the customer, although this is not true in all contemplated applications.

"customer base" is the group of customers that purchase the product from the organizing business entity. A "stable" customer base is a customer base that is biased in favor of the product offered by the organizing business entity as opposed to competitor products so as to reduce a tendency to shift between competitive products.

"revenue base" is an income stream generated from selling a product to customers. A "stable" revenue base is one that tends to remain constant or increase in a predictable manner in the face of competitive market forces such as entrance of new competitors.

"ownership interest" broadly refers to any type or kind of claim that one may have to the equity or future profits of an organizing business. An ownership interest is typically, although not always, represented by some legal instrument such as a contract or a share of stock. As used herein, an ownership interest may range in kind from a promise or contractual obligation to a fully transferable unrestricted stock.

FIG. 1 illustrates a typical distributed computing environment, such as the Internet, in which the present invention may be implemented. In overview, FIG. 1 shows general and/or special purpose computers, workstations or personal computers that are connected via communications links of various types. The representative computer system shown in FIG. 1 includes a workstation or personal computer (PC) 111 coupled to communicate with other devices through a network, fabric or other data communication "cloud" 116. Workstation 111 typically includes input/output

("I/O") devices, central processing unit ("CPU") and memory sections (not shown) and an associated monitor for interacting with a user. A variety of input devices, such as a mouse or keyboard, form a portion of the workstation 101 and are coupled to the I/O section to provide user input data.

Host computers such as host 101 are accessible through the network 116 to provide requested data and services to end users such as workstation 111. Host 101 typically includes mass storage devices such as CDROM and hard disk devices (not shown) for read only and read-write storage. Additionally, host 111 may access external mass storage devices such as disk array 102 that is directly connected to host 101 and disk array 103 and tape storage 104 that are coupled through connections to network 116. ln a particular implementation, host 101 implements an internet-based business directory that is essentially a database for storing, retrieving, and distributing business information. The business directory includes a plurality of entries with each entry associated with a customer business. The business information may include, among other things, business name, address, phone number, SIC code, and other equivalent types of information useful in identifying the products and services provided by the business. Data storage device 102 stores the business directory in, for example, a database having a plurality of entries. An organizing business entity operates host 101. It should be understood that the organizing business entity may own host 101 and/or storage devices 102-104, or may lease storage space and processing time from a third party that owns the hardware equipment.

The computer program devices in accordance with the present invention are instantiated in host 101 and are operative to interface with users through network 116. The computer program devices in accordance with the present invention process requests to access data from the business directory database and respond to those requests by providing that data to a user operating, for example, a workstation 111.

In addition to business and product identification data, the business directory database includes a pointer or hyperlink pointing to an internet world wide web site associated with the customer business. Host 101 also includes computer program devices configured to implement and host the customer's web site. Alternatively, another host 101 (not shown) may host the customer web site. In either case, the host entity controls both the directory database and the customer web site and sells the customer a product that includes a directory listing and the customer web site.

Network 116 may be implemented as a public network, a wide area network (WAN), local area network (LAN) and may use any available technology for establishing communication links such as Ethernet, Fibre Channel (FC), transfer connection protocol (TCP), Internet Protocol (IP), asynchronous transfer mode (ATM), digital subscriber line (DSL), cable, satellite, and the like Network 116 may also couple to external LAN or WAN subnetworks such as LAN 108 including workstations 112 and 113 and a server 1 10 coupled together by a hub 109

Each host 101 serves to provide requested data in response to request data packets received from network 116 In accordance with the present invention, each host 101 can have a unique interface, data format, query syntax, security protocol, and the like For example, server 101 may be configured as a web server and so responds to hypertext transfer protocol (HTTP) request packets and generates responses formatted as hypertext markup language (HTML), standard generalized markup language (SGML) or extensible markup language (XML) web pages, and the like In contrast other servers 101 may use file transfer protocol (FTP) or other available transfer protocols, both public and private

In a particular example, at least one server 101 implements a web server that hosts a customer "website" having a predefined structure and access syntax and protocol In general each website is designed to provide information about the associated customer's product offerings in response to queries communicated through network 116

