UPDATE: AOL announcement targets B2B market

America Online and its subsidiary Netscape Communications announced a series of strategic agreements Wednesday that would beef-up the e-commerce offerings of a recently-launched B2B portal for small and midsize businesses.

Part of Friday's announcement was that 10 companies, including Hewlett-Packard, Homestore.com, and Spherion Corp., would sign on to the Netscape Netbusiness B2B marketplace. In addition AOL announced that PurchasePro, a B2B e-commerce ASP, would help develop the site's marketplace, bringing to the partnership an extensive network of its private-label B2B marketplaces and more than 140,000 participating businesses.

The site will generate revenue through a combination of sources, including online advertising, certain partnership deals, and the site's marketplace, says Derick Mains, an AOL spokesman, though he declined to offer more specifics.

"The key strategy we're pursuing here is to build out individual vertical marketplaces," Mains says, explaining that a company creates an online marketplace in which all of its suppliers join as members, thereby streamlining the procurement process. For example a company that buys everything from computers to paper to pencils can create an online marketplace to quickly search and place an order for just about anything it needs rather than sifting through a phalanx of supplier catalogs, then putting a purchase order for that item through.

Of course, a company can act as both a customer and a supplier in a marketplace like the one on Netbusiness. While an IT equipment maker might need a whole range of supplies on the one hand, it can also acts as a supplier to many other companies in other B2B marketplaces. With today's agreement HP, for instance, can offer products like PCs, workstations, and servers to customers on Netbusiness that were previously being targeted through its own business e-commerce site. Such a move gives a company like HP a much larger audience than it could have generated alone and one that is already grouped into specified niches.

"AOL's Netscape Netbusiness Marketplace would allow us to offer products and services specifically tailored to meet the needs of US small and medium business customers via one of the most heavily trafficked sites in the world," says Michael Weir, general manager of HP's Small and Medium Business Organization.

The Netbusiness site, started by AOL and Netscape in September, targets small to medium businesses, offering them a "business card," which, as Mains says, acts as a sort of one-page URL for companies that would like to have a Web presence without devoting resources to such an effort. When first developing a B2B site, AOL conducted significant research on the market it would target and found that small and medium sized businesses truly were under-served, Mains says.

"One example the executives here like to give is that there are lots of tools, products and content that's made for the enterprise and then passed off to small and medium businesses," he says. "We thought we could really focus on this market."

And because a lot of small and medium sized businesses use AOL and Compuserve for their Internet needs, Mains says the company knows this market "very well." After all, AOL and Netscape know a thing or two about building online communities.

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