After strong runs for the consumer-targeted equities, it's only natural for momentum players to follow the power cord to see where the juice is coming from. I can't argue that a company like Siebel Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: SEBL)") else Response.Write("(Nasdaq: SEBL)") end if %> doesn't matter. Enterprise software makes companies more productive and that's a necessity. But, you know, sooner or later, investors will flock back to the tangible brands.
Let's pivot and consider a traditional consumer giant like Coke <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %>. It's instinctive to seek out secondary players (and I don't just mean whoever specializes in pink slip stationary for the soda giant lately). If there was a software company out there that could further automate operations and lend a hand to bottlers, bonus. If there were a chemical company that could find a way to store a gallon of syrup concentrate in a thimble, bully. But sooner or later it all comes down to Coke. It's the real thing.
So, right now, with market share leaders like Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> and Amazon.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> trading well off their highs, is it right to turn away? A niche leader like eToys <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ETYS)") else Response.Write("(Nasdaq: ETYS)") end if %> is now trading at an all-time low. Has Ebenezer claimed the top bunk in perpetuity? priceline.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCLN)") else Response.Write("(Nasdaq: PCLN)") end if %> continues to add new product lines, yet it can't fetch nearly what it did last summer. Hey, I thought we could name our price?
The irony here is that investors have followed the cord to B2B without realizing that B2C is battery-powered. It is B2C, and not B2B, where the greatest potential for growth lies. Not in raw numbers but in terms of raw growth. The Boston Consulting Group projects that the percentage of all B2B business done online will more than triple over the next three years from 7% to 24%.
Nice, right? But let's consider the online toy market. Internet sales grew tenfold for the plaything e-tailers this past holiday season. However, online orders make up just 2% of the toy market right now. If it were to grow at the same pace as Boston's projections for B2B, it would be exactly where B2B is today by 2003.
Analysts like Merrill Lynch's seasoned Henry Blodget have been banging the B2B drum for a few months, but maybe they are singing a different tune now. After all, Blodget recently found consumer magnets eBay <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: EBAY)") else Response.Write("(Nasdaq: EBAY)") end if %> and America Online <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AOL)") else Response.Write("(NYSE: AOL)") end if %> attractive again at these prices.
The thing is that many of the arguments that form the basis of B2B's current popularity down Wall Street are either overstated or obsolete. Let's consider a few:
"Well, Rick, you stink! The barriers to entry for B2C are non-existent!"
That's true, on the surface. I was able to set up PetsPeeve.com in all of three minutes. But let's not confuse the plethora of hobbyist storefronts with the reality that it takes a great deal of money to ramp things up to the level of legitimacy. Besides, the B2C heavyweights are shrinking in number while the B2B players are growing.
Right now, there is a shakeout in B2C. Earlier this year, Beyond.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BYND)") else Response.Write("(Nasdaq: BYND)") end if %> hacked at its software e-tailing roots to devote itself to B2B. Venture capitalist CMGI <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CMGI)") else Response.Write("(Nasdaq: CMGI)") end if %>, which cut its teeth by investing in consumer-oriented players like Lycos <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LCOS)") else Response.Write("(Nasdaq: LCOS)") end if %> and GeoCities, launched an exclusive B2B venture pool back in November. So where do you want to invest? In the B2C leaders who will reign by default or in the quickly crowding B2B market space?
"Rick, isn't it time for your monthly bath? B2Bs rule because they have large concentrated accounts. They don't have to spend bucks to draw in users for a small negative gross margin sale like that Buy.com <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BUYX)") else Response.Write("(Nasdaq: BUYX)") end if %> place. What's up with that?"
You see, for me, the lure of the consumer-oriented companies is the very amount of the eyeballs they attract. The lids don't come cheap. The incremental sales might not mean much. There's a big quantitative difference between an airline clicking on a billion-dollar jet order and a guy picking up a copy of You Have More Than You Think at Amazon. But that B2B sale was going to happen anyway between the two players. The B2C sale either pulled the buyer away from a competitor or pushed the notion of item desirability in the first place.
Most Internet users make Yahoo! a part of the online experience. I doubt a B2B will ever cast that wide a net. The mob rules.
"Yawn. Sorry to snooze out on you like that, Rick. You are just SO boring. Oh, and stinky too. You do realize that the online B2B market is about a dozen times bigger than the B2C market, don't you? Bathe in fundamentals, chump!"
That's it! Do you want to step outside? It's not the size of the market but the growth that is alluring. Will i2's <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ITWO)") else Response.Write("(Nasdaq: ITWO)") end if %> materials monitoring software be in demand by manufacturers forever? At least we know that we as consumers will always be buying -- items and B2C stocks.
And, as Paul promised, here are the five companies that will be duking it out with his B2B Five (I think that's one of those new Orlando-based boy groups actually).
Amazon <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: AMZN)") else Response.Write("(Nasdaq: AMZN)") end if %> Company Snapshot
Yahoo! <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: YHOO)") else Response.Write("(Nasdaq: YHOO)") end if %> Company Snapshot
Webvan <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WBVN)") else Response.Write("(Nasdaq: WBVN)") end if %> Company Snapshot
Priceline <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCLN)") else Response.Write("(Nasdaq: PCLN)") end if %> Company Snapshot
eToys <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ETYS)") else Response.Write("(Nasdaq: ETYS)") end if %> Company Snapshot
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