A-Clue.Com
by Dana Blankenhorn
Volume III, No. XXI
For the Week of May 24, 1999

This Week's Clue: The B2B Revolution

This Week's Clue: The B2B Revolution

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One True Thing

Value and Meta-Value

The Key to the Name Game

Slobodan's Clue

Knowing the Players

Clued-in, Clueless

Thanks go to Russell Shaw  for this week's Clue. He covered it a few months ago in Net Marketing where he found a revolution in business-to-business commerce. But it's not happening in the way we expected.

The equation was supposed to be the same as in the consumer business. Content draws traffic, traffic can be built into community, and communities can be mined for commerce. But business buyers need more to change their habits.

Cutting costs isn't enough. A site that wins a b2b buyer (or seller's) loyalty must adapt to their specific industry. It must be open to all players, an honest broker. Kevin Jones covers this area well at his newsletter, NetMarketmakers, and says the key is careful study before going live with anything.

For his story, which appeared in April, Russell interviewed Gartner Group analyst Chuck Shih, who later told me there are already 350 such companies, and there could be 7,500 in three years. The key to success in every case is involving industry insiders and adapting the business model to their specific industry's needs.

For example, he noted, the paper industry  needs to match orders, like a stock exchange. That doesn't sound very sexy, or profitable, until you learn the bulk paper business is worth $260 billion. Even a few basis points on that volume - which replaces telephone brokers now taking up to 10% of a transaction's value - can build quite a business. On the other hand the commercial printing industry really needed a "virtual distributor," someone who could handle the expensive technology of collecting, and managing, print files for everything from business cards to computer manuals. Many printers aren't heavily computerized, and by taking on that role a company can get a hefty chunk of a $100 billion business.

These kinds of b2b deals (sometimes called "vertical portals") are now the hottest things on Sand Hill Road, where Silicon Valley's venture capitalists have their offices, according to Net Marketing. And for once the VCs aren't looking for gee-whiz technology. They're looking for industry insiders, a "granular" (they like that word) understanding of how the industry works, based on extensive discussions with all the industry's players, and an impartial system adapted to the industry's needs. 

This, I should say, is the problem I find with Healtheon, which announced last week's it is merging with WebMD. Healtheon's leadership comes from the Internet industry, in the form of Netscape co-founder Jim Clark. It doesn't come from the hospital industry it purports to serve. And the business plan of WebMD was developed with an eye to what works for the Internet, not what works for the giant hospital chains or insurance carriers. 

There's a key Clue that comes from all this, one I want you to remember. In b2b, it's the Web that must adapt to the players, not the other way around.


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You can now get your Daily Clue at ClickZ, putting a "clued-in" spin on the day's news. I'm also continuing to do monthly columns for  NetMarketing, Boardwatch, and  Intellectual Capital. I'll also begin work soon with the IC folk on a book project concerning politics and the Internet, which will appear first on the Web. A-Clue.Com is also the Monday e-commerce column of Andover.News. Buy my book now. Subscription instructions are at the bottom of each issue.

Remember that it's still journalism -- checking the news, calling people, listening carefully and writing on deadline -- which keeps the Clues coming. If you're looking for excellent work, give me a call at 404-373-7634. Now back to the show...


One True Thing

I've read a host of shared lists in which Web storeowners complain about just about everything. The topic may change, but the complaint remains the same. The answer is the same as well.

On the Web, the customer rules. The customer isn't just always right, but they always rule. It's just too easy for your customers to become someone else's customers for it to be otherwise. It's the correct answer to so many "controversies" I see on lists like I-Sales and I-Advertising. One merchant complains about "ad blocking" software and suggests a lawsuit. It's just not worth it - the customer rules. Another complains of how customers have no loyalty, jumping around from store-to-store, or service-to-service, looking for the best price. So what - the customer rules. (Schwab's doing great, by the way, despite charging the highest price in the online brokerage business - they make up for it with telephone, mail, and brick-and-mortar customer service.)

