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Party Like It’s 1999

by Matt Manning

Some 18 years ago I spoke at the European Association of Directory Publishers conference. This was at the very height of irrational exuberance over online information services. The conference attendees were all very interested in transactional business models such as those floated by VerticalNet. The idea was that you could create a buyer’s and seller’s marketplace on your web site (a buyer’s guide combined with an RFP and ecommerce mechanism) and use a business model where the buyers and sellers would compensate the platform’s owner via a percentage of the deal transacted.

At the time, I certainly understood why the platform owners would like that model, but I saw no reason why the buyers and sellers would agree to participate under those terms. Yes, sellers will pay for advertising and ‘preferred placement’ in search results to reach buyers without any guarantee of return on that investment, but the idea of paying a big commission (a small % but large dollar amount) on a guaranteed order was still something most firms would only entrust to their in-house sales teams. And, of course, there was the obvious issue that users could choose a vendor, agree to terms, and simply do the deal offline.

Almost two decades later, we have not advanced much further toward this exact transactional model, but there are a couple of variant business models that are taking hold and showing the path forward.

The first is BuyerZone’s model, which uses sophisticated SEM strategies coupled with a short survey to identify people looking to purchase a particular product right now. They do this by buying web traffic for specific keywords and displaying a link to a brief survey in the search results. The survey refines the search request and gathers data on the requester. Vendors agree in advance to pay $X for each qualified buyer delivered, so the end result is that BuyerZone can sell vendors a list of specific people interested in buying a very specific product (i.e., not a printer but an HP Envy 401X printer) and they can even take it a step further and provide retailers with lists of people in their geographic area who want to buy their products now.

Another more hands-off approach is the “deal room” model where two parties to a large transaction agree to pay flat fees for access to a collaborative workspace powered by third-party software and relevant data. It works like co-working space where the buyers and sellers can pay a flat fee and get in and out with no long-term commitments. This software-first model has a low barrier to entry and delivers the kind of ROI that buyers instinctively understand and appreciate.

Both of these models for enabling transactions involve transparent pricing and convenience to the firms buying the service – the two aspects missing from the ‘wishful thinking’ transactional business model of 1999. I expect these to evolve in 2018, along with other creative approaches to inserting ‘middlemen’ layers into b-to-b buyer and seller transactions, eclipsing the traditional industry-specific buyer’s guide model completely in the not-too-distant future.

posted by Shyamali Ghosh on December 11, 2017

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