The communication process involves a request message generated by computer 111 that is addressed to a specific server 101 The request message is processed by the receiving server 101 which responds by returning a web page in, for example, HTML format In conventional applications where the computer 111 is running a web browsing application, the HTML page is rendered and displayed on the requesting computer 11 1

In a distributed computing environment, some of the computer program products containing mechanisms to effectuate the apparatus and methods of the present invention may reside in the memory and mass storage portions of the workstations 111 , 112 and 1 13 The computer program products containing mechanisms to effectuate the apparatus and methods of the present invention are readily embodied in magnetic, optical, magneto-optical or other available machine readable encoding systems

As shown in FIG 2, the organizing business entity provides a product

201 that comprises one or more components that can be purchased by a customer The present invention is particularly illustrated as an advertising product and more specifically as an Internet based web site hosting service and product directory, however, it should be understood that the inventive features of the present invention may be usefully applied to other products For example, banking services, financial services products, telephony products, subscription services as well as conventional goods may benefit from the business model implemented by the system and methods in accordance with the present invention

In the example of FIG 2, the product 201 includes a directory listing

202 and a web site 203, both described above Directory listing 202 comprises a plurality of entries selected from a database 205 in response to an inquiry from end user 210 Directory listing 202 includes a number of entries where each entry is associated with a particular customer of the organizing business entry Typically the customer's in directory listing 202 are competitors that have each purchased an entry in the directory database 205 Each directory entry includes a hyperlink pointer to the website 203 to aid in directing a customer inquiry from the directory listing to a particular web site that is associated with an end user selected customer business The content of the customer specific web site is typically selected and arranged by the customer to provide the end user with product information unique to that customer An important feature of the present invention is that each product 201 includes a right to ownership 203 that can be exercised at the customer's request to obtain an ownership interest 209 Preferably, the right to obtain an ownership interest 209 is exclusive to those who have purchased a product from the organizing business so that the owners are either the founders of the organizing business and the customer-partners that have exercised their rιght(s) 204 Ownership interest 209 enables a customer that purchases a product 201 to purchase an ownership interest in the organizing business itself This ownership interest 209 may be in the form of shares of stock, restricted stock shares, partnership interests, preferred stock, options, contractual rights to buy, and the like The right to ownership 204 is exercisable by the customer ownership interests 209 in a ratio determined by, for example, the amount of business done between the customer and the web organizing business entity Other criteria may include the size of the customer's web site, the number of entries purchased by a customer in the directory database 205, or the length of time that a customer has been a customer of the organizing business entity These criteria and others will be readily apparent to those of skill in the art and are readily modified to meet the needs of a particular application

An important advantage of the ownership interest component of product 201 is that each customer becomes an owner of the organizing business entity in rough proportion to the amount of business that the customer does with the organizing business entity Customers who choose to exercise the ownership right 204 will potentially receive future benefits not only in the form of product benefits, but also in the form of owner benefits such as dividends, increased stock price, and the like This feature of the present invention provides an incentive for customers to continue purchasing advertising services from the organizing business entity because as part owner, they receive a direct benefit from their own purchase Also, this feature of the present invention provides a mechanism by which end customers of otherwise diverse business interests can band together to control the products and services provided by an organizing business entity. In this manner, the ownership interest feature provides both a means for creating a customer base and a means for stabilizing that customer base once created.

The coupling of a right to an ownership interest with the purchase of a product is an efficient way of raising capital. This is of particular importance for startup organizing business entities. Because the shareholders are customers it is contemplated that they will be superior shareholders as compared to those gathered by conventional capitalization mechanisms. The customers/partners will have common interests that include not only profitability of the organizing business entity, but also a fundamental interest in the competitiveness, quality, and sustained performance of the organizing business entity's products themselves.

In essence, the ownership interest component 209 serves to differentiate product 201 where other features of product 201 are difficult to differentiate among competitors. For example, many competitors can provide web site component 203. Any innovation in web site 203 is readily copied by competitors thereby preventing its use as an effective product differentiator. However, because a competitor site 207 cannot offer the equity component, end-users will continue to prefer product 201 to those offered by competitor site 207. Moreover, because customers owning products 201 are also owners of the organizing business entity, they have not only an interest in improving product 201 , but also the control necessary to implement changes to product 201 that will make it superior, or at least competitive with any product offered by competitor site 207.

