Getting involved in the community

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There's a commonly held belief these days that successful Web sites are ones that build into themselves a sense of community, where visitors can find information and people with similar interests.

That's the powerful principle behind VerticalNet, a Horsham, Pa.-based collection of 15 vertical online business-to-business communities that started in spring 1995 and expects to gross $5 million in 1997, mainly from online advertising sales.

Mark Walsh, who joined VerticalNet in August as CEO, won't say whether any of that is profit, but one thing is clear: The company is generating lots of traffic. In October, the 15 online communities (such as, and together exceeded 1 million page views.

Tough criteria

VerticalNet is, in essence, a back-end collector of topical material for a variety of different industries, which are chosen after careful analysis.

"We use a number of judgmental factors, such as the number of participants in the industry, the growth of the segment, whether it has its own SIC code, and how many new products are introduced in and for the industry on an ongoing [basis]," Mr. Walsh says. "Then, through this process, we find some that fit the grid."

"We look for industries with a lot of SKUs, with [people and companies that] have a high need to get the latest product information to spec the product and the project," adds Exec VP Mike Hagan.

Get good editors

The key to all this, Mr. Walsh believes, is that if you build compelling content, the eyeballs will come.

"First and foremost, the plan is to hire good editors," he says. "The editorial product draws people in, and then gets them back the second and third time. We need to be thought of as timely destination viewing with [specific industry information] and live forums."

And those editors, says Mr. Hagan, are most likely to be found in the print world. VerticalNet has hired away journalists from such trade magazines as Chemical Engineering, Chemical Equipment, Laser Focus World, Medical Design News and Water World.

"We generally hire a business manager or publisher to head up a different group and they are likely to bring along senior-level editors and salespeople," Mr. Hagan says.

But what of the common lament that selling print ad space and banner ad space are two different skills? True, because the media have at least as many dissimilarities as resemblances, he says.

"We definitely agree," says Mr. Hagan. "We have interviewed a bunch of [salespeople candidates], but we have hired only a select few. Ours is not a CPM model, but one in which we get qualified eyeballs to come to a very focused site. Some people immediately get it. These are the great candidates for our world."

Not a zero-sum game

Though it is poaching people from trade magazines, VerticalNet doesn't seem -- so far -- to be taking ad dollars away from publishers. Mr. Walsh says that while no specific research has been done on the subject, he thinks most of the ad dollars coming into his company are in addition to the money his advertisers spend on trade magazine advertising.

ABB Water Meters, an Ocala, Fla.-based supplier to municipal water utilities, has been advertising on VerticalNet's Water Online site since October 1995. ABB's ads are linked to an e-mail form that prospects can use to request information.

"Every morning, I start with 10 to 20 new leads," says Marketing Manager Holly Robinson, who spends about $5,000 a year advertising on Water Online. "Considering the response we get, that's next to nothing," she says.

Simple marketing approach

To market itself, Mr. Hagan says, VerticalNet exhibits at or attends major trade shows in its sectors, buys search engine keyword ads and conducts joint marketing campaigns with relevant industry associations.

The company does not release specific advertising expenditure information.

By the end of 1998, Mr. Walsh expects VerticalNet to grow to 30 to 40 communities.

Several new service offerings and enhancements are being evaluated, such as a series of enhanced industry-information databases, custom sites co-branded with trade associations, and perhaps electronic commerce.

But Mr. Walsh quickly adds that if VerticalNet gets into e-commerce, it won't operate its own back channel, but will work through a third-party vendor.

Nor will it become another Nets Inc., one of the first b-to-b malls that flopped and has gone through a series of ownership changes recently.

To paraphrase Mr. Walsh -- who before joining VerticalNet was senior VP of America Online's b-to-b enterprise division and president of onetime consumer online powerhouse GEnie -- any comparison isn't accurate because unlike Nets Inc., VerticalNet is very selective in choosing industries. Plus, the individual subsites it builds for these industries are far more concerned with acting as community-building knowledge disseminators than they are with selling Product A made by Company B to Customer C.

"Nets Inc. predicted the future, but it's a few years away. You cannot force the transition to electronic commerce," says Mr. Walsh.

Content still king

An approach far more in tune with the times, he says, is to be a "smart content site."

That's not to say there aren't competitors out there. Some extranets also attempt to integrate community with catalog, but Mr. Walsh doesn't perceive a direct threat.

"Usually, in technology, these extranets are sponsored by a major manufacturer. Ford runs extranets for suppliers and vendors, but if you want to buy an engine, guess what they recommend," he says. "We are not in the business of saying that [product] is better than this one."

Mr. Walsh sees a future with unlimited business potential, where the skeptics will be swept aside.

"What b-to-b has to understand is that the Internet has rolled the tide right up to the beach and changed the way of doing business forever in numerous markets and sectors," he says.

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