Date: Jnauary 8, 2000

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The Jupiter/Net Market Makers "Ground Zero 4" conference was
held December 5-7, 2000, at the Bonaventure Hotel in Downtown LA
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Dear Clients, Partners, and Fellow Stock Market Refugees:

As the worst year for the Nasdaq since 1974 was winding down (and good riddance to it!), I found myself jumping onto yet another flight to LA...usually my favorite destination, though I wasn't so looking forward to this event. B2B stocks had been turning to crap for some time--like damn near everything else Internet--and I knew the mood would be....well, shall we say a little less *festive* than the conga-line dancing of "iB2B" in Boca in March? God, could it be only eight months since that extravaganza event of all time? Seemed like an eternity....

Anyway, trooper that I am (and ready to get out of the lousy winter stacking up in the Twin Cities), I made the journey...after a half-day stop in Chicago to catch one of my buddies speaking at yet *another* B2B event, "Online Exchanges 2000"--which was even more sparsely attended than the one I was about to experience in LA. (He was, quite fittingly, speaking about consolidation in the B2B exchange business -- meaning he ran an independent that was finally down to selling out or folding, so he did the former. Oh well, he's now on to his next thing -- a B2B credit intermediation service for industry exchanges, based in Chicago, which he's cofounding with a former Federal Reserve bank exec. Email me if you want to know more.)

Once I got to LA, I found I was right. This gig was a far cry from the B2B conferences of old, though I did run into some friends and met lots of interesting new ones....who remain on a mission to figure out what business models are going to work, as we keep staring this *GIGANTIC* business opportunity in the face at the dawn of the (real) new millennium.

I had promised Conferenza.com, the conference-review site that actually pays me to write about these things, that I'd file a story soon after GZ4 wrapped up....and the following is what I sent them. Admittedly, not my most upbeat of recounts, but I tell it like it is. (Hey, at least I pulled out some optimistic quotes at the end!)

This is my second-to-last report on Year 2000 events. Watch for the final one, on a more positive B2B event ("Line56 Live! NY"), which will follow in a day or so....

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Glow Gone, B2B Net Markets
Conference Plods On

by Graeme Thickins
grt@gtamarketing.com

The fourth iteration of Net Market Makers' "Ground Zero" conference was, unfortunately, not destined to be its best. Though the event helped clarify what the coming next phase of the B2B online marketplace business will be about, the one common thread throughout the gathering was the fact that the young industry has hit a hard wall of reality. Many speakers exhorted attendees to keep a stiff upper lip and try to look for positives--while negatives swirled about in many presentations and panel discussions, keeping the mood much in check.

Not the luckiest timing for event operators was the announcement by Ventro (Nasdaq: VNTR) on the first day of the conference that it was closing its flagship Chemdex exchange for the life sciences industry, along with its lesser-known Promedix exchange for high-end medical equipment. The company, one of the highest of fliers among public B2B companies earlier in the year, had tried and failed to sell both exchanges. The firm's announcement was part of a major restructuring, changing its business model to that of a builder of online marketplaces and provider of services to other exchanges.

To say that news set a bad tone for the event would be an understatement, since Ventro had been one of the nascent industry's most respected pioneers. But there would be plenty of other downers to ponder for attendees who could manage to hang in over the three days (which, unfortunately, wasn't many). Traditionally, the core of this event's attendance has been executives of independent exchanges and hopeful startups.

The Disappearing Numbers Game

Attendance was well down this time, seeming nowhere close to the 1700+ claimed. (I almost laughed when I heard that number--choosing instead to believe my own non-lying eyes, or less than half that. But, however many there were, about 300 to 400 of the total would have been exhibitor and sponsor personnel. And some 250 of the number were there for the pre-conference workshop on Monday, I learned.) Attendance in the sessions on Thursday, the last half-day, ranged from 100-150 at best.

The conference promoters--including representatives of their new parent company (Jupiter Media Metrix), who were everywhere--and the many speakers and moderators found themselves preaching mostly to the choir, or each other, in many sessions. They spoke of looking out to better days ahead, as the industry matures, the shakeout continues, consolidation of independents keeps happening, and industry consortia get beyond the mere announcement or incorporation phase--and perhaps even begin acquiring or partnering with independents.

Gone were the party atmosphere and mobs of people, including the large numbers of VCs, investment bankers, and analysts evident at previous Ground Zero events--which was not much of a surprise, as everyone was painfully aware that the heady days when almost any business plan with "B2B exchange" on it could get funding were long gone.

