ANALYSIS: XS-Media crashes as industry scepticism stays high - Failure to win over sceptics felled a revolutionary idea, reports Leithen France

<p>In its 12 months of operation, failed business-to-business </p><p>exchange, XS-Media, didn't appear any closer, even in its final days, in </p><p>breaking down industry scepticism over its business model. </p><p><BR><BR> </p><p>When it set up shop in May last year with some of the most experienced </p><p>(read that as expensive) media talent around, the plan was to </p><p>revolutionise the regional media industry. The objective was to get </p><p>media companies to sell their leftover advertising space via its </p><p>business-to-business website. </p><p><BR><BR> </p><p>Where XS-Media founders, Paul McNeill and Julie Harrison, saw a gap in </p><p>the market in becoming a one-stop shop for the media and advertising </p><p>industries, the market saw flaws in the model. </p><p><BR><BR> </p><p>Which may explain why in the final six months, the company finetuned </p><p>operations twice, going from a site selling media space, then playing up </p><p>its news content and finally positioning itself as a back office for </p><p>agencies to book media. </p><p><BR><BR> </p><p>So a year later, USdollars 4 million poorer and industry scepticism over </p><p>dotcoms running high in the current climate, XS-Media was forced to wind </p><p>down operations on June 13 when it was unable to raise a second round of </p><p>funding. </p><p><BR><BR> </p><p>A few media deals had been signed, including with Reader's Digest Asia, </p><p>Transportation Displays and its headline-making deal with Time Inc to </p><p>host Asiaweek and Time on the portal. By and large, the region's major </p><p>media organisations remained sceptical. </p><p><BR><BR> </p><p>In all, XS-Media claimed it had signed on USdollars 150 million worth of </p><p>media inventory on its site, tiny considering that Zenith placed the </p><p>regional advertising market at USdollars 57.2 billion last year. </p><p><BR><BR> </p><p>Putting excess media for sale on the site, as far as publishers were </p><p>concerned, was tantamount to giving up control over pricing for their </p><p>media. In a business where relationships count for plenty, few </p><p>publishers appeared willing to take that route. At the same time, ad </p><p>sales directors were suspicious of XS-Media, believing that the portal </p><p>was seeking to usurp their sales role. XS-Media earned sales commissions </p><p>whenever media buyers booked ad space using the site. </p><p><BR><BR> </p><p>Through it all, McNeill, XS-Media's co-founder and chief executive, </p><p>defined its role as a marketplace or an exchange that would allow media </p><p>buyers and sellers to come together and trade online. </p><p><BR><BR> </p><p>Media buyers were also reluctant to use XS-Media because they could </p><p>negotiate better deals by going to the media companies themselves. </p><p>"Whatever was on offer on the website we could get ourselves, so </p><p>XS-Media provided no added value," said D. Sriram, managing director of </p><p>Starcom. "They needed to provide something media buyers couldn't get </p><p>from their contacts. For example, booking ad space in overseas countries </p><p>where the media buyer doesn't know anyone." </p><p><BR><BR> </p><p>Manpreet Singh, general manager at MindShare, adds: "It was tough for </p><p>XS-Media to provide better deals because the media buyers will simply go </p><p>to the media organisations and say: 'why are you giving this website a </p><p>better deal when we book x amount of media with you each year?'" </p><p><BR><BR> </p><p>The website also held little appeal to those media buyers who enjoy </p><p>meeting with ad sales representatives and negotiating deals over the </p><p>phone. </p><p><BR><BR> </p><p>Adrian Smith, executive director of The Media Edge, said working in the </p><p>media industry is about relationships and media buyers are in the habit </p><p>of picking up the phone. "Getting them to log onto a website instead is </p><p>very hard." </p><p><BR><BR> </p><p>Losses piled up as XS-Media had some very experienced - and very </p><p>expensive - people who had held senior positions either in ad sales or </p><p>media agencies, on its payroll. </p><p><BR><BR> </p><p>Despite having around 40 staff, it took six months before it launched </p><p>its website, draining cash reserves further. </p><p><BR><BR> </p><p>McNeill said the six-month delay was due to the revolutionary nature of </p><p>the concept, which meant that media organisations had to be convinced to </p><p>come on board. </p><p><BR><BR> </p><p>Launching the website was also a massive task because XS-Media entered </p><p>four markets simultaneously - that may have been a case of biting off </p><p>too much too fast. </p><p><BR><BR> </p>