On the other hand, Amazon.Com cuts the prices of best sellers in half and upgrades delivery of some goods in anticipation of holidays like Mother's Day. They know the customer rules (they also know there aren't that many best sellers), and it's the key Clue they offer you now.

Value and Meta-Value

The recent break-up of the Lycos-USA Network merger, the launch of iNBC, and the negative reaction to the proposed merger of equals between US West and Global Crossing shows a growing gulf between the perception of real-world values and Internet values. (It's as though they're different worlds, a real world and a meta world.) The gulf threatens the ability of many Internet companies to find a real world connection.

Your Clue is that this problem will be cured, one way or another. It has to be, because Internet businesses must eventually be grounded in the real world. My guess is, as usual, that Internet prices will come down. But as long as stock buyers keep prices for these issues in some meta-reality, this Clue can't be used.

The Key to the Name Game

Your business name is your .com - not the other way around. The shorter (and more descriptive) the .com the better. So some name speculators have been doing quite well lately.

What's interesting (and most just) is that the name speculators aren't usually the ones cashing in. A technology company owned Art.Com until Bill Lederer realized Artuframe.com was the wrong address for him. They made out well, but Bill made out even better, getting $220 million for his company within a year from Getty Images.

Lately a host of Web companies have been looking for shorter, snappier domains - Barnes & Noble has become bn.com, theminingco has become about.com, all the Disney sites are now go.com and Time's Pathfinder sites are becoming variants of cnn.com. Shorter is better, but the key Clue is that http:// and www are gone once everyone smells a Clue. Your .com is your company's name (unless it's a .net), and that's just the way it will be - until it changes.

Slobodan's Clue

In the cyber-war over Kosovo, the winner has been Serbia . Serb civilians have volunteered as spammers, hackers, and newsgroup participants. They have far outdistanced the efforts of NATO (and Western media) in winning hearts and minds - which is the key to beating democracies in war. They have also outdistanced the efforts of Kosovars and Albanians in the U.S. (In-fighting among the allies doesn't help, either ).

So what is Slobodan's Clue? Committed, organized amateurs can beat professionals every time. Give them the freedom (within the limits of the mission) to get the J.O.B. done and they'll do you proud. As Netscape learned from Apache and as Microsoft may learn from Linux, people on the Web can (and often do) beat institutions. (Linux' problem is keeping everyone on mission.) This is how affiliate marketing works, it's what word-of-mouth is all about. It's the key to the success of any Web business.

Knowing the Players

Here's a common Clue that unites a bunch of stories - the consolidation among medical Web sites, the slow take-off of pharmacy Web sites, consolidation among Web bank software companies, and the excitement among Venture Capitalists described in this week's lead Clue.

The key to success in today's Web markets is knowing the players and winning them to a fair, impartial Web play. Drugstore.Com and WebMD are having trouble because they went to market before winning the confidence of hospitals and insurers. CVS can quickly move its business to the Web, via Soma.Com and online rivals better hope it succeeds because they badly need the precedent. Security First's recent moves don't mean that much, because it has yet to win the loyalty of many banks to its system, and that (as opposed to the customers sought by net banking rivals) is the key to its business plan. All the b2b plays mentioned in our lead Clue, meanwhile, did their homework first, winning the confidence of players directly (through meetings) and indirectly (through information services). The technology was, and is, a secondary consideration.

In most lagging Web markets, in other words, the key to business isn't technology, but doing business. An open, honest, unbiased approach that takes every side's interest into account is one key to the equation. Understanding and winning-over the players (with inside help) is the other key.

Clued-in, Clueless

Clued-in is Red Herring Magazine , for a wonderful story putting the kibosh on the Internet investing frenzy, especially its clear explanation of how the numbers work (or don't work). Really good financial reporting is far more rare than it would seem, and this story is a gem.

Clueless are those politicians who are using the techniques of spammers to get what they want from Congress. Permission marketing will work much better in the long run, guys - get with it. Buy a good list and you might win the battle - but anger a few of the names you've bought and I guarantee you'll lose the war .


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