Re: B2B
A view from across the pond. (Disclaimer-I currently do not own any of the players in this sector)
erivativesreview.com
The State Of B2B
A splendid parody of internet fads found itself onto the Satire website recently. B2U was the new model it
trumpeted i.e. "Business to Unemployment." Harsh but fair.
The B2B business was the absolutely greatest thing since, well, all those other hyped fads which ultimately hit
the skids. In the case of B2B, its initial zenith was probably around March, although it's heartening to note that
swathes of the UK newspaper industry were still trumpeting its brilliance in mid-November when already several
B2B players' funding had dwindled to almost nothing. Nevertheless, like biotech before it, the B2B business is one
which has resolute potential and ultimately will amount to a great deal indeed.
The early 1990's slump in biotech rooted out the blokes who looked good in lab coats grasping test tubes, from
the Craig Ventor's and so forth who actually could do something groovy with the new technology. B2B is
precisely the same (well, except having less to do with biology obviously) as biotech. The first wave has now
ended and thankfully a lot of third-rate charlatans with poor ideas will be out of business presently.
After all, B2B is all about the core issue of disintermediation. That's why, surprise, surprise, the force of
reintermediating through mediocre procurement sites masquerading as "new era businesses" just flat out doesn't
work. If you look at the British notion of the internet, it's not difficult to see that Napoleon was indeed right. The
British are, well, not so much a nation of shopkeepers as the short Corsican put it, but in 21st century lingo, we
would say they are a nation of intermediators. That's probably why, alas, a great many British internet
companies fundamentally suck.
In America, it's a more mixed bag although a lot of pisspoor intermediaries continue to pose as B2B organisations.
Having said that, the B2B world already has some very good new model exchanges which will help to ultimately
reestablish the way the entire world works - or at least buys and sells.
The reason the B2B exchange bandwagon is essentially unstoppable is the way in which it combines
disintermediation with greater price transparency. Reducing the supply chain in almost every good or service
known to man or beast on planet Earth is a great boon for mankind whether in the developed or developing
world. From that perspective alone, B2B is a big winning proposition. Couple the prospects for widespread
disintermediation with the potential for much more transparent pricing and suddenly the whole equation of doing
business in a productive capacity looks altogether more enticing. After all, how many consumers have ever
suffered (whatever their position in the value chain) from knowing more clearly the pricing structure (and
delivery details et al) of a particular product. Then of course, there's the key issue of accessibility. The internet
allows anybody, anywhere, anytime to access the system - that's how, for instance, we can boast readers of
this periodical from 130 countries world wide when getting paper copies to much more than 70 would be highly
inefficient. Exclusively digital dissemination of markets is here to stay and it can only grow - especially when the
truly wireless world of dealing starts kicking in with a vengeance, probably within the next two to three years.
So, the key issues which make B2B an unbeatable and unstoppable proposition, are Liquidity! Accessibility! And
Transparency! Hmmm, now where have we heard that line before...
Admittedly a lot of "sacred cows" have been destroyed in the wake of the initial B2B explosion. For starters, man
was unable to sustain himself on fee income alone. The whole concept of being able to live on transaction fees
was just too narrow. Equally, revenue from advertising is a largely limited prospect unless folk have enormously
broad marketplaces - but then again there's some money to be had here. There are ways to improve revenues
at the front end but it takes some work, some thinking and indeed a degree of further laterality is going to be
required in this space. Perhaps once everybody has some time to think in the B2B space (either having secured
additional funding or having gone bankrupt) some new and improved revenue models will begin to appear.
Ironically, the best prospects for revenue are probably in the least explored area of the whole B2B space:
clearing. One meeting with a few B2B guys in the US early this year, revealed a fabulous situation where they all
looked somewhat vexed about what they described as "the banking thing." "I mean," said one rather geeky tech
character, "if somebody buys and then their cheque doesn't clear and we've already sent the stuff to them,
then like what happens, I mean, it may have even been delivered?"
"Ah," I said, "you mean you may have a problem with your clearing system?"
The all looked aghast and finally one of them piped up and said: "Clearing? You mean there's a word for it?"
Ironically, with the battle for Euro-zone domination in Europe, B2B clearing initiatives there are slow, although
there are newcomers with potential in the fray such as CapClear. In the US, the picture is a little rosier although
not much. BOTCC, CME and NYMEX are all on the verge of getting their B2B clearing operations into gear, one
hopes they will arrive at the party in full strength soon.
So, where is B2B going? Well, in the short-term probably the doldrums for now. However, it's not all doom and
gloom. Robust revenue models are all, and indeed an ability to have a vast quantity of the marketplace In an
accompanying article, Doctor Richard Sandor, global market guru and amongst other achievements, special
advisor to erivatives.com, discusses bridging the gap between content and technology in the B2B and futures
marketplaces.
Patrick Young
- the editor has, incidentally, advised several B2B exchanges and is a founder of a new, global B2B market
launching in 2001.
The companion piece about technology and content follows in the next post. |
