Feasibility Analysis

All Advantage

Assignment #2
Evaluations by Ryan Dear
3325727
Submitted Nov 24th
Executive Summary:

Jim Jorgensen launched AllAdvantage with good intentions. As an infomediary,

the company would collect information from the user, and then display ads relevant to
their surf habits in hopes that the targeted ads would generate sales. But to sweeten the
deal for users, AllAdvantage introduced a compensation scheme, rather, a viral marketing
strategy that would forever change the web forever.
The ever-aproaching collapse of the online blackhole for investment dollars can
be attributed to failures all over the business strategy map. AllAdvantage, the firm that
brought you the earliest forms of spyware and spam, has grossly overestimated the value
realized by the customer using the ViewBar. Customers did not value the
advertisements, but were motivated to download the ViewBar by relatively low sums of
hourly monetary compensation. AllAdvantage also duped their customers into believing
they would have 40 hours a week of payable surfing time – the company reneged on this
offer and infuriated customers with a reduced maximum of 25 hours. The ViewBar was
also not designed for targeted advertising, which commands premium revenue dollars
consequentially unrealized by the company.
Market conditions also slowed AllAdvantage’s growth. Many companies that
would pay for advertising had left the market due to the dot-com bubble burst. As a
result, advertising inventory was sold out but at a significantly reduced price. Customers
were also very wary of their privacy.
In a panic to legitimize their business and quash the scrutiny over privacy
infringement, CPO Ray Everett Church was hired on. This confused many as the title
had never previously existed, which leads one to question the legitimacy of the very
position itself – nobody had been trained to be a CPO. Why would someone concerned
with the spread of spyware and spam be interested in becoming a stockholder with
AllAdvantage? There were too many executives with too much cash to cushion the
company’s failing operations.
The company needs to stop burning cash and focus on overhauling the ViewBar’s
design and matching that new design to the customer expectations they had not
anticipated. Serious consideration should be given with regards to selling this company
as quickly as possible.
Product/Service Feasibility:
AllAdvantage has both a product and a service to be put under the proverbial
microscope. It was to be “an internet infomediary – a trusted third party that would bring
buyers and sellers together” and would be profit of the connection made. The business
model was intended to create value by providing their online business clientele with users
interested in their products. “Marketers would be able to target their sales pitches to
interested customers, and customers would be able to simultaneously protect their privacy
and enjoy filtered advertising…” The product that would perform this for the customer is
a downloadable Toolbar that continuously streams advertisements tailored to the user’s
preferences. In essence, AllAdvantage is paying users for their clickstream data, as well
as to look at ads.i The service is the connection it provides between the company and the
users with potential interests in those companies based on information surrendered by the
user.
AllAdvantage has contradicted their concerns for the customers privacy by
collecting their surfing information. The actual ties to DoubleClick are weakly illustrated
in the case, but with the admission that the ViewBar was a “two way communication
device.. AllAdvantage could track the sites that members visited and the keywords that
members typed into search engines…” In order for AllAdvantage to fetch premium
dollars for advertising, the information collected from the customer would have to be
interactive with DoubleClick’s services. The contradiction resides in AllAdvantage
saying to its users “we’re protecting your privacy, but we’re also trying to sell it better.”
Jorgensen exhibits frustrated position of a shareholder stating, “We can’t get that
information into the communication between the ViewBar and DoubleClick.” I would be
concerned as an investor as to who else this information is being shown to. What
follows is a gross overestimation of value the customer receives through the pyramid
scheme of compensation. The question should be asked, at what price is a customer
willing to surrender information about their surfing habits? Is this price satisfied at 50
cents per hour? There are the statistics that prove customers enjoy tailor made advertising
– but there has always been evidence that people don’t like advertising! Although
Jorgensen makes a point of good intent by paying customers for their time, perhaps it was
not enough to persuade the customer to legitimately utilize and value the ViewBar rather
than feel inconvenienced.
Customers also had figured out a way to cheat the system, which suggests a
rushed or careless development of the ViewBar software. Many customers would simply
block out the ViewBar with masking tape as they surfed. This meant they were getting
paid without actually paying attention to advertising that was meant to create sales for the
advertising side of AllAdvantage’s clientele. There was no method or device in place
that would ensure the user was actually viewing the ads. Furthermore, AllAdvantage’s
vulnerability to hackers attributes to a substantially unknown loss of money, according to
Jorgensen, who understates the situation calling it a “distraction.” This is comparable to a
banker saying “I’m sorry I left the safe with all our money open for people to take, there
was just so much going on.” It becomes increasingly more obvious that the customer
actually acquired was not the “ideal” candidate, which raises the question of whether or
not AllAdvantage really had any so-called “ideal” users at all. If this is true, then the
alleged value that AllAdvantage delivers to the advertising firms significantly diminishes,
which pushes down the price advertisers are willing to pay for AllAdvantage’s services.
CEO Jorgensen states, “When you’re running a business, the business needs to be
profitable in order to be sustainable.” The reality is that the business idea itself must be
sustainable first and foremost in order for profits to even be realized. Consequences
regarding the potential attractiveness to hackers were completely ignored, which not only
puts the company in dire financial straits, but it also contradicts their business mission by
suggesting that people’s personal information is at risk. As a result, they could not be a
trusted infomediary, which renders the current product and service offering from
AllAdvantage infeasible.

