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An illustrated and animated primer
- diagrams:
- animations (Virtual Fair format):
- matching criteria:
An ePrio-based confidential matching service can take many different forms, according to the domain and the domain maker's choices.
The examples below are intended as quick sketches only. For formal designing, look up the tEC domain maker manual.
I- Who are tEC domain makers
I-1 the benevolent leader
You are active in a particular domain. You belong in fact to some community of members sharing the same interests. This community may be local, defined by geography and avocation, or professional, defined by area of expertise, or based on any manner of concern.
This community may happen to be big enough and fluid enough that there is a need to facilitate contacts between members or between members and the outside world.
One good reason may be because there is explicit or implicit competition between members.
e.g.
- all professional musicians of local standing in some metropolitan area
- all charitable projects within a geographic area, which compete for the same donors' dollars
- competition is also very keen within academia, where ideas and knowledge are freely traded with self-interest in mind
- and what is more competitive than the marriage scene for those with an ethnic, moral or religious preference ?
Another reason is that suppliers may clamor to get the attention of the members while members yearn about a life free from unwanted sollicitations. e.g. homeowners versus the many suppliers of home, house and garden goods and services
The matter is that you have the three qualities which mark you as a benevolent leader:
- you know very well what are the key questions on people's minds when they interact within or with, your community
- people know you or know of you as someone both knowledgeable and trustworthy
- you do not mind taking the steps necessary to improve the working of your community, if they prove efficient
To you, ePrio offers the means to get a matching service going with little expense.
Better still it gives you the comfort to know nobody can later on accuse you of buttering your own bread first under cover of helping others. "Hands off confidentiality" gives no competitive edge to a tEC domain maker as a user of his or her own domain. This is unlike all other solutions, which would give him or her access, directly or indirectly, to other users' information, competitors included.
I-2 the bold organizer
You are a born entrepreneur. A glance at ePrio's unique approach to matching services and you know there is money to be made before slower competitors wake up to the opportunity. Before checking ePrio's terms and conditions, it is worthwhile to review what domain making is all about.
Since your goal is to make money, you can bet others are already busy doing what you intend to do. The only difference is that these incumbents must use some form of a database. With the database comes power over their users, a power to which they have become addicted. Compared to you, even small non profit alumni or professional associations selling their members' list are Big Business and act accordingly.
Against this competition, think of yourself as a union organizer. You need to persuade enough individual players that Big Business has already accumulated too much data and control and yet cannot deliver enough precision and negotiating power. While an individual player, a consumer, an employee, a citizen, but also a line manager, a small business owner, a professional worker, while each of these players has absolutely no chance to change the current system by him or herself, they can undercut the power of the database by simply trying your solution first.
If your organization drive is successfull, for example because you are a student leader, a community activist, a networking fiend, if you are focused enough on a domain of interest within your reach, if your matching service is well designed, users will start getting contacts through you and forget about the database service. Sheer size does not matter in itself. Good results do.
But new worlds also await your discovery. There the only competition is word of mouth among friends.
- This is the case of new niches. Emerging needs have not been met yet and no competitor enjoys the incumbent status.
- This also happens with known domains whose complexity have discouraged the use of traditional tools.
E.g. imagine a matching service for at home care for the elderly. Too recent a need, too many variables to match, too personal information to reveal for comfort. Big Business is not present, even less entrenched.
To you, ePrio offers the means to get a matching service off the ground with almost no capital and a unique edge over your competition: better services through better privacy. Plus freedom from lawsuits over content
I-3 the smart investor
You know all about making money. To make a lot of money, one need three things: a lot of money to invest, some kind of a monopoly to enjoy and the operational skills to deliver. You have already noticed, tucked in ePrio's message about giving priority to privacy, the fact that ePrio's technology is protected by several patents, granted or pending. Let us then assume ePrio's terms and conditions offers you a fair way to share in its legal monopoly.
Your situation is not without resembling the case of the bold organizer. Whatever you do, you will have to face an incumbent and the strength of your competition will be the size of its current database. When a user looks for a match, probabilities favor the largest market, i.e. the incumbent.
