Study says European Net marketplaces to dwindle

Jupiter Media Metrix says that of today's 500 online marketplaces, fewer than 100 will survive.

2 min read
European business-to-business marketplaces have a tough road ahead.

A study by Jupiter Media Metrix released Monday found that of the 500 marketplaces that exist today, fewer than 100 will survive. The majority will perish even though the value of goods traded over the marketplaces, also known as online exchanges, will rise from about $185.8 million (200 million euros) today to about $1.7 billion by 2004.

"When you go through the...marketplaces already out there, it is obvious not all will cut it," said James MacAonghus, an analyst at Jupiter in London.

Business-to-business marketplaces gained a lot of backing last year from investors looking to put their money somewhere other than e-commerce retail companies, which were losing momentum. Soon enough, however, those marketplaces and business-to-business technology providers began feeling the pressures of a weakening Internet economy.

The Jupiter survey highlighted several major criteria for success--or lack of it--during these tougher times: volume of transactions, partnerships with existing businesses, and integration of offline services and smaller or less technically savvy businesses.

It said a marketplace that fails to get enough users selling and buying goods is likely to fail. "One of the most likely reasons for failure is the volume of transactions going through the marketplace," MacAonghus said. "Money attracts money."

It also added that it's important for the marketplaces to partner with existing businesses--that is, they must have the backing of industry leaders that already have earned trustworthiness in the market, garnered financial support and shown a commitment to placing orders.

Finally, successful marketplaces must have sound ways of bringing on board smaller businesses and companies with little technical know-how. They also must integrate their online offerings with offline services such as telephone service and local customer and IT support, the report said.

"A lot of marketplaces fail because they become just online-only companies," MacAonghus said. "Especially here in Europe, you have a lot of companies who are technically immature" and need support to get on the marketplace, he said.

Of the 500 marketplaces surveyed, Jupiter listed 10 that it thought would fare best: Acequote and Mondus, which are office supplies sites; Band-X, which targets the telecommunications and bandwidth industry; Buildonline and EU-supply.com, which target the construction industry; Eumidix, which focuses on the medical supply sector; Goodex, which deals with the industrial equipment sector; IngredientsNet.com, which handles food ingredients; PEFA.com, which targets the fishing industry; and Phonetrade, which targets the mobile phone industry.