Industry/Market Feasibility
The continued operations of AllAdvantage.com are certainly hindered due to the
demise of many companies, and the resulting drop in advertising expenditures.
According to the case facts, there has been a downward trend existent for years regarding
the CPM rates. And yet, the trend ignored by management and made a fundamental part
of the revenue generation scheme. The release of zip code information identifying
wealthy communities does not validate the user’s spending in these areas, nor would
other zip codes. Simply by reading between the lines suggests the company’s reluctance
to give up information that could harm shareholders. Furthermore, these cities are full of
educated people who likely understand how to take advantage of a system that pays for
minimal efforts, or may not have any interest in such a scheme at all for the
compensation offered. AllAdvantage may very well have had enough cash to effectively
be insulated for a while.ii This is likely why they were able to survive so long off
charging so little for CPM rates. It seems as though AllAdvantage does not have any
information to substantiate who their customer is and what they value. The few
companies that remained in business after the dot-com burst were also reluctant to use
AllAdvantage for targeted advertising. As illustrated by Jorgensen, “Not many companies
sell it, so not many companies want it… 2 to 3 percent of our ads are targeted.” (See
Appendix 4) In other words, the opportunity they saw in targeted advertising never
materialized, which excludes the company from millions of advertising dollars. The
millions of customers that signed up for AllAdvantage greatly exceeded the number of
advertisers. Jorgensen admits, “There is a limit to the number of advertisers that want to
reach our customers,” but never specifies what that limit might be. In order to fulfill their
promise to pay customers, there would have to be sufficient advertising to generate
revenues and profitability. It seems evident then that market conditions have had adverse
consequences regarding the effectiveness of a business model that relies on advertising so
heavily. As such, it seems infeasible that AllAdvantage will succeed under the existent
model.

