VerticalNet Presentation

Date: 29th November, 2000

Group: 2F (L2)

Members: Chan Man Ying, Mandie

Cheng Wing Lam, Angie

Hui Wai Shan, Charis

Leung Chung Yan, Joey

Or Pui Yin, Doris

Siu Ngai Yan, Careen

OutlineBackground Information

VerticalNet’s Business Model and it’s sources of

Revenue

VerticalNet’s main competitors

VerticalNet’s competitive advantages, capabilities

and competencies

Recommendations

Q&A

VerticalNet’s Background Information

established in 1995 the Internet’s leading business-to-business e-

commerce enabler owned and operated more than 50 industry-

specific websites open to both large and small sellers

VerticalNet’s Background Information

Missions: strives to build and manage dynamic, industry-

focused communities

provide the most innovative online information

resources communication vehicles, and e-

commerce channels for industrial, professional

and technology-based companies.

VeticalNet's Business Model

Brokerage Model

- operates in more than 50 vertical communities

VerticalNet's Business Model

In 1998 and 1999:• major source of revenue from storefront• small proportion of revenue from e-

commerce

VerticalNet's Business Model

Methods of earning revenue:• operates storefronts which offer linkage to

advertisers' websites• provides limited extent of e-commerce

services

VerticalNet's Business Model

1999 onwards• major source of revenue from e-commerce• small proportion of revenue from storefront

and advertising

VerticalNet's Business Model

Method of earning revenue:• charges fees for transactions facilitated by

its website

VerticalNet's Business Model

Effect of change in source of revenue:• increase in revenue • need for additional resources and

technology

- through acquisition and strategic alliance

VerticalNet’s Competitors

• Direct competitor: Office.com (http://www.office.com)

• Business Model: Business Trading Community

• Content: 17 Communities -- office supplies

• Source of revenue: Advertising, sponsorship

VerticalNet’s Competitors

• Under the brokerage model, there are different forms which are in direct competition with VerticalNet.

• E.g. 1) Buyer aggregator

2) Vertical Distributor

VerticalNet’s Competitors

Buyer Aggregator Bringing the individual buyers together as

a group to purchase empowering small buyers to obtain the

same discount

Source of revenue: Sellers pay a small percentage of each sale on a per-transaction basis.

VerticalNet’s Competitors

Example:

Mercata ( http://www.mercata.com )

Operation: “PowerBuy” System, allows

thecustomers with common

purchasing interest to achieve a discount.

VerticalNet’s Competitors

Vertical Distributors

Bring multiple buyers and multiple sellers together through a catalog-type operation.

Source of revenue: Advertising fees from the seller, the commission fees from the transaction.

VerticalNet’s Competitors

Example: Manufacturing.Net (http://manufacturing.net)

Content: 5 communities focus on manufacturing industry

Operation: Support each stage of the buying cycle with its comprehensive SuperCatalog

Competitive Advantages

CultureFirst to enter the industry

first-mover advantages

ReputationStrong brand name

Competitive Advantages

Company sizeSufficient funds large company size

replicate existing resources for new communities

Get into a portfolio of businesses

enjoy economies of scale & scopespread out risks

share common resources betweendifferent functions

Competitive Advantages

Relationships Good relationships with content providers

ensure high qualitycreate customer value

Good relationships with manufacturers, distributors and customers

Competitive Advantages

Understanding of customers’ needs Understand customers’ preferences

Specialized services to specific customerse.g. tailor-made websites or storefronts

Offer comprehensive distinguishable information

Customized websites (easy to use)

Localized websites e.g. VerticalNet Japan, VerticalNet Europe

Competitive Advantages

Market entry decision Strict criteria

Transform markets rather than create

avoid extra costs

Focus on markets less satisfied by traditional channels

Competitive Advantages

Acquisitions and alliancesStrategic

e.g. Isadra, Tradex

Human resourcesExperienced and skillful staff

e.g. management, IT specialists, sales reps

Recommendation

Mark Walsh (VerticalNet CEO )- Two choices of strategies for

VerticalNet- Doing more of the same: to continue in

building vertical communities- Doing more than it currently does: to

expand into the e-commerce business by creating and managing transactions

Recommendation

Choice of strategy:

should do more than it currently does

Recommendation

To be a Technology Service ProviderReasons:* Established resources & familiarity with the

B2B marketplace* A leader in the existing business* Can make money through providing

technological services

Challenges

1 . Needs help from technological expertise

> BUT this can be overcome by:

* Strategic Alliances e.g. Microsoft

* Reputation

Challenge

2 . Needs to persuade traditional businesses to create B2B marketplace> BUT, VerticalNet can overcome this:* Professional Sales People* Focus on Businesses which have an

interest and need for a B2B marketplace* Act as a Pilot Test

Challenge

3 . Maintenance and Technological support> BUT, this can be overcome by:* Gain support from the Strategic Alliance

(technological expertise)* Set up a group of staff to work with

technological expertise(Can learn and develop own technological knowledge)

Conclusion background of VerticalNet

the Business Model

the competitors of VerticalNet and their

relevant business model and sources of

revenue.

VerticalNet’s capabilities, competence and

competitive advantages

Q & A