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What is a B2B e-Marketplace?

B2B e-marketplaces can be defined as “an Internet-based solution that links businesses interested in buying and selling related goods or services from one another” . IDC describes the e-marketplaces as online versions of the town markets that still exist in many countries, at which buyers and sellers gather to exchange goods and services, whose criteria of participation are relatively liberal, and in which no participant has the ability to dominate the structure of the market.

The Gartner group definition approaches B2B e-marketplaces from a different angle. It defines an e-marketplace as “an enterprise that brings together buyers and sellers in particular industry, geographic region, or affinity group, for the purpose of commerce”. This definition emphasizes that e-marketplaces are typically independent enterprises. Most of them are either newly established dot.coms or independent joint ventures created by incumbents. What is meant by “commerce” is a provision of content, value-added services and commerce transaction capabilities.

This paper relies on a more comprehensive definition that describes an e-marketplace as a “virtual online market where buyers, suppliers, distributors and sellers find and exchange information, conduct trade, and collaborate with each other via an aggregation of information portals, trading exchanges and collaboration tools .”

Practically speaking, an e-marketplace can be seen as a Web site or a set of linked sites of common interest to particular participants. It may help enterprises to do business in several different ways:

• • Most e-marketplaces primarily transact and execute the purchases on behalf of their participants. By reducing complex, paper-based transactions between buyers and sellers, they aim to improve purchase order efficiency and help their customers decrease related operating costs.

• • E-Marketplaces may also emerge when customers face a highly fragmented base of suppliers who are either difficult to reach off-line or too numerous to try to contact them all on-line. In this case, e-marketplaces usually provide a possibility of parametric search across suppliers and in-depth products information. In that way they help customers to make an effective cost-quality analyze and to choose the product that suits them best.

• • Similarly, for products that are too low volume or non-standard to warrant of-line exchanges, e-marketplace may help buyers and sellers as well. In this case, an e-marketplace usually organizes for its members an on-line spot exchange and helps to build the market liquidity.

• • For SMEs in particular, a kind of e-marketplace that aggregates its customers’ purchasing power could be of interest. Through such an e-marketplace it is possible to achieve a much better deal with a supplier.

• • Finally, there are e-marketplaces that provide a platform for c (collaborative)-commerce.

2.1. Ownership of the e-Marketplace

It is possible to identify three types of e-marketplaces according to their ownership structure:

• • Third-party e-markets, as neutral communities of many sellers and many buyers

• • Consortia e-markets, as communities founded by a few large participants joining forces to face their market inefficiencies, and

• • Private exchanges, or so-called “minimal e-marketplaces”, as communities where one large player establishes one-to-many connections to ensure in depth integration and tight relationship with its buyers / sellers.

Which e-marketplace type will dominate the particular industry basically depends on the industry level of concentration and the relative market power of buyers and suppliers, as well as on the type of the product traded and the complexity of the business processes involved in its production. For instance, the idea from GM, Ford and Daimler to establish an e-marketplace together came as no surprise, considering their high concentration of purchasing power and their level of power in the automotive industry. On the other hand, in an industry as fragmented as the health care sector, a lot of third-party e-marketplaces are emerging, in the attempt to fulfil a variety of specific needs and requirements for different market niches. Third-party e-marketplaces appear already to be viable for commodity goods, such as chemicals, and indirect goods, such as MRO materials, but for differentiated and direct materials both suppliers and buyers still prefer private e-marketplaces, which, from their point of view, protect best their existing business relationships.

2.1.1 Public e-Marketplaces

2.1.1.1 Third-party (Independent) e-Marketplaces

Third-party e-marketplaces, also called Fat Butterflies, are independent, neutral, Internet-based trading platforms. Their main function is to facilitate trade between buyers and sellers. What they aim to achieve is, basically, the right number and the right kind of participants, for which they would provide a single venue for conducting business and different trade facilities. Considering the large number and variety of participants targeted, they should not be expected to offer deeper integration possibilities.

There are certain characteristics that distinguish independent e-marketplaces from other e-marketplace types:

• • Independent e-marketplaces represent a community of many buyers and many sellers

• • Independent e-marketplaces attempt to establish a level playing field for buyers and sellers to ensure that the interest of none of the participating interest groups predominates.

• • Independent e-marketplaces have open criteria for entry, meaning that any business can participate if it agrees on the Terms and Conditions and is eligible to apply. Eligibility is usually broadly defined.