Organizational Feasibility:
AllAdvantage’s failure to identify core constituents of an organization’s operation
caused harm to the customer and the Internet community. To illustrate this point, assume
that AllAdvantage were a person. If Mr./Mrs. AllAdvantage’s motives and decisions
were based on a conscience composed of financiers, what kind of person would it be?
People tend to dislike obnoxiously rich people who have very little to contribute. A
company comprised of uncreative, money-hungry capitalists controlling a business
concept that bribes people into substituting time to potentially develop tangible skills for
the mass-spamming and harassment of others. Hardly a socially responsive business. On
that note, DoubleClick, an organization strategically tied to AllAdvantage through the
ViewBar software, had always been under scrutiny for violating user privacy by
monitoring clickstreams. DoubleClick was pummeled six years ago when it announced
its intent to create a database of consumer profiles that would include names, addresses,
and online purchase histories. After public outcry and a class-action suit (which was
settled in 2002), DoubleClick did an about-face and said it had made a huge mistake.iii
This means it was possible that AllAdvantage was actually threatening their user’s
privacy all along by partnering with DoubleClick.
Another point that continues to evade my reasoning is why AllAdvantage hired so
many executives to solve this problem, while adopting a cost cutting strategy that reduced
the customer’s satisfaction – biting the hand that feeds so to speak. Compensation for
surfing was subject to a new maximum of 25, and not 40 as originally promised. The
company also went three months without compensating users for the surfing they did.
The expansion at any cost strategy should be immediately abandoned, if it isn’t already
too late to backtrack. Hundreds of employees hired as a part of the former vastly
expanding AllAdvantage sales force will no longer have positions, which looks bad on
management among other things.
AllAdvantage also hires on a CPO who is presumably responsible for the
mitigation of the dominant business and consumer models on the internet: “The dominant
business model on the Internet is 'we must know you to serve you, “the dominant
consumer model on the Internet is 'you can't know me unless I want you to.'" The two
positions are on a collision course, and the CPO must make it his mission to fix that.”iv
While this move may quash some rumour or tension with regards to privacy
infringement, it fails to solve the problem – that is – the apparent disconnect between the
targeted customer and who actually uses AllAdvantage.
By considering the aforementioned it is evident that AllAdvantage does not have
a feasible management team or directive in place to revive the company.

Financial Feasibility
CEO Jorgensen admits that the financial statements are a mess, but doesn’t realize
that they ring the bell of resounding doom for AllAdvantage. The problem with too
many investors and too much cash allows the cash flows to appear as positive (from the
Net Cash Provided by Financing Activities) when the company’s consolidated statement
of operations reports net losses. (See Appendix 3.) The periods in which these losses
take place are not easy to understand. But it is clear that Direct Member costs are
increasing much faster than are revenues. This supports the idea that people who use
AllAdvantage just want the payout, and aren’t interested in the advertising. As a result
advertising revenue falls, as such, investors are constantly losing value on their shares at
a progressively higher rate. If this trend was apparent at all, why would AllAdvantage
become a direct sales agent increasing the employee count to 600, 220 of those being in
direct sales. But if there are so few sales happening, why would AllAdvantage assume
more costs by expanding their employee base?
In order to fulfill their promise to pay customers, there would have to be sufficient
advertising to generate revenues and profitability.
One suggestion might be to switch to sweepstakes for compensation, although this is
likely to have a negative impact as it will motivate customers less. Less people will be
willing to surf the web if they aren’t paid under the same or better payment structure.
AllAdvantage is currently running an infeasible financial strategy.

Overall Recommendations:
Customers spamming customers, coupled with poor industry conditions and a
mismatch of the proposed ViewBar value and customer value are destroying the
company’s legitimacy, and profitability. The haste in which this plan was created is
evident, and with hasty decisions to be made by Jorgensen, the company is surely
doomed. First, the software needs to provide more value, if not done away with entirely.
With all the money and resources, the company could look into reinventing itself,
transforming into a personal metamediary, without the ViewBar. It would serve as a
personalized buying agent, displaying products and services pertaining to all things
valued to the user (with certain information surrendered). The model should also offer
price comparisons for the customer, thus adding more value to the business model.
Membership would be free, and the pyramid scheme could still exist if there were
referrals made to become a member. Under this model the customer would receive
commissions on purchases made by referrals. The database of products and services
would be hugely comprehensive, and this would be difficult for anyone who didn’t have
access to limitless funding. Personally I would abandon this silly business concept, as it
is just giving away money to customers without meaningful results. Management should
pursue an exit strategy that implements the selling of AllAdvantage. It is too late in the
game for this company to save itself, customers are already catching on as to how this
business idea can be manipulated purely in the user’s favour. The chicken and egg issue
in this case isn’t nearly as problematic as Jorgensen’s assumption that he can have cake
and eat it too.
 Appendix 1.v

