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Published: October 11, 2002

 
 

E-Marketplace Survival Strategies

With the help of the Darden Graduate School of Business at the University of Virginia, Booz Allen revisited a large sample of the e-Marketplace sites — approximately 1,100 of the 1,802 — to document the failure rates.

In more than 200 cases, the e-Marketplace had clearly failed: The Web address no longer exists and the Web browser returned an error message stating that the Uniform Resource Locator (URL) could not be found. For another 50-plus sites, the address routed to a generic Web site, such as www.BuyDomains.com or www.NamesDirect.com, that offers to sell URLs. In six instances, we were routed to a pornographic Web site that had apparently acquired the name of a defunct e-Marketplace to capture unsuspecting potential customers. (Other than for www.ActiveAssets.com, it wasn’t obvious to us why the porn purveyors had wanted to acquire the particular site name.)

URL acquisition for alternative purposes, in fact, seems to be a fairly common phenomenon. One former e-Marketplace employee had acquired his company’s old URL for $25 and created a new Web site lampooning the executives and venture capitalists ostensibly responsible for the company’s creation and demise. Another respondent with whom we made contact said he relaunched an exchange site as a joke. His reason: He planned to trick a friend — and former employee of the e-Marketplace — into believing the founders had gained new funding to resurrect the business.

Even if a site proved accessible, we still tried to verify its legitimacy by studying the most current press reports, news service information, active catalog listings, and copyright dates. We then identified a contact point and sent an e-mail with a short generic message requesting additional information. We logged the date of the inquiry and the reply date. Such detail helped us weed out the many sites that no longer have a business supporting them but continue to reside on a server somewhere in the World Wide Web.

By tracking press releases and follow-up e-mails, we tried to determine if the original e-Marketplace had changed its name, if it had been acquired, or if another entity had purchased the URL but not the company. For example, the URL for the failed B2B e-Marketplace Wine Buyer was acquired by eVineyard Inc. to attract incremental Web traffic. Now when Web surfers try to go to www.WineBuyer.com, they are routed directly to the Wine.com-branded retail site, which is operated by eVineyard. In the end, of our original 2001 sample of 1,802 sites, we’ve been able to classify 1,100 as either dead, active, or merged/ acquired.

What Went Wrong?
Different e-Marketplace ownership models have experienced different failure rates. Of the full sample of exchanges, 45 percent have disappeared. Of the e-Marketplaces in the consortium-backed category, however, only 21 percent have failed. Yet it’s difficult to discern the reasons for that qualified success. Some might argue that the lower failure rate proves the advantage of the immediate liquidity provided by established owner–customers. Others would say that because consortium exchanges were launched later, on average, than “pure play” sites, and backed by greater funding, they’ve been better positioned to withstand the collapse of e-business and the disappearance of venture capital financiers.

What’s more, 15 percent of the consortium marketplaces we examined merged with or were acquired by others. With the average merger/acquisition rate for the total sample running at only 7 percent, this suggests that the consortia have recognized the value of standardization within an industry, and may indicate further consolidation in the months and years ahead. (The e-commerce rumor mill continues to speculate that the consumer products e-Marketplace Transora will merge with the retailer-sponsored WorldWide Retail Exchange.)

 
 
 
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