• • Generally, but not always, an independent e-marketplace acts as an Internet-based broker, in the sense that the e-marketplace itself doesn’t take physical possession of the goods and services being traded, but rather just facilitates their exchange by matching buyers and sellers.

Independent e-marketplaces constitute a vast majority of e-marketplaces so far. They are typically private and therefore often dependent on venture capital. With many competitors on the one hand, and the scarcity of venture capital available on the other, the number of this kind of e-marketplaces is in decline.

A recent Forrester study of Europe’s 25 leading e-marketplaces and 30 companies shows that 88 % of the main e-marketplaces are currently unprofitable and only 36 % are expected to reach a break even during 2002 . The leading 25 marketplaces generated just 350 mio Euro in revenue during 2001 - but have received a total of 2 bio funding from VCs and industry. These figures illustrate very well why venture capitalists are increasingly reluctant to spend capital on e-marketplaces. E-marketplace usage remains low by European firms. During 2001 only 6 % purchased more than 5 % of direct materials through a net market, 80 % sold less than 1 % of goods through an exchange.

To survive the shake out independents are now searching for new, original business models that offer significant cost savings and/or enhanced revenue opportunities to both buyers and sellers. Not so many generalists are left standing. Instead, most of them are refocusing today either on a particular horizontal or vertical niche within highly fragmented industries, or on low-risk trading activities. Some of them are simply backing up from this kind of business and become software solution providers or hosts for other e-marketplace enablers.

Most of the independent e-marketplaces are serving highly fragmented industries such as the electronics, chemicals, medical and construction industries. For example, there are more than 15 e-marketplaces serving the construction industry, which is characterized by rather lengthy and complex building processes. Within such a competitive environment, just well tailored, hard to replicate and complete business solutions are apt to survive. As an illustration, it’s possible to take BuildOnline, a European independent e-marketplace. BuildOnline offers solutions tailored to simplify the complexity of the construction industry processes. By using ProjectOnline, its Internet project collaboration and workflow tool, participants are able to get access to the most up-to date information on the project, regardless of their location. ProjectOnline contains: a central document manager where files can be organized and managed, a project dashboard summarizing what’s going on, what’s new and what’s overdue, workflow tools that can be used to raise and answer questions, an integrated viewer where users can view and add comments to the documents and so on. BuildOnline offers additionally three other useful tools: TenderOnline, TradeOnline and SupplyChainOnline. TenderOnline, tendering tool, has been designed to improve efficiencies with the selection and award of tenders. TradeOnline, purchasing tool, stream the RFQ process and facilitates communication. SupplyChainOnline is an Internet-based software system that allows companies to manage their supply chains in a secure, close environment. Users can track suppliers and sub-contractors’ performance and leverage the company’s knowledge by sharing best practice supplier information throughout the company.

The second attractive market for independent e-marketplaces is the maintenance, repair and operations (MRO) supplies market, but also commodities and other indirect products markets in general. The risk of trading with unknown partners within those markets is comparatively low and buyers and suppliers show less resistance to join an e-marketplace. The situation differs within differentiated and direct material markets, since the consequences of buying unsuitable products are much worse and buyers tend to view their relationships with existing suppliers more as strategic resources. A large number of nationally, as well as globally oriented e-marketplaces, spotted the inefficiencies within MRO and indirect supplies markets as their opportunity. Most of the successful e-marketplaces are, however, national. For instance, one of the most profitable MRO e-marketplaces is Manitu, nationally oriented Italian company providing e-procurement services in MRO products designed for the use by industrial companies. The company is the only Italian distributor of MRO products based entirely on the Internet. It offers complete automation of buying processes and end-to-end service, delivery included. It aims to help companies to save money, time and resources in their purchasing of MROs. The only language available on its Web site, at least for the moment, is Italian. As another example, Works.com, operating within the same field, targets US SMEs in the retail and professional service industries. The company helps them to buy MRO products like big corporations do, by enabling buyers to track order status and monitor their budgets and spending levels. Also, it permits small and medium sized businesses to assign purchasing privileges to individual employees, create “cabinets” of products approved for purchase and arrange product returns.

