VerticalNet : The New Face of B2B

VerticalNet: The New Face of B2B Chris Wood, Ashley Glading, Jessica Gabriel, Megan Longtain, Ashli Edmund, Patrick Robbins

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

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? • Content • Community • Commerce

Developing a Vertical • VerticalNet had a refined process for developing a new vertical through a series of steps. • They used various criteria to identify and industry sector that might benefit from a vertical portal. • VerticalNet recruited well-respected industry editorial talent who acted both as a content producer and a credibility builder for the site. • 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 Intermediaries • Industry-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

VerticalNet : The New Face of B2B