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US B2B MARKETS PREDICTED TO REACH $6 TRILLION IN 2005

Posted on June 29, 2000

      Online B2B transactions are expected to reach more than $6 trillion by 2005, representing 42 percent of total business-to-business non-service spending in the United States, says a new industry study.

      The research from Jupiter Communications Inc. says that while this year's B2B trade on the Internet will only represent 3 percent of the total U.S. B2B non-service market or $336 billion, the online volume will grow 20-fold over the next five years, "opening the doors for new business models such as net markets and coalition markets."

      To take advantage of this growth, Jupiter (NASDAQ:JPTR) said it is advising that businesses begin now to incorporate Internet strategies throughout their procurement and sales processes, and invest in multiple selling models "to leverage market disruptions while protecting share of market."

      Currently, the direct channel, a model of one seller to many buyers, dominates 92 percent of the Internet B2B market. However in 2005, 35 percent of the Internet B2B trade volume will be conducted via a net market, a model of many buyers and many sellers, or through a coalition market, comprised of a consortium of buyers or sellers, Jupiter said.

      "The value proposition of the Internet is on a grander scale for the B2B space; the sheer size of B2B trade, coupled with inefficient processes, makes the Internet migration of business strategies very attractive," said Melissa Shore, senior analyst for Jupiter.

      "Early adopters have already made their investments, but it will be the mainstream companies that now embrace the Internet and will drive it to mass penetration.

      "Over the next several years, businesses will face an array of new opportunities to improve and expand their sales and procurement processes," she said. "They must invest now even though the payoff will take some time; it will require several years to see a substantial migration from today's manual, paper-based solutions to tomorrow's Internet purchasing counter."

      Shore advises that businesses also must look to diversify their investments across multiple models and partners. All companies are not in the same position; businesses must allocate their resources according to the company's market power within their specific industry.

      Companies with stronger market power should allocate more of their investment toward the direct selling model, while those lacking power should seek opportunities to differentiate themselves within net or coalition markets, she said. The new B2B e-commerce research was unveiled at the inaugural Jupiter B-to-B Commerce Forum on June 26/2000 in San Francisco.

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