Small and medium sized businesses are in general an attractive market for independents because of their sheer size. The major problem for Work.com and similar companies, and the main reason why SMEs have been neglected for a long time, is that it is tremendously difficult to make small companies aware of the existence of an e-marketplace designed to serve their needs. However, more and more independent e-marketplaces are showing up, willing to face that challenge. While some of them, like Works.com, are focusing on a particular problem area (MRO supplies), others have a more general approach. For instance, e-marketplaces such as Onvia link both buyers and sellers to their Web site, enabling the smaller companies to come together in one market. A small start-up might, for example, buy a computer or get a quick quotation for a bank loan, exchange the information and access tools to enhance productivity. Onvia started recently to offer high-value added services to differentiate itself from its competitors. A lot of other independent marketplaces adopted a similar approach.

2.1.1.2 Consortia e-Marketplaces

Consortia e-marketplaces are built by industry leaders, typically “bricks and mortar” companies that dominate their respective old economy industries. They are the mechanism that traditional companies use to fight back against the dot.coms within their own e-business strategies. By forming jointly an e-marketplace, traditional companies become able to concentrate a substantial portion of their industry trading volume. They bring along their long-established, extensive networks of suppliers (in the case of buyer-driven exchange) or buyers (in the case of supplier-driven exchange), or both, including distributors and resellers. The chicken-and-egg problem, typical for third-party start-up e-marketplaces, is therefore much easier to overcome. If the founding companies are strong enough, most of their suppliers and buyers have no choice but to join their network. They constitute automatically critical mass and provide liquidity for the transactions.

In most instances, consortia e-marketplaces are being set up as joint ventures. They operate neutrally and independently from their owners, since they are established as independent companies with an independent CEO and an independent management board. The authorities such as the European Commission for the EU and the Federal Trade Commission for the US scrutinize their independence and investigate the “pro-competitive effects” or “anti-competitive harm” that the collusion within these collaborations might cause. Covisint, for example, underwent stringent checks by the European Commission and the FTC to ensure that competition in the industry was not being stifled by the collusion of the largest automakers in the world.

Consortia e-marketplaces emerge typically within a vertical supply chain in the following situations:

• • If the purchasing side has being consolidated into a few dominant players and the supplier community is relatively fragmented and inefficient, a buyer-driven e-marketplace might emerge. Buyer-driven e-marketplaces typically appear within verticals such as the automotive, health care and aerospace industry. For example, within the automotive industry the buyers are consolidated into a few dominant manufacturers. Their suppliers are numerous and spread across multiple vertical supply chains such as the steel and rubber industry. Dominant manufacturers such as Ford, General Motors and Daimler Chrysler have attempted for years to gather and work together, primary via the automotive network exchange (ANX) initiative. Covisint therefore came as no surprise. Renault, Nissan and Peugeot Citroen joined recently as partners. The name Covisint was derived from the primary concepts of why the exchange is being formed. The phoneme “Co” stands for connectivity, collaboration and communication. “Vis” represents the visibility that the Internet provides and the vision of the future of supply chain management. “Int” represents the integrated solution the e-marketplace aims to provide as well as the international scope of the exchange. Covisint is an open e-marketplace, meaning that any company may join. It is not necessary to be one of the founding companies to be able to use its tools, but it is necessary to become a member. In the attempt to enhance liquidity, Covisint approves memberships free of charge. It launched its European operations in March 2001. After a relatively slow start Covisint managed in August 2002 more than $129 bio in transactions over its e-marketplace – nearly 53 % of the estimated $240 bio spent last year by Daimler Chrysler, Ford Motor and GM. 30 of the top 40 auto suppliers use Covisint, which had a total of more than 2000 users in 2001. The main problem when launching Covisint was that, in the beginning, buyers did not ask their suppliers to perform a part of their business online. This was a conscious decision to avoid a disruption in the supply chain. However it led to a slower growth of this e-marketplace than initially expected. The danger of possible negative effects that may arise due to the Covisint dominant position became less evident after another promising exchange, being set up by Toyota in partnership with i2, recently emerged within the industry.

• • If the supplier side has been consolidated into a few dominant players and the purchasing side is fragmented among a huge number of smaller companies, seller-driven e-marketplaces can emerge. The steel industry makes a perfect example. According to Lou Schorsch, CEO of brand new marketplace GXS, the steel market can be divided into two major segments: the contract market and the spot market. The contract market is focused on the automotive manufactures and the mechanical engineering industry which have specific demands concerning quality specifications for steel. Both industries are well organized and have formed already strong private and buyer-driven e-markets. On the other hand, the spot market is characterized by commodity-type products that are used by the construction industry. GXS consortium focuses on that market. Its founders are the industry giants Cargill Steel, Duferco, Samsung and TradeArbed. The company targets international markets. In this market, GXS doesn’t have many potential competitors. The reason why e-marketplaces are either not interested or are backing up from this market is a liquidity problem - the steel industry doesn’t offer a possibility to charge acceptable margins on transaction conducted through an e-marketplace, since the traditional margins are rather low themselves. E-steel, an independent e-marketplace, met this barrier and is now repositioning itself more as a tech provider then as an e-marketplace enabler. Additionally, independent e-marketplaces met another very common barrier: since most of the regional markets key players were already linked through EDI, they know each other well. Each new deal is thereby dependent on existing long-term relationships, and there is not much place left for an unknown intermediary.

