Independent e-marketplaces have embarked on their own high-stakes game of "Survivor." The prize? Not a million bucks, but the chance to stay in business in a market flooded with look-alike competitors and massive coalition exchanges eager to extinguish their tiki torches.
The past few weeks have seen pioneering, independent markets adopt a wide array of survival tactics. Most involve finding a profitable niche or a well-capitalized partner for funding. Complicating matters is the fact that the IPO door has slammed shut for almost all b-to-b and e-marketplace plays-at least for now.
Analysts have identified a number of strategies for Net markets to reposition themselves. Independent Net markets, for instance, could morph into software or services providers, or concentrate on providing match-making services, said Jupiter Communications Inc. analyst Tim Clark, who closely follows e-marketplaces.
Aviation spare parts Net market TradeAir.com, for example, said last week it plans to give away to other vendors and marketplaces its proprietary software and database that tracks recent sale or auction prices of surplus parts. In exchange, competitors would add their sales data to the database, known as Trade-O-Meter.
The idea, of course, is to build a larger marketplace that TradeAir would help oversee.
"There's been a total mentality change," said TradeAir CEO Bill Morales. "Six months ago, Net markets wanted to strike up exclusive deals. Now we see people partnering more."
Why the sea change? At least part of the explanation is the emergence over the past six months of massive industry-backed exchanges-including Exostar.com and Aerospan.com, for example, in TradeAir's market-which quickly overtook many independent exchanges.
Indeed, TradeAir isn't alone in changing course in the aerospace market. High-profile marketplace AviationX.com said earlier this summer it was abandoning its e-market ambitions to sell supply chain and e-procurement software customized for the aviation industry.
TradeAir is looking to clear its own space as well. "We're a niche play within the Net market world," said Morales. TradeAir will release new software in January, dubbed HellCat 2.0, to facilitate its new role as industry match-maker.
Earlier this month, electronics marketplace PartMiner.com took a similar tack, parlaying a rejiggered focus on match-making services into a deal with coalition giant e2open.com.
Deals between independent and coalition markets have just begun to spring up, but are expected to become more widespread.
Just last week, for example, energy marketplace Pantellos said it had selected e-marketplace Cephren Inc. to supply online construction and building services for its utility customer base. And last month, in another bonding of independent and collation marketplaces, real-estate Net market FacilityPro.com received a $25 million investment from real estate consortium Constellation Real Technologies.
Elsewhere, MetalSite.com recently said it would swap customers and co-develop technology with consortium MetalSpectrum, which went live last week.
Another metals site, CoreMarkets.com, earlier this month made a bold move of its own, eliminating transaction fees on its marketplace to instead focus on value-added services like logistics, financing and even education. "By eliminating commissions and tying our future to the scope and quality of the service we provide, we strengthen our position as a partner to the industry," said CoreMarkets CEO Howard Feldman.
No Net market is above tweaking its business model. Two of the biggest, Ventro Corp. and VerticalNet Inc, for instance, are both reworking their business mix with a greater focus on e-commerce, technology and services revenues. Both companies have seen their stock prices head south, and stay south, in recent months.
Another pioneer, Commerx Inc., has been overhauling itself for the better part of the year, refocusing on private hub supply chain services and phasing out reliance on revenues from its public marketplaces such as PlasticsNet.com. In recent weeks, Commerx has announced deals with Mitsubishi International Corp. and Schick Wilkinson Sword Inc. for private hub services.
"What's happened here is the notion of marketplaces is still a good concept, but in the way it is getting executed we're starting to see some divergence," said Tim Stojka, CEO of Commerx. Stojka also revealed his company had finally pulled its IPO, which had been on the table since earlier this year.
Stojka believes Commerx, despite its setbacks, can win with its new strategy. But not all early markets will survive, he said. "I think some market makers will continue to exist. But you won't find many that have the proprietary technology and the right business model to build big businesses," he said.