But you also understand how fragile the power of the incumbent is: the contracts it manages are fairly easy to break and, besides, most users do not even have to sign a contract. Since you know that perception is reality, all you need is to communicate the advantages of your solution to the user base ahead of time so as to convince users to switch en masse when your own market opens. And good communication is a matter of money, to which you have access.
Changing market circumstances can especially help you unseat the incumbent. Most databases are simple minded affairs, driven by the volume of common searches. When the transaction volume contracts, three things happen: the incumbent's profit falls sharply, more users are left unsatisfied and all users become more specific, ready to wait for the "right" opportunity. That builds up a constituency ready for you. For tEC precise matching, coupled with "hands off confidentiality", means that your users can look and wait without cheapening their negotiating power,
e.g. in real estate markets, "eager to sell" adjectives and "price reduced to sell" signs attract bargain hunters but drive away the perfect buyer, who absolutely needs that location, that number of bathrooms and that separate entrance.
What you need is to find the optimal focus for your initial attack. For a first victory brings a reward well beyond its immediate spoils. Let the world know you have momentum, your communication cost decreases exponentially, ripping your competition apart like a plastic sheet after the first cut.
To you, ePrio brings the monopolistic edge with which to carve out a new Internet business, according to your own business model. Combine ePrio's patent portfolio with your business focus.
I-4 the shrewd incumbent
You are the incumbent. Granted, your business model is unsustainable and you know why:
- the costs of print media are for ever increasing while young readers no longer compensate for those whom you lose to old age.
- the growth of your own Internet business is stunted in view of the economy of scale enjoyed by a Google, a Yahoo, an eBay, an Amazon.
So your goal is to get cash out of the cow, not to invest for the future nor to get featured by Inc. Magazine. Yet you are just as smart as those pesky entrepreneurs, so busy eating away the hay from your cow while calling you a dinosaur. You would not consider out of line to remind them a live dinosaur is rather something to run away from. Why not steal a few pages from their book, if only you could do it without consuming cash.
What if you considered stealing two pages? One from the smart investor and one from the bold entrepreneur.
For instance consider the areas which border on your current domains. e.g according to geography for local newspapers, profession or subject matter for trade magazines. In these domains in which you have nothing to lose and everything to gain, you are not going to spend money you cannot afford if you act like the bold entrepreneur. And against the more conservative incumbent whose domains you invade, you can act like the smart investor, taking advantage of your domain knowledge, your business experience, your current economy of scale, and your local reputation to breach your opponent's local defenses.
And remember that, with a bit of imagination, you will find new domains in your own backyard, where there is no incumbent at all, not even yourself, e.g. matching services in home care for the elderly.
Consider ePrio's service as outsourced, production-ready R&D and your current reputation as underutilized marketing power. A project with no budget cannot be stopped by accountants. And before you decide to wait and see, ready to buy out the bold entrepreneur when the risk has disappeared, read below the ePrio's terms and conditions to understand how ePrio intends to reward those who choose to take the risks.
To you, ePrio brings the possibility to try out the future without having to attack yourself and consume cash in the process. Because tEC is at its very beginning and you are facing retirement, complement inexpensive experiments with depreciated experience in a "may win - can't lose" scenario.
II- ePrio's proposal
II-1 what you get
ePrio's proposal to you, the prospective domain maker, is based on a tEC grid. The grid is there to define and measure the alignment of the parties to be matched by your service. Well focused, it is made of the criteria you have carefully selected for maximum efficiency. Neither too many, as users would be confused, nor too few, to ensure well informed matches.
The deal is for ePrio to make your grid accessible by all tEC users so that you can run a matching service for the corresponding domain. In order to receive mail and matches, users will use this grid to declare their filters and c-filters according to the templates you will provide them.
Your service will be listed for one year and be granted exclusivity, together with an advantageous renewal policy. Given ePrio's legal monopoly on its patented platform, this is provides you with a real opportunity to develop a business or help your community.
For exclusivity to work, the domain needs to be well defined per its underlying grid.
Take online dating for example. You may claim exclusivity in a metropolitan area such as Greater Boston if your grid contains precise geographic criteria describing the Greater Boston area. It is probable that, as you develop your grid, you will find impractical for the users to go into too many details about religious beliefs and practices for, if you cover one religion well, you must cover them all. If that is the case, someone else may also claim exclusivity to a domain specialized in dating for followers of a particular faith, including Greater Boston.
