Chapter 1 Enhanced Version Overview of E-Commerce Framework Exhibits/Tables October 21, 2000

CAS-COD-Prez-Date-CTL Confidential 2 Table 1-1: Four Categories of e-Commerce B2B B2C C2B C2CConsumers Business And selling to... Business originating from... Business Consumers

CAS-COD-Prez-Date-CTL Confidential 3 Supporting Slide 1-A: Point Counterpoint: Valuations - Do they or don’t they make sense? Point — Counterpoint Valuations Make Sense Valuations Do Not Make Sense After the April 2000 NASDAQ slump, there has been an increased focus on path to profitability and revenue –Lines are beginning to get drawn between winners and losers Techniques such as real options valuation yield observed valuations Investors are placing hundreds of billions of their money based on valuations Network economics and information economics will combine to create highly profitable companies that dominate their industries There is a high level of uncertainty leading to wide fluctuations –NASDAQ fell by 30% in April 2000 Many companies do not demonstrate profits for a long period of time, making it hard to value them There is an inconsistency between assumptions made in the valuation of on- line and off-line companies –On-line companies tend to assume high market share growth and not as severe impact of competition There is often a “bending” of the accounting rules by on-line companies Valuations are based on the number of customers and make the assumption that the economics of “monetizing” them will remain favorable Many stocks tend to be moved by momentum

CAS-COD-Prez-Date-CTL Confidential 4 Exhibit 1-1: Growth in Number of Internet Users U.S. Online Population Forecasts by Researcher Population (Millions)

CAS-COD-Prez-Date-CTL Confidential 5 Supporting Slide 1-B Growth in Number of Internet Users U.S. Online Population Forecasts by Researcher Population (Millions)

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CAS-COD-Prez-Date-CTL Confidential 7 Supporting Slide 1-C Business-to-Business E-Commerce Projections, In Millions ( )

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CAS-COD-Prez-Date-CTL Confidential 9 Internet as Mass Medium — North American Adoption Curves North American Users / Households (MM) * Launch of HBO in 1976 used to estimate the beginning of cable as an entertainment / advertising medium Radio TV CableCommercial Internet 50 Million Users / Households Years to Reach 50 MM Users Radio: 38 years TV: 13 yearsCable*: 10 years Commercial Internet: 5 years Exhibit 1-3: Internet Adoption Rates Versus Other Mediums

CAS-COD-Prez-Date-CTL Confidential 1010 Exhibit 1-4: Estimated Savings from e-Commerce

CAS-COD-Prez-Date-CTL Confidential 1 Exhibit 1-5: Where to Play On-Line and Off-Line Fulfillment Systems Customer Interface On-lineOff-line Yahoo! Amazon.com BN.com McDonalds Egghead

CAS-COD-Prez-Date-CTL Confidential 1212 Exhibit 1-6: Media Convergence to a Digital Platform Telephone/DSL Cable Broadcast Radio & TV Satellite Wireless Print (Newspapers and Magazines) Television Radio Music Motion Pictures Digital Convergence Digital Convergence Network Infrastructure Network Infrastructure Media Infrastructure Media Infrastructure

CAS-COD-Prez-Date-CTL Confidential 1313 Exhibit 1-7: A Framework for Electronic Commerce Framing the Market Opportunity Business Model Implementation Evaluation: Metrics and Valuation Media Infrastructure Network Infrastructure e-Commerce Strategy Market Infrastructure Customer Interface Publics and Politics Market Communications and Branding

CAS-COD-Prez-Date-CTL Confidential 1414 Supporting Slide 1-E: Point Counterpoint: Who will win? Online vs Offline Point — Counterpoint On-line Will Win Off-line Will Win Off-line companies can’t easily cannibalize their own businesses Off-line companies stock does not allow them to adequately incentivise key new economy talent Off-line companies move too slowly Key elements of business (e.g. business design, strategy, value proposition) are different in the New Economy “innovator’s Dilemma”: Focusing on current customer needs causes companies to divert focus from new technologies Market will not tolerate blue chip companies running loss-making businesses Off-line companies may face a channel conflict Schwab has become a leading player in the on-line brokerage industry Companies with established market leadership have key assets such as relationships with customers, suppliers, deep industry knowledge and experienced management Established companies have deep pockets Off-line companies have established and trusted brands Off-line companies can create spin-out businesses with new culture, processes, funding, etc. There have been other technology revolutions –From 1894 to 1903, there were 20,000 telephone companies that started in the U.S.