An optional feature of product 201 in accordance with the present invention is that each product 201 includes an obligation 206 owed by the organizing business entity to the customer to purchase entries or "hot links" on competitive business directories that include hyperlinks that point to the customer's web site 203. A hot link in a hypertext media system such as the World Wide Web is a reference to another document that when activated by a user loads the referenced document into the user's browser application (or the equivalent). Component 206 serves to increase the distribution and accessibility of the customer's web site 203 to the end users. In the past, this cross listing technique was not implemented because the competitor site might steal the customer's business by providing a competitive product that was substantially equivalent to product 201. However, in accordance with the present invention product 201 provides sufficient marginal superiority by virtue of ownership interest 209 such that the benefits of cross listing with a competitor site 207 can be achieved without risk of losing the customer. It is contemplated that the net benefit of the competitor link purchase component will increase the value of product 201 and provide increased exposure and distribution for the products of the customer and increased selection for the end user.

A further component shown in FIG. 2 comprises an obligation 208 owed by the organizing business entity to the customer to spend a fixed portion of the purchase price of product 201 on promotion of the organizing business entity's product 201. In essence, product 201 includes an obligation on the part of the organizing business entity to contribute an agreed upon portion of the purchase price to a promotional fund where that promotional fund is dedicated to promotion of the organizing business entity's product (not the customer's product directly).

This promotion can be in the form of advertisement or other promotion directed to attract additional end users 210. Component 208 had little value in the past because the customer had little interest in whether the organizing business entity promoted product 201 or not as such promotion primarily benefited the organizing entity, not the customer. However, because the customer is optionally a part owner because of ownership component 209, an obligation to promote future sales of product 201 is directly beneficial to a customer.

All of the components of product 201 shown in FIG. 2 work cooperatively to 1 )unite a diverse group of customers into a cohesive and stable customer base 2)stabilize the revenue stream generated by a particular product and 3)capitalize the organizing business entity with a group of owners with superior motivation. These features of product 201 are particularly useful in markets where the customer base is readily fractured. In addition to markets where there is little product differentiation, the present invention is useful in markets where there exist few factors that tend to make the customer base cohesive. For example, where the customer base includes customers with varying business needs, diverse economic and social backgrounds, and the like, there is little opportunity for the customer base to achieve a "critical mass" sufficient to sustain the host business. The present invention essentially creates this cohesion by binding an ownership interest with a product offering.

The present invention is also particularly useful in markets where the end user of the product is different from either the product provider (e.g., the organizing business entity in the particular examples) or the product purchaser (e.g., the customer or customer-partner in the particular examples).

A typical example of such a market is an advertising market.

FIG. 3 illustrates steps in the operation of the method and system in accordance with the present invention. In step 301 a product is developed comprising goods, services, or a combination of goods and services such as product 201 described hereinbefore. The organizing business entity performs the product development 301 directly or through the use of agents. Alternatively, an organizing business entity may purchase rights to a product that is already developed by a third party. ln step 303, the organizing business entity authorizes, using available or required legal means, an ownership interest in the organizing business entity itself. Various governmental authorities may have diverse requirements for the authorization in step 303 and so the appropriate combination of steps must be chosen in step 303 to meet the needs of a particular jurisdiction.

The ownership interest authorized in step 303 may be divisible and freely transferable on a public exchange, restricted to trading on a private exchange, or restricted from trading for a period of time, or a combination of the above according to the securities laws of the appropriate governing authorities. To give the ownership interest value they must be transferable in some fashion, but it is contemplated that a wide variety of ownership instruments may be used to provide the value needed in a particular application. Accordingly, it is not intended that the present invention as defined in the appended claims be limited by the type of ownership interest authorized in step 303.

In step 305 a product 201 (shown in FIG. 2) is sold together with the right in step 306 to purchase the ownership interest that is authorized in step 303. At the end user's discretion the right transferred in step 306 can be exercised or not in step 307.

The right will have a time period in which it must be exercised to convert the right 204 into an ownership interest 209. If the right is not exercised, the customer becomes something akin to a conventional customer with the organizing business entity providing the product in step 309. The customer thereafter receives the benefits of a superior product 201 but is not otherwise obligated to, or benefited by, the success of the organizing business entity.