On the other hand, a grid trying to compete with a national, let alone international service such as Yahoo personal, will not be acceptable. Nobody can claim to service well such an amorphous "market". But you may have the necessary experience to build a well informed grid to address the concerns of people of a certain ethnic origin, wherever in the world they happen to reside.
Finally a grid trying to encompass dating and housing would be rejected as silly. One may lead to another, but it is for the users not for you the domain maker to decide. You remain free of course to set up as many related domains as you wish, as long as they are kept distinct.
In dealing with ePrio, you agree to abide by ePrio's judgment as to what makes the gound for exclusivity. Here is a quick and simple test: does your service title convey its focus to its intended users ? e.g. "Boston Jobs" does not because there is no such a thing as a single job market but "Greater Boston Nursing Jobs" qualifies. "Engineering" will not because no formalized system can be that general, but "Engineering Advances in Oil Spill Containment" may qualify, as well as "Pro Environment Advocacy in Alaska".
The terms and conditions are as follows:
- ePrio offers you neither a guarantee of results, nor a guarantee of means. While ePrio hopes to serve you better in the future, you must acknowledge ePrio is today in a position to offer you a pledge of intent only, with no legal obligation nor warranty of any kind.
- For each domain and its corresponding matching service, you are required to:
- send ePrio an unrefundable deposit of $500, using a check payable to ePrio Inc., 14 Barbara D. Lane, Tewksbury MA 01876
- pay ePrio a fee of 1 cent per filter or c-filter download, $1 per match per person, $1 per user mailbox per month
- to facilitate fee payments, ePrio credits the initial deposit towards fees and will continue to issue users rights in batches in exchange of further advance payments of no less than $500.
- a companion mailing service requires setting up a separate mailbox, at $1 per user mailbox per month. Distributing a tECmail generates two downloads, one for the filter granting permission, one for the c-filter carrying the mail. A tECmail reply counts for one match.
This means in particular that you are totally free to choose how to charge or not to charge the users of your service. You may choose to subsidy a free service for your members, pick a subscription formula or a "pay as you go" model or a combination thereof. ePrio will provide you with the consumption of each receiver you have registered, from whose account all activities by the receiver and its prospective senders are debited. While you will find it convenient to charge your own clients, you are not bound by this structure.
For example a service which would match well heeled consumers to high end sellers may be managed as a list selling business. While structurally the consumers are the receivers, you will probably charge the sellers for access. Notice of course the fundamental differences with the traditional list business. With tEC, consumers receive no unwelcome junk or spam, but timely information based on their personal needs, whether for a gift or for personal use. With tEC, high end sellers no longer have to settle for an uninspiring campaign aimed at no one in particular save for an upscale ZIP code, but can target offers and incentives on a truly personalized basis.
For a benevolent leader from academia, the fees should not prove an inconvenience. Assuming members are happy to pay the $1 fee to find some new correspondent with whom to share a common interest, consider that the $500 initial payment will cover 50,000 (c-)filter downloads and probably cost less than a subscription to a journal.
II-2 what you do
-step 1- the grid
The key step is to define the tEC domain and its corresponding grid. But before you start working on your grid in earnest, you may want to check out the tEC platform and for this you need to receive an invitation, as must any tEC user. If you prefer, you may contact ePrio directly for an invitation as a prospective domain maker. You will need to provide ePrio, reachable at partners@eprivacy.com, with four pieces of information:
- your name and the postal address of the organization you legally represent and at which you can be reached
- the URL of a site managed by your organization and protected by an SSL certificate, to which ePrio can connect under https:
- a short sentence characterizing the exclusive nature of the projected domain, such as the potential title under which to list it
- a sketch of the grid you project to develop
By refining the definition of the grid, you will formalize your expertise in the domain under consideration. This is going to be the key to your success but you need not try to be perfect the first time around. Grids can be updated as you gain feedback from your users.
In fact the best grid will evolve over time to reflect changing circumstances.
There are two parts in a tEC grid.
