VERTICALNET: THE NEW FACE OF B2B

Chris Wood, Ashley Glading, Jessica Gabriel, Megan Longtain, Ashli Edmund, Patrick Robbins

•Evolution of B2B, History of Vertical Net•Why visit a vertical/ Development•Revenue/ Expenses and Income•Competition•SWOT Analysis•Problems and Recommendations

Introduction

Evolution of Business-to-Business E-Commerce

Electronic data interchange (EDI) started to be used in the early 1980’s as a way for businesses to electronically transfer information

Web-based internet applications began to replace EDI’s

A successful B2B exchange included: High availability Transaction support XML Security timeliness

Digital marketplaces business models: E-Communities E-Distributors E-exchanges

History of VerticalNet

Mike McNulty believed the internet could be an efficient and effective way to satisfy his clients complaints

In August 1995, VerticalNet was established in Horsham, Pennsylvania by McNulty and friend Mike Hagan

At first, McNulty and Hagan contributed $75,000 together, and a $1 million equity investment was made from Internet Capital Group (ICG)

Cont. History

August 1997 Mark L. Walsh signed on as CEO

5 verticals with less than 50 staff members when Walsh joined VerticalNet

ICG provided more equity-based funding and took 49% stake in the company

VerticalNet developed new verticals and almost doubled their number of employees by the end of 1997

Cont. History

May 1998 VerticalNet won the Tenagra Award for “Successful Internet Business Model”

WaterOnline had about 80,000 unique visitors a month and had annual revenue of more than $500,000

VerticalNet had 29 verticals by the end of 1998

Due to expansion, a $14 million operating deficient accumulated and their venture capital was about to run out

Cont. History

February 11, 1999 VerticalNet went public to take advantage of the IPO market

650,000 unique visitors a month and 40,000 sales leads generated

During the IPO, 4 million shares were traded and the price rose 184% to $45 a share

Why Visit a Vertical?

ContentCommunityCommerce

Developing a Vertical

VerticalNet had a refined process for developing a new vertical through a series of steps.

1. They used various criteria to identify and industry sector that might benefit from a vertical portal.

2. VerticalNet recruited well-respected industry editorial talent who acted both as a content producer and a credibility builder for the site.

3. The company hired sales professionals to develop an industry buyer guide and a potential list of advertisers.

*The resources required for each vertical included an editor, an industry manager, and a sales manager.

Primary Source of Advertising Storefronts

Banners

Sponsorships

Sources of Advertising

Storefronts Simple Display company information Display product overviews Directed to storefronts from

banners

Banners Ads available in 2 formats

Large banner ads Small banners

Advertisers purchase 2 types General Vertical specific

Sponsorships 2 Types

Sponsorship of specific area, or channel, of a vertical

Sponsorship of a vertical’s newsletter

Primary Expenses

Salaries Staff on salaries

Editors Sales staff Engineers

Marketing Expense 2 Major catergories

Off-line advertising Online advertising

Offline is placed in: Trade magazines Exhibited at trade

shows Online works with 2

portals: Excite Altavista

Competition for Vertical Net

Online B2B IntermediariesIndustry-Specific Online Sites

Traditional Trade Magazines and Publications

Distributors

Competition for Vertical Net

Online B2B Intermediaries Free Markets

Manages and hosts B2B auctions for buyers of industrial parts, raw materials, and commodities

Purchase Pro

Company offers proprietary software that enables businesses to buy and sell products over the Internet.

Distributors W.W. Grainger

E-Distributors that consolidate goods and services offered by multiple vendors stand as competition to the Vertical Net Business Model.

Competition for Vertical Net

Traditional Trade Magazines and

Publications Penton Media

Provides its customers with a portfolio of advertising options including trade magazines, trade shows, and websites.

Cahners

Emerged as a B2B publishing and trade show management company.

Industry -Specific Online Sites

Chemdex

Is a provider of e-commerce solutions for the life sciences industry. Part of a new B2B e-commerce company that unites buyers and sellers in a virtual marketplace.

E-Steel

Online steel industry marketplace. Uses one-to-one profiling software to deliver customized content to steel buyers.

SWOT Analysis

Strengths Already have market

power early into the market growth

Rapid growth of their shares, $16-45 in first day

Weaknesses Had an issue with end of

year revenues with the risk of bankruptcy early.

Since this was a new market to the business world, there was a lack of experienced workers in this field

Opportunities Room for growth as the

internet developed and evolved.

Great room to make revenues and be successful, Analysis of 1-3 trillion by 2002

Threats Many people trying to get

in the market, also many other successful companies in the same position as Vertical Net

Could be quickly taken over if Vertical Net didn’t keep innovating and reinventing

Problems

Online Advertising Expanding Target Market

Recommendations

Advertise more online Concentrate on current customers

Yahoo Google

New Target Market Short and Long Term Goals