
SkyMall's SkyFall - DavidChouinard
http://priceonomics.com/skymalls-skyfall/
======
aresant
Here's what I think happened:

a) Xhibit has built a solid digital agency team on the back of nutraceutical
affiliate marketing offers, and enough revenue to support a trailing $300 -
500m valuation. But they realize their business isn't sustainable, and want to
unlock the value of their team & experience with a larger play. They have
failed at doing this with their own projects.

b) Najafi Companies, that originally owned Skymall, recognizes that the
continued move to digital will eventually, and probably quite rapidly,
decimate what is effectively a print advertising business in Skymall. They
need a forward looking strategy, and a team that can execute said strategy
ASAP.

c) Given that both companies are in Phoenix, a fit is recognized, and
Skymall's recently appointed CEO Kevin Weiss is named CEO of the merged
organizations. They sign him to a 5-year agreement to develop the digital
strategy for Skymall and, given his background at "Author Solutions" which
shows his experience in transitioning print-to-digital, this makes sense.

d) They hatched this plan when Xhibit's CEO met Skymall's CEO standing in line
to use the restroom at a Phoenix Sun's game (a team that Najafi Companies has
an investment in).

(1)
[http://biz.yahoo.com/e/130621/xbtc8-k.html](http://biz.yahoo.com/e/130621/xbtc8-k.html)

~~~
rohin
I'd suggest listening to this interview with the the CEO of Xhibit for even a
few minutes to get a sense of the kind of "value" their team is bringing to
the table.

[http://www.youtube.com/watch?v=bfA165MFcBI](http://www.youtube.com/watch?v=bfA165MFcBI)

~~~
acchow
His meandering string of banal platitudes and buzzwords is seriously next
level:

"I personally refer to Xhibit as a multi-dimensional digital ad agency. Our
gaol was to build a company with combined strengths of design, development,
and distribution, to be a one stop shop for a clients digital marketing and
advertising needs. Our synergistic array of software suites, tools, and
offerings have been engineered from the ground up to help companies maximize
results from digital strategies. I really want to emphasize results, Nick.
Since we build our concepts from the ground up to help businesses maximize
revenue, I always have the belief that if a client made money from a marketing
campaign, they will in turn spend more money. This is why we have integrated
some performance result models into our work today. The long term success any
business or product relies on monetization."

~~~
luke-stanley
This isn't that bad. Joel Spolsky points out how bad Steve Ballmer's recent
memo was: [https://www.microsoft.com/en-
us/news/Press/2013/Jul13/07-11m...](https://www.microsoft.com/en-
us/news/Press/2013/Jul13/07-11memo.aspx)

~~~
ams6110
Link to Spolsky's critique?

~~~
taspeotis
This is the best I could find:
[https://twitter.com/spolsky/status/355358776280363008](https://twitter.com/spolsky/status/355358776280363008)

------
rohin
Author here. We published this about a month and a half ago so the stock price
information in the post is out of date.

Since then, the stock price of the acquiring company (XBTC) has fallen roughly
in half.

[http://finance.yahoo.com/echarts?s=XBTC+Interactive#symbol=X...](http://finance.yahoo.com/echarts?s=XBTC+Interactive#symbol=XBTC;range=2y)

~~~
dmix
So they're basically a company doing adwords PPC/CPA (cost-per-action)
campaigns and they managed to become public via reverse takeover?

A big portion of the PPC industry has always been shady. I build software for
diabetics and constantly came across highly-optimized landing pages promising
to cure diabetes for $99. With highly questionable diets or videos.

They buy up all the expensive adwords health keywords (competing with big
pharma), so they must be raking in money.

I also have friends who worked as adwords marketers for people making millions
selling non-FDA approved health products (for ex. cleansers and skin bleaching
products).

~~~
callmeed
My wife got scammed by one of those nutraceutical "trials" once. You get some
sample pills on a 14-day trial. The phone number to cancel the trial is
disconnected. 14 days later, your card gets charged $80.

I've noticed a lot of them advertising on Facebook.

~~~
3825
did you try to charge back?

~~~
jusben1369
He may not of but apparently a lot do per the article and 10-K )

------
ErikAugust
Xhibit's "Twityap": [http://www.twityap.com/](http://www.twityap.com/)

What an insulting joke.

Looks like their Twitter account was suspended:
[https://twitter.com/TwitYap](https://twitter.com/TwitYap)

Elancer from Punjab who put the app together has a couple screenshots:
[https://www.elance.com/samples/twityap-
android/71857479/](https://www.elance.com/samples/twityap-android/71857479/)

Totally funny stuff...