Depending on the domain, criteria will be:
- either identical for all users (symmetric domains),
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e.g. a filled in criteria list for Dating in Greater Boston together with the expansion of scored criteria 17
- or sharply different, with a subset for "receivers" and an other for "senders" (asymmetric domains),
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e.g. for Boston CAT technologists, compare the wishes contained in the filter of an hypothetical recruiter (receiver) to those of a candidate (sender), which are contained in the c(ounter)-Filter he or she tries to send
In case of an asymmetric domain, you may want to open a reverse service, giving every user the choice to pick between being a "sender" or a "receiver".
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_______________ 
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In the example given for CAT technologists, the recruiters are the "receivers", who take the initiative to circulate their wishes as filters and invite candidates upon a mutual match. The "senders" are the candidates, who have the last say in confirming or not the receivers' invitations. In the reverse service, the "receivers" would be the candidates and the "senders" the recruiters.
Take the real estate market as an illustration of an asymmetric domain matching sellers and buyers.
You will mimic multiple listings by turning sellers into "receivers", who wait for interested prospective buyers.
Suppose enough potential buyers are choosy and opportunity-driven. By opening a reverse service with buyers as "receivers", you let them try their chance as a "sender" on the first service and, if not satisfied, wait as a "receiver" on the reverse service for that interested seller who fits their dream.
"Ability to pay" is certainly a criteria for sellers. You may express it by incorporating in your grid such questions as: "source of financing" and "credit recommendation".
"Source of financing" may be a list of options including: "cash in US currency", "cash in a US bank account", "proceeds from property currently in escrow", "proceeds from property currently on the market", "pre-approved mortgage-back credit", "to be approved mortgage-back credit".
"Credit recommendation" may refer to a list of acceptable third parties who have agreed with you to issue a tEC recommendation to the prospective buyers who asked for it. The corresponding facts will be entered in the buyers' profiles
When you proceed to define the sellers' wishes, you can then declare a simple criteria letting sellers check acceptable "sources of financing" as a multiple choice. For instance most sellers will eliminate "cash in US currency" to avoid the burden to report large cash payments to the US Federal authorities and some sellers, at least initially, will strike out "proceeds from property currently on the market" and "to be approved mortgage-back credit" to avoid delays and disappointments.
But maybe this approach is too simplistic for you because, when multiple sources of financing are used, sellers are also interested to know their respective percentages. You may even combine this preference with the asking price (a criteria to be checked against the bid price) into a weighted score. In this way a buyer may express a willingness to accept a lower offer from someone with stellar financing.
A good grid, impossible to implement using traditional methods, will convey your hard earned experience of what counts and what does not. It is designed to nail down real opportunities. By advertising your service rather than each individual search, you save time and money for your clients.
-step 2- the service
To put your service in the tEC catalog, you need to send the following to ePrio (partners@eprivacy.com):
- the first part (profile facts) of its grid, called a tEC vocabulary (*)
- its listing title, its starting date, whether it is symmetric or not, follows a schedule, uses a companion mail service... (form provided by ePrio)
- optionally, a zip file with the html files to be used for the user interface (**)
- the $500 non refundable deposit (add $500 for a reverse matching service and $500 for a companion mail service)
- a list of tEC ID's for initial user enrollment as "receivers", e.g. for testing purposes
Receipt of the funds by ePrio will determine your priority date in case other requests conflict with your exclusivity. The first one by the post wins.
ePrio will then package your service, depending on the options selected, as one to five trusted applets under ePrio's seal and list it for testing only.
ePrio will further provide a mailbox to every tEC ID submitted and receiving rights (downloads and matches) in the amount you requested within your credit limit.
Remember that, in an asymmetric domain, only one side receives, such as recruiting managers for job related markets, or sellers for real estate markets while the other side (candidates and prospective buyers) try only to send. If you request the reverse option, you need to divide the list of tEC ID's between the two related services. As far as the companion mailing service is concerned, every user is a "receiver" and gets a mailbox dedicated to tECmails.
(*) ePrio has released a tool to format such a tEC vocabulary. See the tEC Domain Maker Manual.
