From Canadian Business Magazine:
Little orphan auctioneer
A spurned Web auction firm comes back as a B2B play.
By John Shoesmith | Oct. 2, 2000
Bid.com was once a virtual poster child for Canada’s burgeoning Internet economy. As a darling
of Bay Street, the Mississauga, Ont.-based company saw its shares (TSE: BII) rise above $30 in
April 1999. But in July, with yet another quarterly loss and revenue of $3 million–down 50% from
the prior quarter–its stock was punished, and hard. The slide began when analyst Mark Pavan of
Yorkton Securities downgraded the stock in 1999. By August, it had dipped below $3, the lowest
since the dot-com’s initial zero-revenue days. So, you might expect Bid.com International Inc.
president and CEO Jeff Lymburner to be a little bruised. Instead, he’s positively plucky.
Lymburner claims the loss was not just expected, but calculated. The online consumer auctioneer
spent this year reinventing itself as a Web software provider to companies setting up
business-to-business (B2B) transaction sites, and plans to shut down its consumer auction site
by year’s end. "We’ve gone out of our way to explain to investors what we’re doing," says
Lymburner. "The consumer legacy is being perpetuated by a handful of pundits and financial
industry people who haven’t talked to us in years."
Lymburner is trying to change the firm’s modus operandi so it can compete in the promising yet
uncertain B2B market. At first blush, the transition is a gamble, since the bulk of Bid.com’s
revenue derives from the business-to-consumer (B2C) market. Its patented Dutch auction software,
which lets consumers hold out for the lowest price, still seems viable–though less so than in
’98, when revenue increased 600% to $20.1 million, and less so now that Web auction pioneer eBay
holds 85% of the market. Still, its 55% growth and $30-million-plus revenue in 1999 was
fine–until investors soured on profitless dot-coms, and revenue tanked.
Bid.com chalks up last year’s $20.8-million loss to the high cost of branding–$11.9 million went
toward ads and promotion in 1999. But that strategy, Lymburner vows, is past: "The advertising
costs, the customer acquisition costs and so on are prohibitively high in the consumer space."
The Bid.com company man since its 1996 founding as Internet Liquidators International Inc. says
he planned the B2B move since day one: "As far back as 1996, there was talk about building a B2B
platform, and how the expectations were large, and that it would be larger than the
business-to-consumer market."
The word "larger" hardly suffices. Market research firm Gartner Group Inc., based in Stamford,
Conn., expects worldwide nonfinancial B2B transactions to reach US$7.3 trillion in 2004. A model
that skims 0.25% from each transaction would yield almost US$20 billion. Add consulting,
implementation and hosting fees, and the other revenue streams from which Bid.com hopes to
drink, and that $30 million in 1999 looks like chump change. Bid.com’s fees and market share
must still be earned.
But at least one analyst is keen. "The company has been for taking a long-term view," says
portfolio manager Jim Thorne of Toronto-based Caldwell Securities. "They’ve been doing
everything they said they were going to do."
Such corporate change must be applauded by investors. That’s why Lymburner is singing. "When
you’re going through a transition, sometimes it appears that you’re neither fish nor fowl," he
says. But thanks to a type of fowl, he won’t have to raise more cash. A $1-million investment it
made a year ago in Sunnyvale, Calif.-based Quack.com, a mobile voice-recognition software firm,
became $24 million of Dulles, Va.-based America Online Inc. stock when the online giant bought
the largely Canuck-founded and -funded Quack.com in August. That stock will be liquid by
November. "It really does pretty much lock in our cash position for the next couple of years,"
says Lymburner. "I can now do a ‘read my lips–we aren’t going to run out of money, folks, trust
me.’"
Bid.com will vie with deep-pocketed competitors such as Commerce One Inc. and Ariba Inc., which
also do backbones for B2B sites. And it will have to prove its proprietary style outperforms
open industry trade exchanges, such as the GM/Ford/Daimler auto
exchange touted earlier this year. Still, Caldwell’s Thorne believes Bid.com is well positioned,
with sound technology and alliances that include a recent deal with GE Capital Auto Financial
Services to auction off-lease automobiles to North American dealers. "This company is leading
edge," says Thorne. "It was just abandoned by the financial community." Some orphans grow up
tough; others never fully recover. But show Bid.com compassion: after all, it’s still at a
tender age.
canadianbusiness.com |
