B2B Marketplaces: A New Breed Takes On an Old Problem

July 19, 2010

Since the early days of the Internet, b2b purchasing has seemed like an area ripe for the efficiency and transparency improvements the web could bring. The theory has been that b2b buying processes are labor-intensive and inefficient, with heavy reliance on phone calls, emails and even face to face meetings. Large purchases, and often even small ones, involved negotiations conducted with imperfect and limited information, leaving both sides wondering if they really got the best deal. Web-based systems could improve transparency and efficiency, significantly and simultaneously reducing both procurement costs for buyers and selling costs for vendors.

However, problems with this theory quickly became apparent. While online marketplaces worked well for commodity purchases like office and maintenance supplies, they were viewed skeptically by buyers and sellers alike for more strategic purchases. Vendors didn’t want to reveal pricing and specifications to their competitors, and in many cases buyers didn’t want their own competitors to be aware of what they were buying (as it could tip off competitors to new product designs or process improvements) or even the terms they were getting.

As a result, the dramatic forecasts for b2b ecommerce revenue growth from Gartner and other analyst groups never materialized. Some of the market pioneers flamed out: Commerce One, founded in 1994, went public in 1999 and saw it’s stock price soar from $20 to more than $600 per share before the dot-com bust. It filed for Chapter 11 bankruptcy protection in 2004, and the remains of the company were sold off in 2006. VerticalNet, founded just a year after Commerce One, was another classic dot-com-boom-to-bust story. Though the company was never profitable, revenue grew rapidly and the company’s market cap topped $12 billion in early 2000 on revenues of just over $100 million. The company was acquired by an Italian cement maker in 2007 for $15 million.

Ariba is one of the few b2b ecommerce survivors from the dot-com era. Though the company has fallen a long way from its dot-com era $40 billion market capitalization, it’s still in business, posting respectable revenue and modest profits.

But today, a new breed of vendors is determined to leave behind the hype-to-bust path of early b2b ecommerce and online marketplace trailblazers and improve b2b purchasing practices through social media and other Web 2.0 technologies. Here are five companies that exemplify these new approaches.

TradeKey b2b marketplace: sort of a web-based version of a bazaar or street market, TradeKey is an online, global b2b marketplace which connects traders to wholesalers, buyers, importers & exporters, manufacturers and distributors in over 220 countries. With 27 categories from agricultural to transportation products and nearly 10 12 million visitors per month, TradeKey connects an incredible range of buyers and sellers. Looking to buy commercial carpeting or USB drives? Want to offload some extra fishing lures or folding doors? This is the place to do it. TradeKey is sort of the b2b version of eBay or craigslist, with the closest analogues on the b2b side being sites like Alibaba or VertMarkets. But the site’s busy though highly visual design sets it apart, and TradeKey was the first online b2b marketplace to earn ISO 9001 Quality Management System and ISO 27001 Information Security System certifications.

FYIndOut.com b2b social media hub: billing itself as “the central place to find and promote business information, applications, and services,” FYIndOut.com provides an environment where b2b vendors can list their products and services for free (they pay only for interested leads) and interact with prospects, while buyers can research sellers and post their own reviews. The site covers a broad array of products and services from accounting software to web conferencing services, and was among the first b2b sites to introduce social review elements similar to Angie’s List or Yelp on the consumer side.

ChoiceVendor business-to-business vendor reviews: similar to FYIndOut.com but with a different business model—rather than generating revenue from providers, ChoiceVendor’s revenue plan is to “offer certain features by subscription to users who are seeking vendors.” Both sites enable b2b vendors to register and list their products for free, and buyers to review at least some of this information at no charge. So whether you’re a b2b seller or a buyer researching vendors through social signals, the best site to use between FYIndOut.com and ChoiceVendor is…both!

GetApp.com business software portal: unlike broad-based b2b market sites, GetApp.com is focused on a specific niche—business software, SaaS and cloud-based applications. The company’s goal is to become a global online channel for SaaS and PaaS (platform as a service) b2b application providers. GetApp.com is more like (though more broadly based than) SaleForce.com’s AppXchange or the recently launched Google App Marketplace than a general b2b marketplace. The site got some nice coverage from TechCrunch earlier this year, which stated that buyers can “find, compare and select from a wide range of business applications, organized into categories by IT and business need and by industry. The search functionality is pretty powerful and allows visitors to filter results down to a single vendor or enterprise-grade application. To assist buyers from a neutral point of view, GetApp offers user-generated reviews and a free personalized assessment tool as well as a number of guides on the subject.”

