Excellent commentary on B2C Marketplaces is readily available. (For instance, see here.) Commentary on B2B Marketplaces is relatively rare. That’s why I was excited to be invited to Bessemer Venture Partners’ B2B Marketplace Summit in SF a couple of weeks ago. You really should read their excellent write-up of the event here. For a teaser, here’s a great graphic they put together of many of the participants:
The event had a long-time industry observer like me reflecting on how far B2B Marketplaces have come in the past 20+ years.
Defining B2B Marketplaces
Let’s begin by defining B2B marketplaces. For me, B2B marketplaces connect many buyers to many suppliers of goods and/or services on one platform. The express purpose, among others, of a B2B marketplace, is to help buyers discover new suppliers and to introduce new suppliers to new buyers. Unless new buyer-supplier pairs are created it’s not a marketplace. (That’s my definition, no one else’s.)
A B2B marketplace is not a series of co-hosted one-to-many portals (e.g., Shopify). Nor is it an application that automates transactions between known buyer-supplier pairs. (That’s true for me even if the application is architected as a platform or network). EDI networks, for instance, are not marketplaces. Not much controversy there. But, this definition also means the Ariba Network and the Coupa Open Business Network are not marketplaces. That’s not to say that both of these products don’t have network effects or some marketplace functionality, they do. But being a marketplace is not their primary purpose.
B2B Marketplaces 1.0
Given the average age of the person attending the Bessemer B2B Marketplaces conference, few of the attendees remember B2B Marketplaces 1.0. Marketplaces 1.0 consisted of the heyday in 1999/2000 of CommerceOne and Ariba. (In September of 2000, these two companies had a combined market cap of $60 billion–that’s a heyday!)
In March of 2000, Ariba closed on its acquisition of Tradex, a marketplace platform, for $1.9 billion in stock. Later that fall, Ariba introduced updates to its two marketplace products, dubbed AMNE and AMSE–it’s a long story. Less than 1 year later, Ariba discontinued investing or selling either of those products. (By then I called the two products amnesia.) Ariba chose, instead, to focus on its procurement products and eventually its network. That decision–now called a “pivot”–along with moving to the cloud, and monetizing the network allowed Ariba to ultimately survive and thrive. CommerceOne, on the other hand, stuck with marketplaces and was out of business by 2004. (For a complete history, see here).
From 2001 until 2013, I tried never to use the term “B2B Marketplace”. The term was anathema to clients and anyone who lived through that era. I still call marketplaces “Matchmakers” just to avoid the term marketplace. B2B Marketplaces are simply one of the hardest types of B2B platforms to pull off for reasons I discuss here. The good news is that it now seems safe to wade back into the marketplace waters.
B2B Marketplaces 2.0
Why might B2B Marketplaces have success this time around? The answer is easy. Everything has changed. I like to use the analogy of my two fantastic daughters who were in ages 5 and 8 in 2000. Speed ahead 20 years and they are fully functioning adults each making their own way in the world quite successfully (god willing). But back then, while they were really, really adorable (they still are), they were totally useless and unproductive members of society. The same was true of most, though not all, early marketplaces.
Specifically, here’s what is different now:
- The costs of creating and maintaining a marketplace have benefitted from Moore’s law (and AWS). You can now buy SaaS marketplace infrastructure from a whole category of vendors and pay-as-you-go. Not to mention improvements in bandwidth, mobile, PIM applications, payments, and every other single bit of infrastructure.
- Acceptance and trust in B2B e-commerce. No one is sure how much B2B e-commerce there was in 2000, but it appears to have been about 1/10th of what it is now. It’s hard to remember that no one trusted online security or payments back then. There were no virtual cards or marketplace payment providers. Now there are dozens.
- Marketplace owners are focused on buyer-supplier matching and mutual value creation. Early marketplaces were often consortia of buyers and a big product offering was reverse auctions. Not exactly, a crowd-pleaser in the supplier community!
- People are generally less insane than back then when no strategy was required to start a marketplace. That time period really did add a new chapter to Extraordinary Popular Delusions and the Madness of Crowds.
- Online marketplaces essentially did not exist in 2000. Amazon’s Marketplace has taught the world what a B2C marketplace is. And their latest attempt in B2B, AmazonBusiness (2015), brought marketplaces to the B2B world. Take a look at Amazon’s B2C marketplace history:
Source: Marketplace Pulse.
In 1999, Amazon sellers sold $100 million in volume on the marketplace, representing 3% of GMV. Now the marketplace part of Amazon, alone, is $100 billion in GMV. 1000x growth is noticeable! All that marketplace marketing by Amazon made consumers and businesses familiar with the concept. Amazon paved the way an may have forced many to follow.
Marketplaces at Bessemer’s Conference and Beyond
Bessemer’s conference introduced me to several B2B marketplaces (see above) I had never encountered, as well as an ecosystem of providers ready to provide these B2B marketplaces with services. Among the revelations were:
- Torch, a marketplace for dental offices and suppliers
- ACV Auctions, online used auto auctions for dealers. May compete with Backlot Cars?
- Provi, a marketplace for ordering alcoholic beverages
- Leaflink, a marketplace for Cannabis retailers and brands
- Spoiler Alert, a marketplace for food and beverage manufacturers and discount retailers
- Ecosystem providers such as Stripe (not a revelation, just good to see them at a B2B event), Upper90, ResolvePay, and many others who offer marketplace payments and financing
There are, of course, B2B Marketplaces in contingent labor, logistics, online advertising, the public sector, used capital equipment, agriculture, and parts businesses, but it was great to see entirely new industries being penetrated with true B2B Marketplaces. Maybe it is not deja vu all over again.
To think 20 years ago there were over 1600 B2B e-marketplaces. I only see 2 on the Bessemer chart but there are a handful of others that managed to survive like E2open and Surescripts. You should write the “Where are they now” post.
I think you should help me!