Chemdex closes. The rise and fall of David Perry’s pioneering Net market epitomizes the bumpy ride in the b-to-b sector. Two years ago, David was seen as a visionary for helping create the concept of an Internet marketplace. In December Ventro Corp., Chemdex’s holding company, shocked many by deciding simply to shut down the operation, after trying to sell it.
It’s not about the transaction. Early independent e-marketplaces focused almost exclusively on transactions and saw transaction fees as their chief source of revenue. Today we know matchmaking is not enough. In b-to-b, transactions are just one part of the process, and big companies want marketplaces integrated into their everyday purchasing and operational systems.
Brick-and-mortars move fast. Brick-and-mortar companies moved faster and sooner into b-to-b than anyone anticipated. Many executives vowed not to be blindsided by Net upstarts in their own markets.
ISMs aren’t paper tigers. Industry-sponsored marketplaces were initially derided as simply efforts to steal the thunder of independent Net markets. But the record has shown otherwise: 65% were operational (often in limited pilots) by the end of last year. Yet ownership is not the only determinant of success. Even ISMs can fail.
Neutrality doesn’t matter. The early tenet of independent Net markets held that they must be neutral between buyers and sellers. Even minority investments from potential customers were suspect, tainting neutrality. But the bulk of ISMs were formed by either buyers or sellers. Today the requirement has evolved to balance between the two sides, reflected in both fair marketplace rules and ownership by buyers and sellers.
Private marketplaces thrive. Public marketplaces where buyers and sellers could meet to transact did not resonate with major corporations. Buyers wanted their negotiated pricing and terms, and they considered purchasing data to be proprietary, even strategic.
A writer returns. The final surprise is that I’m back again writing for Crain Communications Inc. In 1993, I was a staff writer for Business Marketing, the predecessor to BtoB. Back then, we sought to marry marketing by smokestack industries with the new online technology tools. We didn’t call it b-to-b commerce then, but we do now.
Tim Clark is an analyst specializing in b-to-b e-commerce at Jupiter Media Metrix, an Internet research firm. He can be reached at email@example.com.