~~~
reedlaw
How is it that Xhibit has so many faces on it's About Us[1] page but they
still had to hire an elancer? Did they make the iOS version and out-source
Android development?

1\. [http://www.xhibitcorp.com/about-us](http://www.xhibitcorp.com/about-us)

~~~
unreal37
Why do they have Facebook Like buttons for each of their employees? Is this a
corporate website, or Hot or Not?

~~~
smoyer
It's also a good thing they differentiate between their 2D artists and their
3D artists. You wouldn't want to get them confused!

------
draz
I propose a 4th reason why they merged with Xhibit: the owners of SkyMall
realized that with WiFi becoming more and more prominent on flights, bored
traveler are less and less likely to flip through their magazines, but instead
get online (where they'd have their own set of advertisements, shopping
capabilities, etc). I think, therefore, it was the right move to cash out
before companies themselves pull out of their agreements with SkyMall.

~~~
UnoriginalGuy
I think you're massively overstating how common WiFi is. First off it only
exists over certain land areas, and secondly it is so costly on most flights
few are paying for it ($35 for a 60 minute flight? Uhh no thanks).

Plus you'd still read Skymall during takeoff/landing where electronic devices
are banned.

~~~
jmathai
I think you're massively underestimating the future trend. More flights will
have wifi for cheaper. Not less for more money.

Sure, from the looks of today it might not seem like a big disruption for
SkyMall but it will.

On most flights I go on I'd say about 10-20% of the folks have a tablet
device. That trend will also go up and continue to decrease the effectiveness
of SkyMall.

~~~
throwaway1979
On what basis do you claim that "most flights will have wifi for cheaper"?
There really isn't much competition when you are at 10,000 feet. Also, if
airlines wanted to differentiate themselves based on quality, they had ample
opportunity to do so. From my understanding, for coach seats in the US,
airlines compete solely based on price.

~~~
marvin
European low-cost airline Norwegian currently has free wi-fi on all their
European flights. I'm pretty sure this trend will continue - it's a relatively
inexpensive way for airlines to differentiate themselves from their
competition.

------
jwheeler79
From their 10-K: "We owe $375,000 at a fixed interest charge of ten percent
(10%) regardless of the time of repayment to four shareholders due March 31,
2014"

That means they issued a 10% bond sale that four dumbshits, already holding
common shares, bought into. A 10% bond!

When spain was on the verge of insolvency, they were issuing bonds at 7%

~~~
ratsbane
This is crazy.

"fixed interest charge of ten percent (10%) regardless of the time of
repayment"

Does that mean, as it sounds, that the interest is $37,500 whether they pay it
back in ten days or ten years? I realize it's due March 31, 2014, but if it's
not paid by when it's due, no more interest accrues?

~~~
pbhjpbhj
I don't know anything about the specifics here but if it helps interest that
is fixed is fixed pro term. So "fixed interest mortgage rate of 5%" is
actually 5% per annum.

If they don't pay it back they continue to accrue a [presumably compounded]
10% charge.

------
chipsy
As someone who has had the misfortune of holding this type of scam stock in
the past, I have great sympathies for the shareholders.

There are all sorts of ways you can find yourself holding a worthless
investment(myself, via the entreaties of an overly enthusiastic and gullible
friend) but once you have it, the rationalization machinery is going to kick
in deeply, because now you're a sucker, and you really don't want to feel like
one.

That's why there's often a lot of online noise generated around obviously bad
companies like Xhibit - it only takes the slightest big of hope to keep people
in as the price plummets.

------
Afforess
Seems like a fitting fate for Skymall. A company that profits by selling
overpriced shiny garbage is bought by an overpriced and shiny company, that is
garbage.

~~~
larrys
"selling overpriced shiny garbage "

People are free to try to locate that "shiny garbage" and buy it cheaper but
yet some people continue to purchase those things from skymall either because
they are a) in a hurry b) money is no object c) product is unique enough that
it can't be easily found

Here's a question. One of the problems people have is app discovery. What if
there was a magazine onboard airplanes where you could advertise cost
effectively and get distribution for an app? Wouldn't you see that as
providing some value just like any advertising?

~~~
Afforess
They have a captive audience (bored passengers in airlines) and the shiny
things they sell appeal to consumers with no self-restraint. The value they
provide is nearly zero. They exist and make money due to a complete lack of
competition and an endless stream of idiots.

