B2B may already be going bust.
The much hyped business-to-business market took a big knock yesterday when Safeguard Scientifics, an Internet holding company, announced it would not invest in any more B2B Web companies.
With the weaker e-tailers already taking a hammering on Wall Street, many fear B2B is also ready for its shakeout.
Ariba, which makes software for B2B e-commerce, yesterday closed at $90.75, down $12.75, or 12.32 percent, while Commerce One, another big B2B player, closed at $119.50, down $20.50, or 14.64 percent.
Meanwhile, New York’s flooz.com — known for its online scrip and touted by Whoopi Goldberg — seems to have come late to the party, announcing yesterday it will jump into the B2B space.
Privately held flooz.com said it will offer to set up businesses with flooz dollars for use as corporate gifts and employee incentives.
Business-to-business companies aim to remove layers of bureaucracy, such as purchasing and inventory control, in order to create efficient electronic marketplaces online.
For example, auto manufacturers can order parts on a just-in-time basis and heavy industry can snap up commodities and materials when they need them.
Safeguard has around half its portfolio value wrapped up in one B2B company, Internet Capital Group, which has lost more than 60 percent of its value this year alone.
Safeguard’s president, Henry Wallaesa, said the company would narrow its focus and invest in infrastructure companies, which he called “the next big thing.” Infrastructure means not just computers and hardware but the software and services that makes e-commerce happen. Such companies include Opus360, Techspace, and Mi8.
Not everyone agrees that B2B is burned out, however. “We remain incredibly bullish on B2B,” said Bruce Temkin of Forrester Research, which predicted the market would top $1.4 trillion in 2004. “You have to separate the stock price from the actual value.”
Successful B2B companies will be those who can solve a real problem, Temkin said.
“For instance, Chemdex did a good job of de-fragmenting the chemical reagents market. Just a few years ago, if you wanted a chemical you had to contact hundreds of tiny laboratories,” the analyst said.
Brad Garlinghouse, General partner at CMGI’s @Ventures, is also a B2B believer. “It sounds like Safeguard is playing toward the next trend. We have investments across the board, in B2C, B2B and infrastructure. They’ll probably say something else in six months,” Garlinghouse said.
He stressed that the B2B market remains a huge prospect: “Look at Findlaw.com” which provides services, content and support for the legal profession. “That’s a $100 billion industry, and it only has one competitor so far, USLaw.com.”