When the right of step 306 is exercised within the predetermined time period, ownership interest 209 (shown in FIG. 2) are issued to the customer, typically in the form of tangible ownership instruments, in step 311 and the customer becomes a customer-partner. The exercise step 307 most likely will require a purchase of ownership interest (e.g., shares of stock) by the customer thereby bringing working capital into the organizing business entity. As shown, the organizing business provides the product 201 to the customer in step 309 and may provide a dividend and/or other ownership benefits to the customer-partner on a regular or semi-regular basis in step 313.

In the case of renewable products such as advertising or a subscription service, the product 201 provided in step 309 will expire and need to be renewed. In such cases, the process returns to step 305 in which the product is sold, once again with rights to purchase an ownership interest in the organizing business entity.

It is contemplated that at some point in time a sufficiently stable customer base and/or revenue base will have been achieved such that further sale of ownership interests of the organizing business will not be desired. It is further contemplated that an organizing business entity may at such time opt out of the process in accordance with the present invention by several means. For example, the current owners may agree to discontinue the sale of stock as a component of product 201 and continue to sell products and ownership interests de-coupled from each other. Alternatively, the shareholders may distribute any remaining authorized stock to themselves and continue to operate the organizing business entity in a conventional fashion.

Although the invention has been described and illustrated with a certain degree of particularity, it is understood that the present disclosure has been made only by way of example, and that numerous changes in the combination and arrangement of parts can be resorted to by those skilled in the art without departing from the spirit and scope of the invention, as hereinafter claimed.

Claims

I CLAIM:

1. A method for capitalizing an organizing business entity comprising the steps of: developing a product to be sold by the organizing business; authorizing an ownership interest in the business; selling a product to a customer; offering only to customers that have purchased a product a right to buy a preselected quantity of the ownership interest in the organizing business; and issuing an ownership interest to the customer in response to that customer's request to exercise the right to buy the preselected quantity of ownership interest.

2. The method of claim 1 wherein the ownership rights provide a potential beneficial return to the customer based upon future performance of the business entity.

3. The method of claim 1 wherein the ownership interest comprises restricted equity shares that cannot be transferred for a period of time.

4. The method of claim 1 wherein the ownership interest may be transferred by the customer to a third party that is not a customer of the organizing business.

5. The method of claim 1 wherein the product comprises Internet- based business directory services including a directory listing for the customer.

6. The method of claim 5 wherein the product further comprises purchasing services causing the business to purchase competitor products on behalf of the customer.

7. The method of claim 6 wherein the step of selling comprises selling the product for a business specified purchase price, and the product further comprises a contribution of an agreed upon portion of the purchase price to a promotional fund dedicated to promotion of the product.

5 8. A system for performing electronic commerce comprising: a server computer having a data storage unit coupled thereto and a user interface; a business directory stored in the data storage portion, the business directory comprising a plurality of entries wherein each entry is associated o with a customer that purchased the entry; computer program devices operating on the server to enable users to access the business directory; an organizing business entity operating the server computer; and an authorized ownership interest in the host business, wherein each 5 entry in the business directory is associated with a right to buy a preselected quantity of the authorized ownership interest.

9. The system of claim 8 wherein the rights at least some of the customer's have been exercised upon that customer's request.

10. The system of claim 8 wherein each entry in the business 0 directory is associated with a specified purchase price, and each entry is associated with an obligation on the part of the organizing business entity to contribute an agreed upon portion of the purchase price to a promotional fund dedicated to promotion of the organizing business's product.

11. A business directory product provided by an organizing 5 business entity comprising: an internet world wide web site; an entry in an Internet business directory with the entry including a hyperlink pointing to the world wide web site; and a right to buy a preselected quantity of ownership interest in the organizing business entity.

12. The product of claim 11 further comprising: an obligation on the part of the organizing business to purchase competitor products on behalf of the customer.

13. The product of claim 11 wherein further comprising an obligation on the part of the organizing business to contribute an agreed upon portion of the product's purchase price to a promotional fund dedicated to promotion of the product.