I say good riddance.

~~~
larrys
"shiny things they sell appeal to consumers with no self-restraint."

Where are you drawing this conclusion from? Perhaps there are people who like
to spend money and buy things because it gives them a rush and makes them feel
good. Same as people will spend money on other feel good things (like a ball
game or a concert, a movie or a play or play an online game).

What exactly is wrong with buying "shiny things"?

And they don't lack competition as many of the things in the catalog can be
located elsewhere. After all you still need to order and have it shipped to
you.

Look stores in the terminal have a business model that depends on a captive
audience as well and the pricing for many items is certainly higher than it
would be in other locations. Why shouldn't it be? This is capitalism and there
is nothing wrong with it at all.

~~~
Afforess
> _Where are you drawing this conclusion from?_

Personal experience.

> _Perhaps there are people who like to spend money and buy things because it
> gives them a rush and makes them feel good._

I feel bad for these people.

> _What exactly is wrong with buying "shiny things"?_

[https://en.wikipedia.org/wiki/Consumerism#Criticism](https://en.wikipedia.org/wiki/Consumerism#Criticism)

> _This is capitalism and there is nothing wrong with it at all._

This is a non-sequitur. I can be against Consumerism and still be a proponent
of Capitalism.

------
skybrian
I think the most plausible scenario is that SkyMall wasn't a good investment
to begin with, so their private investors dumped them.

We have no hard numbers. Magazine advertisers often don't pay list price for
ads and their expenses are private deals with the airlines, who are likely to
drive a hard bargain if they can. And I'd be skeptical about how many people
actually read them regularly; a survey commissioned by the company could be
exaggerated or flawed in some way.

------
dschiptsov
Nothing to see here. In general, being a cheater is much more efficient
strategy than being a working drone, and, on the other side requires much less
actual skills. This is why, for example, so many people struggling to create
an appearance of competence and success, without actually possessing any
appropriate skills or qualities. Their overconfidence sometimes fools
simpleminded neighbors.

Creating an empty-shell companies based on buzzwords, bandwagon effect and
spikes of mass hysteria in order to gain ballooned valuation via media
campaigns and staged "acquisitions" is a normal practice nowadays. The
nonsensical valuation of companies such as Zynga are canonical examples.

Using just appearance and media manipulations to create an association between
few buzzwords, a brand and ignorant snap-judgement - "oh, that is a cloud
virtualization mobile stock" or, you know, MongoDB - "instant gratification
and productivity (of ignorant)" is a new-normal.

The exit strategy could be a fail fail due to "bad economy", while pocketing
all the money, or, if lucky, sale to a bigger fool, but first one is much
easier.

------
throwaway9848
According to Yahoo! the Xhibit CTO makes $3K/year. Three thousand dollars.

[http://finance.yahoo.com/q/pr?s=XBTC+Profile](http://finance.yahoo.com/q/pr?s=XBTC+Profile)

------
toble
Couldn't there be lots of other reasons? Like the current owners may have been
forced to do it? From reading the article, I got the impression that this
business was being passed around like a toy. Are the previous owners
indirectly linked to investors in the airlines that carry the catalogue? Or
members of the same club? I think I have watched too many detective shows, but
there you go.

------
eksith
Funny thing is, I've browsed through for some ideas for electronics projects
(not to use as-is, mind you, just to fiddle with) and found parts at
wholesalers. What can I say, they were a handy supply of barely usable, often
unnecessary rubbish, but as a museum of oddities and bad ideas, it was rather
inspiring.

------
cpks
Last time I saw something like this, threats from the Russian mafia to the
selling party were involved. No kidding.

------
awongh
twityap?!? you can't make this stuff up.

It's sad that this might work to get people to part with their money.

------
unreal37
Option #4, the old owners of Skymall financially benefit from the deal
regardless of the up and down of the stock price. What if current holders of
xhibit stock are the ones getting scammed here?

~~~
andyakb
How would that be the case?

------
lifeisstillgood
Isn't the simplest explanation the best? SkyMall was simply made an offer they
couldn't refuse.

Don't sell horses heads in the magazine do they?

------
circa
So Xhibit is faceblock?

------
cmccabe
I thought Xhibit was a rapper or something. Also-- Twityap? Is that for real?

------
adamtait
I guess when Priceonomics finds their business model has also fallen on hard
times, they can resort to ... uh ... journalism.

