Investor Update Q2 2014
Dear Friends & Shareholders,
We hope this letter finds you well, enjoying a pleasant summer season. Having passed the 2014 midway point, we'd like to take a moment to update you on this year’s progress.
The first quarter was an encouraging start, with evidence to support expectations of an eighth consecutive year of positive growth. As we entered Q2, however, a number of unexpected and impactful challenges arose:
1. Main Servers:
For several years we have rented dedicated servers from Burstnet, a large and well-known provider. Suddenly, on March 30th, 2014, Burstnet went offline without giving any prior notice. As a result, thousands of online businesses across the globe experienced abrupt blackouts.
We immediately implemented an emergency contingency plan using backup servers hosted by another company. After days of silence from Burstnet we began to rebuild full sites through servers provided by a new and different host. While I believe we did the best we could to minimize damage, this was an unanticipated setback that cost us considerable time and energy.
2. Email Servers:
Shortly thereafter, Web.com, the company that handles email delivery to our 1.8 million newsletter subscribers, experienced a problem. A client of theirs used the Web.com service to send email spam. That resulted in blockage of many Web.com accounts by major ISPs such as Gmail and Yahoo Mail. Because our account was within that same IP range, our messages were impacted by association with that IP. Email marketing is crucial to our sales process, accounting for approximately half of our VIP sales. Once again we proactively responded by devising and implementing our own contingency solutions.
Email delivery is a delicate matter, though, especially with a subscriber list as large as ours, so it is not possible to simply do an instant transfer 1.8 million members to a new IP. That kind of activity raises security suspicions at ISPs such as Gmail. So it is necessary to implement the change incrementally in order to build trust in the new IP addresses over time. We followed proper protocol and today our email capabilities are almost entirely restored except for a few minor details that will be also soon be resolved.
3. Major Sponsor
Despite being extremely pleased with the marketing results we delivered to them, our biggest sponsor, HubSpot, regretfully informed us that they will not be renewing their contract with us. The decision was due to budgetary cutbacks within the HubSpot organization that forced them to suspend all of their marketing efforts for the time being.
The brothers behind SeeThruEquity.com are passionate about the eBook industry. After months of negotiations they were enthusiastic about allowing us to raise capital through their networks and investor conferences. But just as our deal with them was about to be completed, SeeThruEquity.com learned that our Auditor, Lake and Associates, had lost its PCAOB accreditation last August. The discovery came as a complete shock to us.
We had employed Lake and Associates for six years and paid them to conduct our 2013 audits on the assumption that they were PCAOB accredited. At no point did they inform us that they had lost their accreditation. As a result, the deal with SeeThruEquity is currently suspended until we can have a PCAOB accredited firm redo and certify our 2012 and 2013 audits. Because of the other unplanned setbacks this year we cannot afford to hire a new firm at this time.
Rising to the Challenge
While these setback are disappointing, I am proud of how our team responded with great poise, agility, and expertise to minimize the impact of those unprecedented challenges.
As a result we now have a tighter, more controlled budget and the advantage of new in-house technologies to help protect our business going forward. Additionally, we remain confident that with sufficient support we have the ability to effectively pursue a public listing. We continue to seek a small capital infusion to fund a revision of our Audits and to file S-1 documents. Please let us know if you are aware of anyone who would like to participate now at a discount from fair market value.
Encouraging 2014 News and Benchmarks
Other key numbers held steady or grew, and I am pleased to report that we now have:
- Over 4.7 million members.
- 3,100 new sign-ups daily.
- 2.4 million newsletter subscribers.
- Over 1.8 million unique visitors per month.
- 400,000 Facebook fans.
Also, although we expended a great deal of unscheduled time during the last few months responding to unforeseen issues, we still succeeded in meeting our development goals on a number of key projects:
UNlimitedEbooks.com is nearly complete, and soon we will begin approaching retailers to ask them to carry our retail gift cards in-house. Our primary objective is to use offline channels to market our existing services (eBooks) by offering our gift cards through high-traffic retail outlets and venues such as hotels, cruise lines, airports, coffee shops, and similar locations. If you have contacts or relationships in the retail, hospitality, or similarly appropriate industries, please let us know. We would like to speak with them about potential partnerships.
We recently added a large collection of AudioBooks to Free-eBooks.net as a V.I.P. exclusive benefit. Our objective in continuously enhancing the value of our V.I.P. program is to incentivize V.I.P membership and increase the rate of conversions and sales. The Audiobooks Launch promotion was well-received and boosted sales revenue.
In July, we began testing our USB eBook Bundles. These USB Memory Sticks are pre-loaded with our top 1,000 most popular eBooks and can be purchased for $97. Early sales metrics are encouraging, as the initial inventory was sold out within days. If the program proves successful, we plan to branch out into other languages; tailor the bundles to specific niches and genres; and offer the bundles through online retail channels such as Amazon, eBay, Groupon and other major players. The program is showing tremendous potential to develop into new and steady revenue stream for Paradise Publishers.
Despite my disappointment in having to highlight a number of difficulties that we weathered this year, I am pleased and proud of how well our team adapted and persevered to overcome each obstacle and keep us progressing with strong momentum. That speaks to the uncommon value of our organizational teamwork and talent. With that in mind, these past few months have greatly strengthened my confidence in Paradise Publishers.
We also truly appreciate your continued support and thank each and every one of you. Onward and upward,
Nicolas Gremion, CEO