The second stage of B2B marketplaces

The second stage of B2B marketplaces was marked by independent exchanges
offering equity stakes to large buyers and sellers as incentives to trade and in order
to align their interests.
Many of the first generation of independent marketplaces set up by entrepreneurs
deliberately excluded equity participation from the industrial companies that formed
their trading base to preserve both their neutrality and ownership. Many feared that
if a large buyer also held an ownership stake in the digital marketplace, sellers and other
buyers would be wary of participating on the basis that the large buyer could unfairly
influence trading rules or gain access to privileged trading information.
Weighing against a desire for independence is the reality that a digital marketplace’s
value is based on its liquidity. That is, companies that trade through digital marketplaces
create value for the them. Thus, many marketplaces originally established independently
began offering equity stakes to significant buyers or sellers as incentives for
participation and in order to align their interests with the marketplaces’ success. Life
sciences B2B SciQuest, for example, remained independent of firms buying and selling on its exchange until October 1999. Beginning in the fourth quarter of 1999, SciQuest issued warrants to key buyers

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Tags: - B2B, B2B, b2b_marketplaces, digital_marketplaces, independent_marketplaces

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