Onward--and Upward?

So the great first phase of the B2B phenomenon, little more than a year, comes to a close, and a new one begins. Ground Zero, to its credit, was there in the very early days--their first event being in May 1999.

What did Ground Zero 4 tell us about the new phase? The latest take on the B2B marketplace business is that the industry consortia--also known as ISMs, or industry-sponsored marketplaces--are in fact beginning to get traction, in just a matter of six or eight months, to the detriment of the independents. Contrary to much current thinking, a survey by Jupiter prior to the event found a surprising 65% of consortia who were contacted said they would be operational by yearend 2000.

Some independent exchanges are actually now morphing--with help from their VC backers--into enterprise software companies, in an attempt to find a sustainable model to profitability.

Consolidation of B2B exchanges will happen in many sectors, especially the true public exchanges, with acquisition being the only viable option for many independents running out of cash. The focus on reducing burn rates is intense, we learned.

Because public exchanges have proven to be more difficult to build into viable businesses, there has been a move to private exchanges, those that address the supply chain.

Also, there is a decided move from an emphasis on only transactions to value-added services and collaboration or sharing of information.

New Magic Buzz Phrase Emerges

A common problem being addressed by many industry-sponsored marketplaces is "visibility of inventory"--which appears to be a major need of firms partnering to launch supply-chain industry marketplaces. This phrase got my vote as the one most attendees would likely drop into their PowerPoints back home to impress the boss with their newfound knowledge.

Undaunted, Jupiter/Net Market Makers has scheduled "Ground Zero 5" for May in Boston.

Selected Quotes from GZ4

"We're in the incredibly early days of B2B e-commerce.
How far are we into it? In our surveys, typically
the answer is only 1%....You must be agile."
-Martha Greer, VP Marketing, Ventro

"My advice to entrepreneurs? Focus on what's working,
where you're making more than you're spending. Where's
the most value-add? Focus very narrowly on that."
-Jeff Crowe, President/COO, DoveBid

"We have 1.5 million customers who are helping us define
our business. The models that are sustainable are the
ones that start with the customer."
-James Ryan, President, Grainger.com

"Do you have a value proposition? Can you demonstrate it?
The integration of the front office to the back office
is where the value is."
-Martha Greer, VP Marketing, Ventro

"We had the customers already, and 220,000 products.
The advantage goes to those who do the dirty-work
of integration."
-James Ryan, President, Grainger.com

"What strategic assets do you have? If you don't have
any, or aren't acquiring any, it will be difficult."
-Godard Abel, CEO, BigMachines.com

"Keep the model simple--one sentence. Burn it into
everybody, like water torture on employees--drip,
drip, drip."
-Martha Greer, VP Marketing, Ventro

"What's changed is the need for more frequent
communications. It's hard having to re-explain the
business to employees, and even moreso to customers,
when the model is evolving."
-Godard Abel, CEO, BigMachines.com

"We VCs *are* subject to fads, but we do respond
to market opportunities. We'll learn the sector
if we don't know it. Make a convincing case!"
-Robert Simon, Partner, Alta Partners

"Revenue models? I'd focus instead on your
value proposition. There now seems to be
value in 'inventory visibility'."
-Russell Siegelman, Partner,
Kleiner, Perkins, Caufield & Byers

"We're investing today for five years out,
and we're extremely bullish on B2B."
-Eric Harrison, Partner,
Crosspoint Venture Partners

"I don't want to leave you with a dour feeling.
A lot of big companies are yet to be built!"
-Russell Siegelman, Partner,
Kleiner, Perkins, Caufield & Byers

"There's more optimism now than 24 months ago.
Strategic maneuvering is now more important
than velocity--which we VCs like, because we
get to keep our jobs."
-Mark Hilderbrand, Partner, Onset Ventures

I hope this report provided some insights for you,
and I'd enjoy getting your feedback.

Please note: if you were gone over the holidays, you
may have missed my last report, which was on the very
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your faithful, B2Blatantly dedicated,
almost-done-for-the-year conference reporter,
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Graeme Thickins, Founder & Principal Consultant
GT&A Strategic Marketing Inc.
*Twin Cities *LA *SF *Anywhere
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Watch for our final conference report of the year 2000,
coming soon....on what turned out to be a very hot
"Line56 Live!" B2B event in New York City....

If you have suggestions about other events I should
cover in 2001, please let me know, would ya? Thanks.