Samir Arora

Rich

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Jul 16, 2001, 4:48:22 PM7/16/01

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Not to put you on the spot, but CompUSA is offering our product with a giveaway Rebate?

Total cost to the end user is $0.01

Any comments on this activity? Why would they be doing that?

Thanks for any input you can provide.

Rich

Rosanna Tafur

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Jul 17, 2001, 1:42:07 PM7/17/01

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Hi Rich

In working with our retail distribution partners, we sometimes run special promotions on our products. These promotions are always limited in quantity and length of time. We worked in partnership with CompUSA on this promotion (which is of limited quantities and runs for one week only) as part of our ongoing efforts to promote NetObjects Fusion MX, generate additional retail awareness of the product, and support future sales and marketing efforts.

Rosanna
NetObjects Technical Support

Rich

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Jul 17, 2001, 2:11:40 PM7/17/01

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Hi Rosanna,

Whew! Had me concerned there for a bit. I figured there had to be a good reason.

Thanks for the reply.

Rich

samir arora /:-)

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Jul 19, 2001, 4:39:48 AM7/19/01

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Hello Rich,

I think this question has been answered already by Rosanna, but as you addressed your post to me- here is my response.

As you may know, we have only recently focused our strategy on increasing NetObjects Fusion units to be the number one Site builder. These efforts are in several areas:

1. NetObjects Fusion License Bundles (IBM PC's, Earthlink, XO, United Internet, Lotus, Novell, Deutsche Telekom, etc) NetObjects is paid per unit license fees by these vendors for every product bundled. In addition, NetObjects also shares in Online Services Revenue from these partners over time- this is new with NetObjects Fusion MX as you know.

2. NetObjects Fusion Hosting Partner Bundle (Dell Computer and others) NetObjects Fusion can ONLY be used to publish to the Hosting Partners Service (Publish View is limited to the Hosting partner) NetObjects is paid for EVERY user monthly subscription fees from Hosting and Online Services.

3. NetObjects Fusion Retail and Online Distribution. NetObjects Fusion MX is offered in Mass Markets Retail with the new version (CompUSA, Fry's, MicroCenter, Amazon, Egghead, etc.) NetObjects is paid for every product sold. Mass Market distribution is used to running a number of promotion with multiple vendors- the good news is NetObjects is in this list for the first time with MX. The CompUSA promotion is a 1 week, in store only, promotion by CompUSA to drive people to their stores- based on the fact that Fusion MX is new and in demand. Think of it like a marketing fund (like advertising) that CompUSA uses to make people pay attention enough to come to their stores. Promotions, Retail Bundles, Store drivers, are common in this business!

What does this all mean for you- NetObjects Fusion MX is turning out to be the BEST release NetObjects has ever done.

What does this mean for NetObjects- we are in the middle of a major shift from a one time, upfront license model with low unit share in the market, to being number one in units with license and services revenue being deferred or recognized over time. For example, a Hardware bundle deal last year $1 Million in revenue for a specified number of Fusion units for 1 year was a one-time revenue, this year, a similar deal would be likely recognized over the whole year. So, as we've stated since we started changing this business model- expect lower year over year revenue, but look for the long term indicators of massive distribution deals where NetObjects is paid per user.

Here are some results of our new model:

NetObjects Fusion units are higher than ever- from 23,000 units in 1997, We have now sold over 15 Million units worldwide. The run rate of bundled AND retail units is highest with NetObjects Fusion MX.

In countries such as Germany, NetObjects has become number 1 using this strategy over the last 18 months (Over 2 Million copies sold) This is very similar to what AOL did by carpet bombing their CD's everywhere. Build the best product, and be number 1 or 2 in the market in units.

With the recent awards- PC Answer's Platinum, WinPlanet's 5 Stars, Computer Active's Buy It Pick, and ZD Net's Best Buy- Clearly NetObjects has built the best Site Building Product in the market. With our partner and channel distribution, we are fast reaching our goal of being the number 1 in units. In addition, with our Web Services (thorugh Fusion MX and Matrix Builder) allows NetObjects to offer monthly subscription based revenue services through this massive distribution over time.

Hope that helps...

sa /:-)