From the point of view of SMEs, there is a serious constraint on the open use of consortia e-marketplaces, which lies in the differences between the technology infrastructures of large companies versus small and medium sized business. For example, Elemica, an chemical e-marketplace, stated that its e-marketplace “functions as…. contact point for connecting multiple buyers’ and sellers’ ERP systems.” The advantage which Elemica offers are reduced overall costs for individual companies that implement these connections on a one-to-one basis. In other words, the e-marketplace, as many others as well, is obviously designed for large companies. SMEs either do not have such systems or they don’t have system that could be recognized by an e-marketplace. Elemica, for its part, offers additionally Web-based and Web-hosted alternatives for SMEs, but this kind of services remain underutilized. The reason is the presence of multiple relatively strong e-marketplaces within an industry. For SMEs it would be prohibitively expensive to join and to adapt their systems to a number of different e-marketplaces considering that they would only exchange limited quantities of goods.

2.1.2. Private exchanges

Unlike public exchanges, where anyone can participate, private exchanges are set up by individual corporations to deal solely with their own suppliers/buyers. They represent password-protected extranets that extend a single company's supply chain to its trading partners. While their technical infrastructure resembles the one that public e-marketplaces rely on, the private e-marketplaces generally provide more complex capabilities, such as joint planning and synchronized production processes. That requires often that e-marketplaces hook into the back-office systems that house relevant data, meaning that the hooked enterprises’ systems have to be complementary to the diverse systems that e-marketplaces use. Such connectivity imposes additional investments in ERP systems adjustments for all participants, but it provides trading partners real-time visibility into each other’s operations that is essential to develop collaboration along the supply chain.

There are several reasons why large companies could decide to establish their own exchange rather than to join a public one:

• • Private e-marketplaces offer greater data privacy and security. Many companies consider their transaction activities to be a competitive secret. They don’t want to make their supplier base or purchase patterns visible to their competitors. For instance, Dell builds its competitive advantage on its extraordinarily short cycle time. If it would joint public e-marketplace, its capabilities would be visible to its competitors. Therefore, Dell relies on its own private exchange and keeps in that way its proprietary supply chain management secret. In addition to being concerned about the privacy, firms also want secure access to their systems and information. For a significant number of large firms the firewalls and encryption techniques that public e-marketplaces deploy are never good enough, and they are only certain of the measures they take upon themselves to ensure security.

• • Each firm has its own way to deal with its customers and suppliers. Firms’ supply chains differ depending on their histories, laws, and countries they come from, institutions, and resources they have available. Those deeply rooted behavior patterns and supply chain particularities determine the way firms prefer to start a business over the Internet as well. Private e-marketplace are the only type of e-marketplaces that offer a possibility to transfer those patterns online and choose the method that suits best. By building their own networks, companies can customize their e-marketplaces to their own suppliers and protect the close relationships they want to maintain. Public e-marketplaces offer different kind of advantage: they provide already tailored standards for describing data and business processes, making the job easier and less expensive, but their solution is tailored to fit all, not anyone in particular. Firms should measure the advantages and costs of those two solutions depending on their size, products and the type of its business processes and products. For example, for Wal Mart, a company with a dominant position in its industry and a world-class supply chain management, it makes sense to invest and build its own private exchange. Any benefits that it could receive from joining an industry-sponsored marketplace are outweighed by an e-market that is tailored to its own needs. However for a company whose supply chain is simple and straight forward, or whose product cycle is long, lower cost alternatives would probably deliver better results.

• • Public e-marketplaces, both third party and consortia, depend on the fees collected from users to finance operations. Almost none-of the public e-marketplaces are making money, and most of them are still refining their systems to deliver value-added services to the customers. Therefore, large companies, confronted with the immature capabilities of the public e-marketplaces and the question of their ability to stay afloat, often choose to avoid the risk and build their own exchanges.

