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Hong Kong publisher succeeds

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The knock on trade publishers is that they’ve been slow in moving to the Web. Hong Kong-based Global Sources Ltd., however, challenges this conventional wisdom, and the company is turning a profit in the process.

As the publisher of a trade magazine providing information to retailers looking for Asian suppliers, Global Sources, then known as Asian Sources, first acted on the potential of delivering information electronically in 1989. That’s the year the company began creating private networks to connect buyers and suppliers electronically.

In 1991, Global Sources went a step further, creating e-commerce software to automate the process of finding suppliers in Asia and ordering products from them. In 1995, the company made many of its services available on the Web at Asian Sources Online.

Where in the world is ...?

In addition to serving 16 vertical industries, including telecommunications products and computer products, Global Sources (www.globalsources.com) now has nine geographic portals on the Web, including Indonesia, Australia and South Africa, to help buyers find suppliers in those countries. It announced earlier this month that it plans to open a tenth portal in October, Mexican Sources, its first Americas-based unit.

‘‘Currently, the Global Sources network of e-markets includes 213,000 buyers worldwide--95,000 of which are registered online--and 83,000 suppliers,’’ said a recent report by Aberdeen Group Inc., an analyst firm. ‘‘The strength of its relationships can be seen through analysis of its Web site visitor statistics: 83% of buyers visit the Global Sources network at least once per week.’’

Global Sources still publishes its original trade magazine and a handful of others. It also produces exhibitions. But the company is largely a Web operation now. In the second quarter of this year, the company experienced its first period in which it derived the bulk of its revenue from its online business. It posted revenues of $25.8 million for the second quarter, $14 million of which was from online marketplace services. That represented a 150% growth in online marketplace services from $5.6 million a year earlier.

A growing online presence

Global Sources did all of this while turning a profit in the second quarter with net income of $1.3 million, despite a one-time charge of $2.8 million for taking the company public on April 17. "Importantly, [Global Sources] is a profitable company with a long electronic history and substantial offline assets which we believe can be leveraged to seed and grow a substantial online business,’’ wrote Bear, Stearns & Co. Inc. analyst Kaushik Shridharani in a recent report placing a ‘‘buy’’ rating on the company.

James Strachan, Global Sources VP-corporate development, said the original niche served by Asian Sources made the transition to the Web a natural.

‘‘The market we served, helping buyers find new products and find suppliers, was particularly well-suited for us moving that business online,’’ he explained.

In addition to banner advertising and sponsorships, Global Sources generates revenues from the fees it charges for the following online products:

•Private buyer catalogs, which are used by such huge companies as Wal-Mart, Dell Computer Corp. and Home Depot. Through these online catalogs, Global Sources constantly updates the buyers’ prespecified list of suppliers and products sorted by country and category.

•Private supplier catalogs, where suppliers can post information publicly or directly to selected private buyer catalogs. Currently, Global Sources is not charging suppliers for this service in hopes of converting them to a subscription fee later.

•Connect, Global Sources’ messaging platform, which is an open system compatible with everything from electronic data interchange to extensible markup language. With a browser-based interface, this automated system includes request for information, request for quote, purchase order and invoice documents.

•Transact, an order management system first developed in 1991 that allows buyers and suppliers to gain credit authorization and track shipments.

Aberdeen’s assessment of Global Services’ position is strong. ‘‘Currently, Global Sources is enjoying first-mover advantage in this market and has three key advantages: access to a critical mass of global buyers and suppliers; a tried and proven technology platform for the marketplace and for linking to back-end systems; and management expertise with a proven ability to develop and manage financially viable b-to-b communities,’’ the firm wrote in its report.

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