During the past year, investor sentiment within the Internet economy has shifted swiftly and dramatically in favor of business-focused enterprises from consumer-oriented companies.
Accordingly, the trendsetters of yesterday--Yahoo, eBay, Amazon.com, CNET Networks (publisher of News.com), Homestore.com and so on--have been systematically replaced in headlines and portfolios by the innovators of tomorrow: Ariba, VerticalNet, WebMethods, BEA Systems, Internet Capital Group, i2 Technologies and so on.
Fortunately, we at WR Hambrecht + Co don't see the world in terms that are quite so black and white. Our "shades-of-gray" perspective has little to do with the virtues (both real and perceived) of business-to-business (B2B) models over business-to-consumer (B2C) models or vice versa. Rather, it stems from intriguing developments within several prominent consumer-oriented Internet companies that have begun to blur the line that separates B2C from B2B.
Leveraging their existing brands, expertise, relationships and infrastructure, Yahoo, CNET, eBay and Homestore, among others, are now home to burgeoning B2B initiatives with explosive growth potential. Though these efforts are likely to remain only modest contributors to the companies' overall top and bottom lines for the foreseeable future, we believe they may present exciting "back door" plays into the B2B Internet economy.
Given its roots as a provider of primarily consumer-oriented technology news, reviews, information and services, CNET is thought of by many as a premiere e-media company. Few investors, though, realize that the company has morphed into a thriving online marketplace, has tremendous reach among IS management professionals, and has introduced several new B2B products and services in the past year that dovetail nicely with its existing franchise.
• CNET Data Services (CDS) is the most important, and perhaps least understood, of CNET's B2B initiatives. Put simply, CDS is a leading supplier of standardized, accurate, timely, structured and indexed electronic product information on PC hardware, peripherals and software from any manufacturer.
CDS catalogs more than 300,000 SKUs in the U.S. and leading European markets in 16 languages. Licensed to e-tailers, manufacturers, distributors, resellers and others, this data facilitates communication and transaction functionality throughout the supply chain. After just 12 months, CDS has signed more than 90 licenses and 50 customers, including Ingram Micro, Commerce One, Dell Computer, Gateway, Buy.com, Egghead.com and Computer 2000 AG.
• NetBate Instant Promotions is a marketing service for technology manufacturers and resellers. Using NetBate, these entities are able to broadcast value-added propositions, such as cash-back rebates, premiums and other special promotions, more widely, accurately and efficiently than ever before. Participating manufacturers at the launch of the NetBate program included Dell, Intel, Corel, Castlewood and Asante.
• CNET Enterprise and Webware help IT and business professionals make better-informed buying decisions by providing them with information about software and services. In addition to offering CNET's own proprietary content, CNET Enterprise incorporates analyst reports, product reviews, product data and analysis from leading research firms, including Gartner, Meta Group, Forrester Research, Aberdeen Group, AMR Research, Hurwitz Group, Input and Spex.
As the leading trading platform on the Internet, eBay is fundamentally changing how products are bought and sold around the world. Given its origins and popular history, the company is clearly rooted in person-to-person commerce, helping to facilitate the sale of everything from Beanie Babies to cameras and concert tickets.
Recent events and articles, however, have made it increasingly clear to us that businesses and governments have begun to embrace the company's trading environment. In fact, we think eBay may actually be one of the most vibrant B2B marketplaces on the Web today.
• There are now 20,000 to 25,000 registered "power sellers" across eBay's platform (and likely thousands more that haven't registered as such). As the name implies, power sellers are members that run full-time online trading businesses on eBay, generating sales of at least $2,000 per month (and sometimes upward of $25,000 per month). Further underscoring this notion of eBay as an invaluable hub for businesses, data from auction management company Andale that was printed in a recent New York Times article (Sept. 20, 2000) indicates that 10 percent of eBay's sellers are responsible for a staggering 80 percent of its sales.
• Launched in March 2000, eBay Business Exchange also offers clear evidence of the company's increasing relevance to the business community. Servicing buyers and sellers within the small-business market (a large, highly fragmented group), this trading site offers product within eight main categories: agriculture, computing, construction, general, industrial equipment, medical equipment, office equipment and restaurant equipment.
Examples of merchandise now available through Business Exchange include a rebuilt diesel engine from Caterpillar, servers from Sun Microsystems and IBM, a forklift from Toyota, a vertical mill from Viper, a turret punch press from Wiedematic...Well, you get the idea...We're a long way from Pez dispensers.
• Several recent news articles have also focused on the growing importance of eBay to state and local governments, all of which have warehouses full of merchandise they are required to dispose of. One article, in particular, from the San Francisco Chronicle (April 24, 2000), indicated that at least 12 state governments, including California, Oregon and Massachusetts, are now active on eBay.
The attraction to eBay's marketplace for government entities is simple: Dispose of product more efficiently and at higher prices than via conventional methods. Given the value of eBay's platform, we suspect that government usage of it will increase substantially over time, particularly as officials get more familiar with the Internet and more comfortable with online commerce.