Online Exchanges

Business 2.0 has a good review of what differentiated online exchanges:

There’s one thing the Internet does very, very well: It can bring together widely dispersed buyers and sellers to create active, efficient markets where none existed before. Think of eBay, FreeMarkets, LendingTree, and They’re trading businesses with none of the usual trader’s risks — no merchandise, no storefront, minimal sales force, and nothing to do but take a cut of each transaction that occurs on their sites. No wonder many B2B believers proclaimed online exchanges the Internet’s long-awaited killer app.

They were wrong. Many online exchanges have turned out to be major embarrassments. Covisint, created by the Big Three automakers to establish a central marketplace for auto parts, has churned through $250 million in capital, but it’s still struggling. Verticalnet, which facilitated online trading in business equipment and supplies, lost $280 million before it sold off its marketplaces earlier this year. Chemdex,,, and

What does eBay have that Chemdex didn’t? Call it good marketecture — a structure that combines the right business plan, good timing, top technology, and the trust of both buyers and sellers.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.