Dell Computer Corporation has one of the most visible success stories from all existing e-marketplaces. It shows best how the adequate transition from doing all the business off-line to putting almost all of it on-line may enhance productivity and bust the company’s revenue. Dell sells its products and services in more than 140 countries to customers ranging from major corporations, government agencies, medical and education institutions, to small businesses and individuals. For all customers Dell offers product information, build-to-order systems and a solid service to back-up its products. Registered customers are entitled to newsletter and e-mail services as well. Customers who opt for long- term contracts with Dell get discount prices, order history details backed by Dell and access to customised links and ads. So-called “platinum customers”, i.e. highly profitable ones, such as Ford, have their own home pages hosted by Dell. They get all those services customized to their specific needs and requests. On the supply-side, valuechain.dell.com, an Internet portal, provides for real-time information exchange between Dell and its suppliers. Suppliers are able to see exactly what parts Dell needs each day and how many parts it expects to need in the coming weeks. Consequently, the company’s most efficient factories order only the supplies required to keep production running for the next two hours. Its suppliers are electronically informed what to deliver every two hours, so that the factory may continue production. This virtually eliminates parts inventory. Dell’s ambition in developing such a private exchange is to achieve a constant state of balance between supply and demand. That way, suppliers get more accurate, timely information, customers get products and components they want in a short time and Dell does not have to manage excess inventory.

2.1.3. Portfolio Approach

Many companies adopted strategies that leverage multiple e-marketplaces. Most of them use those strategies to mitigate risks caused by market uncertainty. Also, there are no one-stop shops. Although many e-marketplaces are built to support a variety of business functions, no e-marketplace is able to support all the functions equally well. For example, third-party e-marketplaces are strong in the indirect material procurement, settlement and payment, while consortia e-marketplaces provide, in general, a higher quality community content. Private e-marketplaces are strongest in the provision of direct materials, fulfillment and logistics, product development, supply chain planning and collaboration and customer service and support. To optimize everything from community content to supply chain collaboration, the best solution for the company is therefore to create a portfolio of e-markets. For example, Dow Chemical is involved in several different e-marketplaces to best meet its diverse needs. Dow’s customers use its private exchange MyAccount@Dow to buy from the company. Dow participates additionally in the consortia e-marketplaces Omnexus and Elemica to sell plastics and chemicals, and uses ChemConnect, an independent e-marketplace, to auction new materials and to find new suppliers. The problem is that this strategy suits just larger companies, since adherence to each additional e-marketplace brings additional expenses that smaller companies could not possibly cope with.

2.2. Industry focus

Distinctions between e-marketplaces according to the industry they focus on are likely to blur with time as e-marketplaces evolve to offer a range of services to participants. But today, this distinction is still present because different types of e-marketplaces have different requirements.

According to the industry focus, it is possible to distinguish two types of e-marketplaces:

• • Vertical e-marketplaces, serving a particular industry and providing domain expertise and content and

• • Horizontal e-marketplaces, providing goods and services to different industries.

2.2.1.Vertical e-marketplaces

Vertical e-marketplaces are typically established along traditional industry segments, such as the automotive or steel industry. The traditional business processes have many points of inefficiencies, so-called “points of pain”, contributing to increased costs and provoking delays in business transactions. This represents an opportunity for e-marketplaces to add value. The industries which were, so far, the most attractive for e-marketplace solutions are the computing and electronics industry, motor vehicles, chemicals, utilities, paper and office supplies and others.

The computers and electronics industry is one of the most attractive vertical e-marketplaces. Most of the industry is already using the Internet for business processes, so the technical barrier is not high. The industry is also characterized by high vendor and product search and comparison costs. The products are info intensive with a complex configuration and have A short life cycle. Distribution channels are as well complex, because in addition to the established relationships with their distributors, companies make considerable purchases in the spot market to meet short-term needs. Most of the companies are therefore moving their sales and purchasing online. Intel and Dell are conducting already close to 90% of their sales electronically, through their private online exchanges. They moved also most of their purchasing online. Compaq Computer and Hewlett-Packard, together with another 10 companies, are planning to create an independent B2B e-marketplace through which they intend to sell PC components and services. IBM is working on its own venture e-marketplace with another 10 companies. Independent e-marketplaces are focused mostly on market niches within the vertical sector. For instance, FastParts.com focuses on excess and dislocated inventories of semiconductors and other electronic components in the supply chain. It enables its members to offer excess inventories for sale on the Internet, or to locate shortages or access bargain prices on goods they are buying on a regular basis..