(**) ePrio proposes a standard set of html files as user interface. You are free to modify it as long as you respect the syntax of the interface between these files and the tEC platform, expressed by their file names, their javascript content and the special tags used by tEC
-step 3- the final packaging
Once you have downloaded your own service, use the standard ePrio toolkit (see the tEC Domain Maker Manual) (*) to :
- define a selfprofiling template, a filter which asks all possible questions in the vocabulary and welcomes the user to the matching service
- make a template listing all possible criteria which may enter into user wishes (the second part of the domain grid)
For asymmetric domains, each side will use a separate service application and you need to do this for both applications. The reverse option introduces two more service applications but their templates are simple mirror images taken from the original service.
ePrio will then make accessible your service self-profiling and wish templates for final testing and, once you have given your approval, for official use in the tEC catalog by all existing tEC users.
ePrio will also issue you a new user registration with increased power to invite new tEC users, according to your plans. These new tEC users will have access to your service as part as the entire catalog. (**)
(*) Custom services are available from ePrio upon request.
(**) If you plan to open multiple services, ePrio offers you the option of operating a private label. This groups all your services into a special catalog page, accessed directly by all the tEC users you invite. While these users and the ones they invite continue to enjoy access to the whole catalog, they will always enter it through your own page, which becomes your very own tEC portal.
II-3 renewal policy
ePrio's renewal policy is designed to promote value creation for all parties in a fair and open way, to the ultimate benefits of tEC users.
- On each anniversary of a domain creation (your priority date), the exclusive rights for the domain and all its options are auctioned off by ePrio to the highest bidder according to a sealed bid process with a $500 minimum bid (plus $500 per option)
- A bid by the incumbent domain maker is entered in the auction at ten times its nominal amount
- If the incumbent places a bid but fails to win the auction, ePrio pays the incumbent 90% of the winning bid
This policy has three consequences:
- an incumbent can protect itself against competitors simply intent on unfairly benefiting from the incumbent's past efforts
- if a third party believes it can create more value than the incumbent, the incumbent cannot block this positive evolution.
- but the premium created by such a highly determined and successful competitor is integrally transferred by ePrio to the incumbent
According to ePrio's initial policy, the proceeds retained by ePrio are both non refundable and credited against future fees.
The best way to analyze ePrio's proposal is to consider the risks and benefits of different strategies.
III- Risks and Benefits
III-1 small stake strategies
In a small stake strategy, the domain owner is aware that his or her talent is more in pioneering than industrial exploitation. Still, as a pioneer the domain owner ought to be fully compensated for creating a domain out of nothing.
This strategy, which calls to bid at least 11.2% of sunk costs, is particularly fit for bold entrepreneurs as it guarantees the fruit of their success will not be taken away from them.
Assume you have invested an amount estimated to $10,000 in your domain, 10,000 chosen here purely to make it easy to scale the following computations to the true figure in your case.
Assume further than this amount covers your sweat equity and any other hidden costs, such as opportunity costs.
Then pay ePrio 11.2% of these sunk costs, i.e. $ 1,120, as your incumbent's bid.
According to ePrio's renewal policy:
- If your bid succeeds, the final tally of your investment will be $ 10,000 + $ 1,120 = $11,120.
- Were your bid to fail, the winning bid will have to be greater than 10 times your own bid, i.e $ 11,200.
You will then receive 90% of this winning bid, i.e. at least nine time your bid value, i.e. $ 1,120 * 9 = $10,080, and be made whole.
Against this base line and under your own responsability:
- a lower bid will save you money if you win. However this saving will decrease the insurance extended to you by ePrio's renewal policy.
If you are outbid, you will thereby lose 9 times the amount you tried to save on your bid, which can be seen as the insurance premium.
- on the contrary you may guarantee yourself a return of 100% over sunk costs in case you are outbid, by bidding $2,240.
However if your bid wins, the premium you give ePrio will have grown in proportion.
For benevolent volunteers, the minimum bid of $500 leaves wide open the passage of the baton to another eager volunteer for a symbolic $4,500. And, to a pre anointed successor, the incumbent can transfer the role at no cost by not bidding at all.
