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

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

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