Fulton Breen
President & CEO
My Background
Founded
XS, Inc.
Survived
Budget cycles
Finished
Statistics
Ether
Dot com crash
Marketing, J.Huber
Started WEMBA
Program
Jan. 1996
Timeline
Breakeven!
Left
Rhone Poulenc
Overview
The US ag market and key trends
Who we are; what we do
Building liquidity
The US Agricultural Market and Key Trends
US Agriculture 101:
Grower Concentration
The 80/20 rule applies in agricultural production
Target XS
customers 
18%
60%
950 million acres
87%
2 million U.S.
farms
Source: USDA, 2000
$209 billion outputs
US Agriculture 101:
Inputs and Outputs
Lower prices are driving operating margins to less than 10%
Outputs=$209b
$112b
crops
$97b
livestock
Source: USDA, 2000
Inputs=$184b
$6-7b
$9-10b
$11b
$15b
Seed
Chemicals
Fertilizer
Equipment
Livestock
$14b
Feed
$25b
Other
operating
exp. and
capital
$102-104b
Industry Trends Require Efficient
Markets
Deregulation
Globalization
Consolidation
Technology
Source: USDA, July 2001
Agricultural inputs move through
traditional, complex channels…
$B
Information
Information
Inter-Distributor
Trading = $0.3B
$12
Inter-Dealer
Trading = $0.3B
$10
$8
$6
$7.1
1.0 To
Dealers
6.1 To
Dist
$4
$7.8
Invoice Margin
0.8
Program Margin
0.9
4.6
4.6 To
Growers
$5.4
Invoice Margin
0.5
Program Margin
0.7
COGS
6.1
COGS
1.0
3.2 To
Dealers
$2
$10.0
COGS
3.2
5.4 To
Growers
5.4
$0
Manufacturers
Distributors
Dealers
Source: NuVentures Consultants, Industry Interviews, XS Analysis
Growers
Agriculture Is “Wired”
History of Technology Adoption and Innovation
Catalog purchases
Satellite Communications, cell phones, Rural Telephone Network
Chicago Board of Trade, New York Cotton Exchange
GPS systems
Roundup® Ready Soybeans
All of which is why…
>80% of Farmers with revenue over
$500,000 have Internet access
Source: US Ag Census
“Power” Is Shifting Towards Buyers
•Deregulation of markets
•Increased regulation of products
•Government subsidies
Sellers
•>85% post patent
•Generics
•Biotech
•Consolidation
•Costs (inv, overhead)
•Internet marketing
External
Forces
Industry
Competition
Buyers
•Globalization
•Internet procurement
Substitution
•Internet (channel)
•Generics (manufacturers)
•Biotech (products)
Farms Purchasing Inputs Over The
Internet
Percent of growers buying
8 to 10
(6)
7 to
8
(6)
6 to
7
(6)
5 to
6
(5)
1 to
5
(11)
Source: USDA, July 2001
1
Who We Are, What We Do
XS, Inc. Profile
Public exchange offering security, full service fulfillment, and
precise customer relationship management (XSAG.com)
Private exchanges (Nterline)
Targeting highly fragmented, $50 billion, U.S. agricultural
inputs market
 ag chemicals
 seeds
 vet supplies
 equipment parts
 animal nutrition
 Turf
 PCO
Launched ag chemicals in 1999, expanded into seed, vet, parts,
PCO and turf
Highly scalable, comprehensive, and proprietary system
>65,000 registered users
Targeted U.S. Agricultural Inputs
Market
Chemicals
$9-10 b
Seeds
$6-7 b
Fertilizer
$11 b
Vet Supplies
$6 b
Equipment Parts
$15 b
TOTAL MARKET OPPORTUNITY
$47-50 b
Conservative 2X multiplier
$100 b
Source: USDA, Industry Reports, Industry Interviews
Building Liquidity
How Hard Can This Be To Sell?
Example
Buyer Value Proposition:
Free service
No risk
Save up to 30% or more
$185.51
Dealer
$34.35
Distributor
$14.87
Manufacturer
24% Savings
$140.41
$136.29
$136.29
Traditional
NYP
Freight $1.39
XS
$2.73
Manufacturer
Best in Class Merchandizing Flexibility
for Sellers
LEVER
DEGREES OF FREEDOM FOR EACH LISTING
Venue
Your Site
Affiliated Site(s)
Pricing
Fixed Pricing
Dynamic Pricing
Contract Pricing
Sell to Anyone
Sell via or to Channel
None
Single Event Promo
Customer Specific
Offers
Rewards Program
Product
Info
Straight Listings
Product
Single Product
Linked from Editorial
Content
Bundled Products
Linked from
Advertising
Products and
Promotions
Cash Sales
Third Party Credit
Seller Credit
No Restriction
Broadly Defined
County Level Detail
Seller ID
Identified
Anonymous
Logistics
Seller Managed
Nterline Managed
Customer
Promotions
Credit
Geography
Real time quotes or
“free” delivery
Demand Starts The Ball Rolling
Maintaining the Relationship
• Feature Enhancement
• Flawless Execution
• Customer Intimacy/One to One Marketing
Degree
of
Adoption
Use Habitually,
Transact Fully
Six Components of E-commerce Trust
Register, Transact
• Icons, Seals of Approval
(trial), Confirm
• Brand
Consider, Validate,
• Navigation
Assess
• Fulfillment
• Presentation
Browse, Search,
• Technology
Compare
Controllable Activities
• 100+ PR articles
• Over 500 Radio interviews
• Print ads, radio ads, DTN
screens, mailings
• TV interviews
• Trade Shows
• Outbound call center
Hear about site
Time
How Do You Build Trust (When Your Sellers
Are Anonymous)?
Leverage “Trust Brokers”
Farm credit
Agricultural education
Teleconference testimonials
Buying Groups; Buying Group Premiums
Build relationships
Phone, E-mail, letters
Tradeshows, personal visits
Educate to clarify value proposition
PR
Speaking engagements
Survey to refine message
Over deliver on service, response time, complaint handling
Identify and Correct Misconceptions
Data required for an ACH
transfer is easily collected
using a simple graphic
Target Segments To Drive Behavior
Beta Testers, special prizes
Personal Letter, premium
$1 Auction, Group Buying
Price Visibility
Call back
E-mail, Word of Mouth,
PR
List;
No sale
Bid;
No purch.
Fully register
Pre-register
Site visit
The Universe
Adoption
Haggle, Market Maker Features
1st Trade
Information
Repeat
Adoption Will Begin With Those Who
Have The Most To Gain
Trading Participants to Date
80%
100%
100%
90%
% of Total Sales
80%
54%
70%
61%
60%
To Grower
50%
To Dealer
40%
20%
30%
20%
10%
0%
3%
17%
5%
5%
7%
6%
To Distributor
26%
13%
Manufacturer Distributor
Sellers
Dealer
Total
XSAg.com: Gaining Real Traction…
1999
•
•
•
•
•
2001 vs. 2000
Trade value: ~2x
Net revenue: ~ 4x
Listings: >$1.5 Billion
Members: >65,000
Avg. trade incr: >50%
2000
2001
2002
Source: XS metrics
What We’ve Learned In 4 Years…
Demand drives transactions (bring customers; the
shelves will fill themselves)
Traditional awareness building activities don’t
generate demand
Big companies respond to fear, not opportunity
Transparency, anonymity, technology have been
the drivers of success, but…
…You can’t build a relationship with ‘anonymity’
Learn how to ‘monetize’ existing relationships
Execution is everything
Questions?
Fulton Breen: fbreen@xsinc.com