Color: Reactions/Recommends: Supporting Case

Evidence:
No cost/benefit analysis as to whether they should expand No customer
White worldwide. research
No real indication of value for customer ViewBar not
No facts on who the customer is acquiring the right
customer
Red Uncomfortable w/ pyramid scheme Customers not
Overestimated the incentive value viewing
Customer should be paid more ads/blocking them
out

Black Viral marketing poor approach Customers unhappy,

Poor business model design generating negative
Poor market conditions attention
Risk of hacking software Withdrawl of IPO,
Users DO NOT LIKE spam! constant loss on
Users DO NOT LIKE ads sharevalue
Is tracking user information to target people for the acquisition of
profits ethical?
Your competitive edge against other online advertising
intermediaries is based on the viewbars inherent ability to control
when, how long, and how frequently someone would see an ad.
Span generated undermines the legitimacy of the company
Create a pyramid scheme for your customers, then take it away and
cancel memberships for people who outsmarted you?
Cannot expect customer to be anything but enraged by reducing
their payable hours.
Yellow Pays the customer for use $.50/h up to 25
Free downloadable software hours, plus referalls.
Lots of resources for change

Green Changing the model could save the business Current model is
Design a new viewbar that handles targeted ads failing

Blue Better model – Personalized Metamediary or purchasing agent

Introducing sweepstakes will prolong life but not promise
immortality
Appendix 2. SWOT Analysisvi
Factors Internal Strengths Internal Weaknesses
1. Incentive system 1. ViewBar not
2. Large amounts of capable of targeted
cash ads
3. Effective Marketing 2. Money-Motivated
Strategy (viral) Investors
4. Worldwide
Salesforce
5. Pure e-model (low
cost compared to
brick and mortar)
External Opportunities Possible Strategies: Possible Strategies:
1. Large response to 1. Redesign ViewBar
payment for surfing 1. Establish sustainable for targeted ads.
2. Partnerships with idea to capitalize on 2. Buy DoubleClick
DoubleClick or 24/7 exponential growth software to re-
to increase potential engineer to
advertising 2. Increase payment to accommodate
3. First Mover (largest immediate customer, requests from
competitor in ViewBar
market)

External Threats Possible Strategies: Possible Strategies:

1. Internet bubble burst 1. Design hacker proof 1. Liquidate company
2. Customer’s hacking system to minimize 2. Redesign ViewBar
the software losses 3. Re evaluate
3. Customers 2. Have regular compensation strategy
spamming eachother privacy audits from (Sweepstakes)
4. Ease of replication third party NOT 4. Fire Executives
5. Raising Privacy CPO! 5. Fire Worldwide
Concerns 3. Create anti-spam Salesforce
policy / eliminate
referral scheme.
Appendix 3. Excerpt from AllAdvantage’s Financial Statements

Illustrated above is the root of all evil so to speak. Despite operating at a loss, the
company still manages to produce positive cash flow statements. It still seems odd that
these statements would be unaudited.
Appendix 4. All Advantages Proposed Advertising Rates

Though the pricing strategy appears attractive, the prices for any targeted ads cannot be
realized based on the ViewBar’s technological inadequacies. If what Jorgensen is true
about only 2 percent of the ads being targeted, this means 98% of the ads are generating
$10 or less.
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Bibliography
i
Schulman, Andrew. (July 18, 2000). “AllAdvantage: A Front-End to DoubleClick”
(http://www.undoc.com, undoc@sonic.net)
ii
Jeffry A. Timmons, Andrew Zacharakis, and Stephen Spinelli. Business Plans that
Work: A Guide for Small Business. McGraw-Hill. 2004.
iii
Penenberg, Adam L. (Nov. 7, 2005). "Cookie Monsters". Slate.

iv
Oakes, Chris (2000-07-19). Privacy Grows Up as CPOs Move In. Wired News.