PurchasePro, AOL amp up e-biz initiative

The companies extend their business-to-business and e-commerce efforts by signing 10 new agreements to develop the Netscape Netbusiness marketplace.

3 min read
PurchasePro and AOL Time Warner announced Wednesday that they have extended their business-to-business and e-commerce efforts by signing 10 new agreements to develop the Netscape Netbusiness marketplace.

Launched by AOL Time Warner and Netscape in September, Netbusiness provides a free meeting place on the Internet for owners of small businesses using a "Netbusiness Card." Members can create an online storefront and connect with one another using message boards and custom Instant Messenger software.

The new agreements are with companies including Hewlett-Packard, Homestore.com, Spherion and BroadVision.

The deal with online behemoth AOL Time Warner should pay off for PurchasePro, said Patrick Walravens of Lehman Brothers. "Look who they signed up today--HP, Homestore.com--these people wouldn't attach themselves to the Netbusiness marketplace if they didn't think it was going well," he said.

Las Vegas-based PurchasePro is a business-to-business e-commerce company that operates electronic marketplaces designed to connect buyers and sellers over the Internet. It has been working with AOL Time Warner on Netbusiness since last year. All of the businesses in PurchasePro's network are being connected to the Netbusiness marketplace.

Investors responded to the deal with cautious enthusiasm, as shares of PurchasePro moved up 19 cents to $7.44 in morning trading. AOL Time Warner was off 89 cents to $42.11.

Last week, PurchasePro shares slipped after a downgrade from Prudential Securities analyst Tim Getz, who flagged concerns about the Netscape marketplace.

Getz cut his rating from "accumulate" to "hold," citing a low conversion rate of registered users into paying customers. In fact, he cited the company's deal with AOL Time Warner's Netscape as a problem. Internet businesses continue to register on Netscape's Netbusiness site, but the numbers of those businesses that become paying customers is "far below expected minimal thresholds," Getz wrote.

Getz said in phone interview Wednesday that the deals don't change anything for the company's financial outlook. "We had a certain amount of AOL licensing agreements built in" to our model, Getz said.

AOL Time Warner and PurchasePro also announced a joint sales and marketing operation for the marketplace that will include executives from both companies. In January, they announced expanded marketing efforts that included a Netbusiness television advertising campaign on CNN.

Getz said the marketing deals are nothing new and aren't likely to do anything to help conversion rates. "It's too early to tell if things have changed" on that front, he said. "My guess is it will take a bit more time."

Added Walravens: "The conversion rate issue, while important, is nothing new. The key to getting all these things going is liquidity, though--you've got to have enough people in the marketplace."

Wednesday's deals may be a sign of things to come, Walravens said. He added in a research note that they may be "only a portion of the deals AOL and PurchasePro have closed to date." He expects the balance of deals to be announced in coming weeks, adding that "with 200 AOL salespeople focusing on this business, the number of new deals will continue to increase."

Walravens, who has a "buy" rating on PurchasePro, also estimated that Wednesday's deals could be worth anywhere from about $1.2 million to $3.7 million each for AOL and PurchasePro.

Other agreements announced Wednesday were with The Thread, PlantAmerica, Viva Magnetics, eFruit, ProfitScape and Bigstep.com.