VERTICALNET: THE NEW FACE OF B2B Chris Wood, Ashley Glading, Jessica Gabriel, Megan Longtain, Ashli Edmund, Patrick Robbins

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

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. 1. They used various criteria to identify and industry sector that might benefit from a vertical portal. 2. VerticalNet recruited well-respected industry editorial talent who acted both as a content producer and a credibility builder for the site. 3. 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