SAN MATEO (05/08/2000) - Digital exchanges are all about liquidity. With some goods it's tough to connect supply with demand. Whatever roadblocks exist between someone's supply and another's demand go to the heart of the digital exchange. Exchanges create efficient mechanisms for buyers to discover suppliers. The greater the efficiencies, the more liquid or dynamic goods become. This in turn means dynamic pricing, given the vagaries of demand at any given moment.
Digital exchanges have enormous potential to transform the global economy (notice the impact of stock exchanges). And digital exchanges also open up intriguing new business opportunities.
Barter is practically synonymous with small-scale transactions -- two chickens for your goat. Not a model that scales well, as BigVine.com CTO Louis Monier would say. Monier is a dot-com veteran: He was founder and chief technologist at AltaVista Co. Monier spoke with me about BigVine, a company hoping to organize bartering on a global scale. If bartering sounds a bit low-tech for a dot-com, remember that eBay generated a $20 billion market cap based on the same principle of organizing a fragmented market of pseudo-hobbyists.
BigVine.com allows individuals and businesses to barter goods and services, with BigVine acting as a directory of services as well as creating an online currency mechanism to facilitate the barter. However, Monier is quick to point out that BigVine is not trying to compete with the dollar -- by all means, try to sell your goods or services for cash. But rather than let surplus go to waste, it can be bartered. That part of the model sounds very similar to the Priceline.com model: getting a small slice of the economy as a whole. BigVine appeals most directly to notoriously cash-poor small businesses, but I wonder about the bigger possibilities. Large companies engage in barter all the time; they just don't call it that. If BigVine can organize informal business-to-business bartering, it could be a juggernaut.
Rightscenter.com hopes to transform the publishing world. Rightscenter is an exchange for publishing rights -- the legal rights to use published works -- which allows authors, agents, and publishers to come together and auction off the publishing rights to a variety of works. CEO Kip Parent -- a veteran of Silicon Graphics -- recently sketched out the Rightscenter vision to me.
Publishing rights is a relationship business: Agents talk to the people they know. With Rightscenter, that system of privacy and one-to-one negotiation is preserved, while granting access to the world market. In the near future, I expect publishing rights for digital assets to get quite complicated. (How about the rights to publish to the Internet for an hour?) Managing such complexity could be invaluable to the publishing world.
Yet2.com, Patent and License Exchange (pl-x.com), Patentauction.com, and the Intellectual Property Technology Exchange (techex.com) are all trying to facilitate the purchase and licensing of patents. It makes sense: Large companies such as IBM, DuPont, or 3M have vast resources devoted to research and development and file thousands of patents a year. But they can't always capitalize on their intellectual property. With exchanges, they can license or sell their intellectual property to companies that have a use for them. These exchanges essentially provide found money, creating revenue from assets that already exist. This model might prove crucial in the coming years. Patents are fast taking center stage in the world of Internet business. Odds are, your dot-com is violating somebody's patent. Whether you agree or disagree with some of the recently controversial business process patents, the patent office is not going away anytime soon. When I recently spoke with intellectual property attorney Stephen Kahn, of Weil, Gotshal, and Manges, he mentioned that standing patents are rarely voided. In other words, a lot of dot-coms might suddenly find themselves in need of a licensing agreement for patents.
The power of exchanges is deceptively simple: making assets liquid. But, given the inefficiencies in the real world, the potential of exchanges is enormous.
Send e-mail to email@example.com. Dugan is senior research editor at InfoWorld.