Within the aerospace industry e-marketplaces abound as well. One of the firsts e-marketplaces to appear was the independent e-marketplace AviationX. It offered technical and procurement resources for small and medium-sized airlines. AviationX was forced to cease the operations shortly after it started to operate, as a strong industry consortium called Exostar was formed. Exostar is a buyer-side consortium, founded by the industry competitors Boeing, Lockheed Martin, Raytheon and British Aerospace, along with the technology partner Commerce One. Its main competitors today are the collaborative e-marketplace Cordiem and the third party independent PartsBase. Cordiem’s 12 founding aviation members include nine airlines, amongst them Air France, American Airlines and British Airways and three equipment manufacturers. PartsBase, as an independent e-marketplace, exemplifies the benefits that small niche players may enjoy from the portfolio approach commonly used by larger companies. It lists some of the founders or equity holders in his competing aero-marketplaces, such as Boeing, Honeywell and Federal Express. Recently the e-marketplace Aeroexchange was set up. Aeroexchange is a consortium founded by 13 airlines in North America, Europe and the Asia-Pacific region.

Energy trading is moving online rapidly. E-marketplaces bring speed, timeliness and increased visibility into market behavior. The life sciences and health care industries also have large, fragmented and inefficient supply chains that can benefit greatly from moving online. The publication” New World Supply Chain Management: A model for Health Care Organizations ” provides an interesting illustration: a typical hospital buys $50 million worth of goods from about 22000 suppliers annually. The price discrepancy for identical items from different suppliers goes up to 75%, while paper invoicing costs $145 in comparison$5 of online invoice costs. There are numerous e-marketplaces, such as Neoforma, Promedix (acquired by Ventro), Sciquest and others, targeting such an opportunity.

To generalize, the industries that are most prone for the vertical e-marketplaces are those with a large base of transactions and with many fragmented buyers and sellers that are difficult to bring together, therefore with a high search and comparison costs. Vertical e-marketplaces were established first within industries which had a strong pressure to cut high processing costs, such as costs of manual processes based on paper catalogues, telephone and fax ordering.

2.2.2.Horizontal e-marketplaces

Horizontal e-marketplaces, as opposed to vertical e-marketplaces, are not focused solely on the needs of one particular industry. They deal with indirect materials and offer services across multiple vertical industries. Horizontal e-marketplaces were initially founded to support trading of MRO materials such as janitorial supplies, and other indirect (non-MRO) materials, such as office supplies. They are now more and more present also in the services sector. Delphion, for example, offers a comprehensive patent research Web site that contains searchable bibliographic data, full text data, and complete patent-images for patents issued by the United States Patent (both applications and granted patents) & Trademark Office (USPTO), World Intellectual Property Organization (WIPO) and European Patent Office (both applications and granted patents), bibliographic text from the INPADOC patent collection, and bibliographic text and representative images of Japanese patents. It empowers business and intellectual property professionals to analyze, manage and leverage intellectual property assets faster and in a more simple way than before.

The B2B e-marketplaces that aggregate trading communities from multiple vertical industries are also sometimes called horizontal. The other terms that are also in use for such e-marketplaces are “aggregated vertical exchanges”, “multiple trading communities”, “vertical industry” and “aggregated marketplaces”. Each of them takes a different approach. For example, Ventro, formerly known as Chemdex, managed to establish a variety of vertical markets that stream the purchasing and the procurement processes for different industries.. Ariba, a provider of e-commerce software and network services, spread into different markets through internal development and acquisitions.. VerticalNet, on the other hand, focuses on sellers, not on buyers. It offers banner ads, storefronts and e-commerce catalogues across almost 60 different business communities, in areas such as wastewater treatment and paper manufacturing. According to the founder Michael Hagan, VerticalNet’s main advantage is its ability to leverage new technologies across 60 balance sheets. For example, it acquired Isadra, which makes technology for aggregating supplier catalogue data, and the technology can be used across its entire network, while other companies would have to absorb it into one market.

It seems that the Forrester Research finding that ”a vertical market is more valuable to the participants the more vertical it is” does not stand, neither from the point of view of e-marketplace enablers which profit from economies of scale and larger audience, nor from the point of view of customers, who get instant access to different e-marketplaces tackling different industries within which they are either sourcing or selling their products and services.

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