Resource Nation business resource marketplace: this site connects business buyers with providers of a wide range of common b2b products and services, from email maketing and payroll outsourcing to phone systems, laser printers and steel buildings. Rather than relying on social signals, all vendors are pre-screened by credit reporting agency Experian.  The website also includes useful articles and guides for buyers. Approved vendors receive qualified leads for a fee. Resource Nation is somewhat similar to BuyerZone, but with less of a focus on price as the sole purchase criteria. This works well for commodity-type procurement (e.g. CD/DVD duplication or mailing services) but shouldn’t be relied upon as the sole source for more involved, strategic purchases like enterprise software or a PR agency.

Despite the challenges of online b2b commerce (e.g. will customers really share honest opinions in an open forum?) and past failures, a new breed of online b2b marketplace sites is determined to make it work. They bring to the task unique approaches and mindfulness of what worked, and what didn’t, for the groundbreakers in this space. The key will be to provide value to b2b purchasers. Vendors will flock to any site that is embraced by buyers.

Disclosure: I’m an unpaid advisor to FYIndOut.com and a (so far) unpaid affiliate of Resource Nation (just recently signed on). As for the other vendors highlighted here, I just think they are doing very interesting things in this space.

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17 Responses

  1. Great article Tom and thanks for mentioning GetApp.com.
    I think that what has changed is the online behavior of business buyers. More and more they behave like a consumer in their professional activities and become “prosumers”. For example in our case, they are getting used to consume mobile apps online from the Apple App Store and it gives them confidence to buy in the same for business applications.

  2. Tom 

    Agreed Christophe. I wouldn’t bet that we’ll ever see the day when human contact is entirely removed from b2b purchasing, but buyers are becoming more comfortable moving more of their buying cycle activities (not just basic research) online.

  3. I wrote up a similar post recently, The rise of the marketplace … again?. The added sites you share about are interesting to think about what works … or seems like is should work. Niches and ready-made marketplaces may be better targets for launching, like mfg.com.

  4. Tom 

    Thanks for the comment Dave, and interesting post. I think you’re absolutely correct that online b2b marketplaces will work for specific types of transactions (e.g. offloading surplus, commodity items) but not universally. And thanks for being one of those people who still makes stuff here in America. :-)

  5. Interesting post as usual :) I feel the current b2b websites are not just focusing on one aspect of business but they have categorized there websites according to specific customers needs thus providing the unique experience for individual visitors. B2B customers now have became smarter when compare to the past. For example they are not relying on one platform and they are also trying to ask other people what they think about this specific company. This thing lead the b2b companies to integrate the areas like communities in there website.

  6. Tom 

    Haseeb, agreed. No one has figured out how to be the Amazon.com of the b2b world yet, and previous attempts and failures seem to indicate that isn’t the right model for b2b purchasing. I updated the site visitors figure as well, thanks.

  7. Sarah 

    Hi Tom! Thanks for mentioning ChoiceVendor. So many of our users say they want more transparency from the vendor research and evaluation process. The sites you reference seem to be working toward a similar end: a better-informed buying process.

  8. Tom 

    Hi Sarah, you’re welcome. Agreed, I think more of the buying process is gradually moving online – it’s not just about collecting information anymore. There are a lot of interesting developments in this space.

  9. Thanks to ChoiceVendor and FYIndOut.com, there are offered real-world ratings and reviews of business-to-business service providers across the United States, improving and securing the buying process to an extend that wasn’t thought possible before.

  10. Tom 

    Actually, FYIndOut.com is now, sadly, defunct. The business model may have been ahead of its time.

  11. nice article Tom, but still need to focus on b2b marketing website, most of them seem non user friendly.some of them are also nice like biztrumpet.com, Ali baba etc etc.

  12. Tom 

    Thanks Shoaib, I will have to check that one out.

  13. Mike Cooper 

    Really good piece of article, its too informative.
    ofcourse business men are focusing these days on online virtual b2b marketplace, but the didnt rely on single platform.
    Hey Tom,
    could u please help me how to find best or reliable b2b market place?

  14. Tom 

    Hey Mike – ezbuyer.com may be one to check out: http://www.crunchbase.com/company/b2b-marketplace Good luck!

  15. Angelos 

    Very interesting article. I want also to mention http://www.tradescraper.com which is a site that combines b2b marketplace with social networking. Check it.

  16. Tom 

    Thanks Angelos, will check that one out.

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