Notice how "place-warmers" are dealt with. As long as they bid the minimum, their acumen will receive a reasonable reward, which decreases as time goes by. If they bid above the minimum to increase their winnings, they risk having to pay ePrio more to keep the incumbency. This may motivate them to become genuine entrepreneurs so as to recoup their stake.
III-2 high stake strategies
If you are a smart investor, success is measured by the speed at which over time you increase the current value of your business.
For the smart investor, bidding 10% of the present value implements a high growth business plan with an opportunity for exit at full value.
Bidding less increases the chances for being bought at a discount and simply reflects doubts as to the estimated value of the business. Notice that, while ePrio duly expects to benefit from its contribution, ePrio seeks to influence neither your business model nor your business valuation.
Assume, at the time of the bid, your plan gives your domain a present estimated value of $100,000, 100,000 chosen here purely to make it easy to scale the following computations to the true figure in your case.
Assume further that your ePrio license is equivalent to a 90-10 split of this value between you and ePrio.
Then bid $10,000 as the incumbent.
According to ePrio's renewal policy, if you bid fail and you are forced to exit you will receive 9 times your bid, i.e. $ 90,000, which is the full value of your participation. While you may have had other designs on the business you built, an early exit at full value will always satisfy a smart investor.
Assume now your bid wins every year covered by your plan. How will your bid expenses affect your return on investment?
For a equal to 100%, ePrio gets 10% of the value created.
Broadly speaking the fraction of the business value you retrocede to ePrio decreases as the growth rate of your plan increases, i.e. the more successful you are, the higher the reward you get, which is as one would expect:
for an anemic 10%, ePrio gets 40% of the value created, for a respectable 65% a bit below 15% and for a torrid 200% less than 5%.
For the bold entrepreneur, this leaves open the opportunity to switch approaches after one year. On the basis of initial momemtum, he or she may very well decide to draw a promising plan, seek outside investors and, with their funding, reposition the business as a smart investment.
In the same way the shrewd incumbent may decide to come out clean and present a solid case to management ahead of the anniversary date.
(*)The formula used in the simulation is _________________________ P= 10 [(1+a)**5 -1] / [a(1+a)**5]
You are welcome to add one variable to the model to align the starting hypothesis, claiming (1-x)% of the value for yourself, with the end result, giving x% away to ePrio. The extra precision does not change much except for very low growth rates (see steady state strategy below).
III-3 steady state strategies
If you are in for the long term, there comes a time when your domain will mature. While you may be busy sustaining your growth rate by investing in new domains, possibly domains that you had previously kept as a "place warmer" or domains in which you plan to outbid an incumbent, each of your mature properties still requires its own separate bid (see renewal policy) and neither sunk costs nor growth rates offer an appropriate basis for its computation.
Assuming no growth and neglecting ePrio's fees next to your bid expenses, here is a calculator for your bid b relative to your yearly income I:
Enter the multiple you use to compute present value from annual income m= %, and click here(*) to get:
the amount of your bid as a percentage of the expected income, b/I= %.
for example an actualization factor of 50% per year, i.e. a multiple of 3, leads to a bid worth 25% of revenues.
In real life, you will have to account for a residual amount of growth and you may be able to recapture part of the bid expense against regular ePrio's fees but the principle stays the same. ePrio's renewal policy protects you from competition by ensuring a fully priced exit. While your bid ensures this business value per your own reckoning, it also reveals the value of ePrio's participation to your success. And so it guarantees ePrio will have the means to be the dependable supplier on which to base your business.
(*)The income you derive for a mature domain is split between you and ePrio, your annual bid b being ePrio's share.
- to give b to ePrio on a regular basis is the same as if ePrio "owned" a certain percentage, say x% of your business
- the virtual split of ownership between you and ePrio should be defined as equal to the actual split of the total revenue stream
- 9*b, which is what you receive should your bid fails, should represent your share, i.e. (1-x)% of the total value of your business
Let I be the annual income of the business, and m the multiple you use to compute present value from annual income.
The previous considerations can be written respectively as:
__________ b= xI __________ and __________ 9*b= (1-x)mI
leading to the following optimum bid b= [m/(9+m)]*I
corresponding to a virtual participation of ePrio equal to: x= m/(9+m)
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