B-TO-B
VerticalNet: Industrial-Strength Portal
From paint to power plants, waste to widgets.
By Eric Hellweg
Vertically challenged: Mark Walsh, CEO.
Illustration: Thomas Reis
"Hold on a second-I'm trying to find my car," Mark Walsh, CEO of VerticalNet, barks into his mobile phone, pacing around the parking lot of his Horsham, Penn. headquarters. "OK," he finally says, "I think I found it." After a moment's laughter, he confesses, "I always thought I'd have a CEO's spot right in front of the building like they used to have at banks, but I'm finding the Internet has zero patience with that kind of perk bullshit."
Parking lot privileges aside, the Internet does deliver other perks with an alacrity well suited to those with little or no patience. Barely four years old, VerticalNet, a creator of online vertical trading communities, has been rewarded with some of the ultimate Net perks: a market cap nearing $2 billion and an IPO that stands among 1999's most successful. Its stock skyrocketed from an offer price of $16 a share in early February to a high of $140 in just over two months. Not bad for a company whose CEO proudly proclaims it "the least sexy site on the Internet."
In an age when many Internet properties are valued largely on their flash or the loftiness of their business model, VerticalNet makes money paving new sales avenues and creating communities for 41 unglamorous industries, such as food ingredients, paints and coatings, and adhesives.
CONTENTS
B-to-B Models
Ultraprise
PlasticsNet
Market Data
Tradex
VerticalNet
Analyst View
"We're doing what the Net is supposed to do-expand your buying community and drive transactions," Walsh says. In doing so, VerticalNet has become a model for business-to-business infomediary success. Each of VerticalNet's arcane-topic portals serves as a hub for the denizens of each trade. People interested in solid-waste management can visit www.solidwasteonline.com and read pithy news stories, product reviews and recommendations, and visit storefronts from hundreds of vendors.
"VerticalNet is in many ways a poster child for infomediary success. They are essentially a portfolio of over 40 vertically focused infomediaries. It's a mutual fund of infomediaries," says Charlie Finnie, managing director and senior research analyst at Volpe Brown Whelan (see "Infomediaries on the Move," p123). "The company is bringing entire industries online that heretofore couldn't even spell the word Internet."
Buyers at VerticalNet portals know that all the vendors presented are in their field of interest, and by virtue of the store's placement, nearly every lead the seller gets is a qualified one.
These thousands of storefronts account for 65 percent of VerticalNet's revenues. About a quarter of revenues come from sponsorships, and about 10 percent come from commissions on transactions enabled by VerticalNet.
The company charges $6,000 per year to host the storefront, "a figure that's trending upward nicely," Walsh notes, and the response has been positive. "We have a 90 percent renewal rate with our storefronts. Our salespeople can barely keep up with the vendors begging them to put a 'buy this now' button next to their products." The storefronts have also proven successful as low-cost sales methods, allowing companies to reach buyers in geographic areas or industries in which they have no sales force.
A VerticalNet-sponsored survey following up on people who left sales leads in storefronts found that 15 percent bought the product from the manufacturer, and 25 percent said the product was still under significant consideration. Fifty percent of the time, these purchases were made from a company the buyer had never done business with before. The average dollar volume of the transaction? $25,000. |
