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ECMgt.com brought to you by ECnow.com
MANAGEMENT PERSPECTIVE Free B2B
Just three short years after the introduction of free e-mail
and free web hosting, the latest wave of free applications has been extended from
the B2C market to the lucrative B2B market. The newest wave of free services targets
businesses, and it includes e-commerce, messaging services, organizing applications,
networking and storage services, and even vertical business portals supporting
B2B auctions and providing complete portal management services. While
the "Free" model in the B2C space is based on building membership and accumulating
knowledge of user profiles that can be leveraged for advertising, the business
model for free B2B is not as clear. We'll examine a dozen entrants in the Free
B2B space, propose a new model called "process share", and discuss up-selling
business customers to premium services with recurring revenue as the Free B2B
driver. An even more interesting model is developing where consumers and businesses
both share benefits from portals that integrate community, content, and business
processes. Let's start with a quick tour
of business productivity and infrastructure services, then move to B2B and market-to-market
portal offerings, finishing with e-commerce and financial services.
In the messaging arena, businesses can benefit from
free long distance, voice mail, faxing, and paging services. Given that the annual
bill for faxes alone in the United States approaches 95 million dollars annually
it's no surprise that use of free fax applications is growing nearly as fast as
the Internet itself. The two most
popular offerings, efax.com and jfax.com, offer a free universal fax number for
receiving, and reasonable rates for enhanced premium delivery services to private
fax numbers. We see the opportunity for a merging of "LAN Fax" with
"free fax" or "fax over IP" as this business grows and most
likely consolidates. Free messaging services
extend to voice, where firms phonefree.com and dialpad.com offer unlimited free
long-distance phone calls to anyone in the United States. DialPad.com, which claims
over 5 million users, has formed an alliance with eVoice to combine free VoiceMail
with long distance calling. Onebox.com offers free voice-mail, e-mail, and fax,
and has been recently acquired by Phone.com, indicating interest by service providers
with global reach. Related office productivity
tools include WebEx, which offers a business exchange service to locate peers
and a range of business service providers, as well as an on-line office forum
in which to conduct on-line meetings. Following the premium-upsell model, they
also offer a pay-per-use plan with enhanced office collaboration tools. For businesses using press releases as marketing tools,
WebWire offers PR professionals and corporate communicators a "free for a
lifetime" tool to post press releases using the WebWire service. WebRelease
makes press releases instantly available to conventional and emerging media. Office supply procurement, a big expense for businesses
of any size, has been made simpler by free Internet services from tradeout.com
and onsale.com (a former business exchange specializing in liquidation). Both
firms serve businesses shopping for bargains, and provide a perfect solution for
firms needing to liquidate stock or hard goods. Two
services that provide direct marketing over the Internet for small merchants include
ELetter and Microsoft bCentral. ELetter (www.eletter.com), an integrated direct
mail solution managed via the Web, allows users to build a targeted mailing list,
create a mailing piece, and generate Internet postage in one transaction. Microsoft's
bCentral is an all-in-one business portal with free and low-cost premium services
for banner and e-mail advertising. Microsoft does an excellent job of attracting
users to the free services, and of promoting effective low-cost services following
the premium-upsell model. PayPal
(www.paypal.com), is an interesting entrant, claiming to be the Internet's largest
instant payment network, offering wire services over the Internet. While not a
pure B2B play, it does appear to be positioned to enter the Internet escrow field,
which appeals to merchants and hobbyists unable to acquire a conventional merchant
account for processing credit cards. Network
Services, an expensive, time-consuming, and technically involved undertaking for
any business, is the domain of x-drive.com and intranets.com. x-drive.com provides
100 Mbytes of free network disk storage, valued at $50 per month. Intranets.com
offers free secure network storage of business content viewable by employee browsers.
Access is controlled through passwords and I.P. addresses, ensuring security. Vertical business portals focused on high-spending
markets include PlasticsNet and Web MD. While PlasticsNET is a vertical business
portal, Web MD merges the space of B2C and B2B, providing consumers access to
medical content and physician information. The interesting approach of Web MD
is the introduction of workflow; moving business documents among doctors, HMOs
and insurance firms, a complicated task involving high dollar volumes. The introduction
of transactive business processes to a portal with market share provides immediate
value to customers and valuation to investors. One
of the most exciting areas in the business arena is the introduction of free electronic
commerce functions, including complete web store building and hosting. In addition,
complete e-commerce portal building tools are available to vertical industry leaders,
communities and geographical portals.
Market entrants here include Bigstep, eCongo, FreeMerchant, and more recently,
JustWebIt. Each of these firms offers a WYSIWYG store builder, including searchable
catalogs, product display functions, and integrated shopping carts and payment
services. Of course, nothing if free, and
they do so by offering credit card
processing services at a nominal rate. As merchants become successful, additional
marketing and financial services are offered as premium upsells. Cardservice International,
which offers credit card processing, and Smarton-line and OneCore, providing financial
services, are examples of business services which migrate "free" merchants
into recurring revenue opportunities. The
free commerce business model is extended to large aggregators of merchants, where
revenue splitting of premium services is shared between portal builders and web
store hosting services. Large firms building these portals include InfoUSA (consisting
of over 150 ISPs with over 200,000 merchant members), and communities of interest
such as The Black World Today The
most lucrative field in the B2B space is Financial Services, which serves traditional
brick-and-mortar business as well as web-based business. One key entrant is SmartOnline.com,
an Application Service Provider that provides a suite of services including legal
and administrative, sales and marketing, finance and business, and human resources
services. Onecore.com also offers a complete range of business services covering
financial analytics, cash management, bill payment, payroll services, merchant
services, leasing, and small business loans. As a Business Service Provider (BSP),
Onecore follows the free / premium service model. BigCharts (www.bigcharts.com)
is a free, professional-level, interactive graphical comparison tool that helps
users create customized on-line financial content. For
B2C e-commerce sites, BizRate.com helps
merchants understand how buyers rate their sites and on-line shopping experiences.
BizRate.com provides access to 60% of all customers making on-line retail
transactions. NetRatings.com offers
a free weekly e-mail newsletter called the Nielsen/NetRatings Reporter, which
highlights headline news, top 25 weekly properties, top 10 advertisers, top 10
banners, and Web average use statistics. So
what is the business model for Free B2B?
Offering something for free is a technique for opening up markets and driving
the "hockey stick", the inflection point where services like e-mail
(Hotmail), web hosting (GeoCities), and e-commerce suddenly explode. Many users
of new free services would not have tried a business service if it weren't free,
and a substantial proportion will graduate to premium services that generate monthly
recurring revenue for the provider. But how
are the free B2B services to be valued, and what is their future? We believe that
a new model we call "process share" -- the intersection of market share
with business process transactions -- is the new metric for valuation. Witness
the valuation of phone.com, which developed and licenses a Web browser operating
system for wireless phones, which are expected to become the initiation point
for over 50% of stock trades within 3 years. Each of the free services mentioned above is a virtual market maker in a vertical market or a horizontal application, has a growing member base that is "transactive", and is pursuing an opportunity to garner a small fraction of a very large number of business transactions. Whether or not free is the motive and transactions are the reward, it is clear that "free" has entered the B2B space, with businesses of all sizes as the beneficiaries. Let me leave you with a few of my favorite quotes this month: *** *** ***
I hope you enjoy this eZine. See you in cyberspace, Mitchell Levy Executive Producer, ECMgt.com <http://ECMgt.com>
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