B2B Opportunities for Web 2.0 Startups

B2B Opportunities for Web 2.0 Startups

Written by Bernard Lunn / September 3, 2007

The
first era of the Web moved from B2C to B2B. However the bubble burst
just as the B2B phase was getting into full gear. As we enter the "digestion phase" of Web 2.0, many startups may want to re-focus their efforts on B2B markets. If Chasm models are still relevant
(I think they are, but so accelerated that it looks quite different),
then B2B niche markets enable the classic strategy of knocking down
“bowling pins”.

Note that I am not talking about Enterprise 2.0. That is behind the
firewall stuff that is mostly catered to by classic enterprise players
such as BEA, IBM, Oracle, HP, SAP; as well as open source.

What is much more interesting is how porous enterprises have become.
The corporate gatekeepers in purchasing and IT have lost power, as
millions of cubicle dwellers vote with their mouse. This leaves a lot
of room for startups to break in without investing in sales guys to
knock on CIO doors. Increasingly IT will bless and reinforce services
that already have traction within their firms, as opposed to bringing
them in themselves. That is a dramatic shift.

This
can also be seen as the “consumerization of business”. People act
online in similar ways, whether they are working or playing. Services
such as Amazon, Google, eBay and others that we all use every day at
home, make us question the clunky, behind the firewall systems that we
use at work. This plays to the strengths of Web 2.0 startups.

B2B Ripe for Startups

B2B strategies do not have to rely entirely on advertising revenue.
Still, advertising to people at work is big business. Traditional B2B
Media firms make over $4 billion a year from their online sites and
that does not count the pure play online-only B2B sites. But you can
also sell subscriptions or make money on transaction fees. In a world
where everybody is trying to make money from advertising, a constrain
play on other revenue sources could be a good idea.

More importantly, there are more significant pain points to solve in
B2B. Let’s face it, home shopping works pretty well, Google works just
fine for most simple home-based searches; and the mix of email, IM and
cheaper online telephony makes communication a breeze, even without
social networking sites. Sure there is always room for great new
entertainment – e.g. You Tube home videos have added a new dimension.

But this is very, very different from the issues that people face at
work. Ask anybody at work for 10 major IT related things that really
bug them and you will get a good list. So the possibility for
significant impact on peoples daily lives is simply greater in B2B.

This intuitive observation is corroborated by a recent survey
showing that 31% of B2B marketers allocate 20% or more of their total
media budgets to new media platforms, compared with only 5% of B2C
marketers. To put it another way, the Visionaries (Chasm speak for
early adopters who spend real money to make a substantive difference to
their business) are more often found in B2B than in B2C.

B2B marketing is inherently more complex than B2C. Many people may
be involved in a decision and the products and services have more
variables. This all makes for opportunities for startups that can
create simple, usable services to tame the complexity.

Web 2.0 / B2B Partnerships

Traditional B2B Media firms also make natural partners for Web 2.0
startups. B2B Media in the USA alone is a $31.1 billion revenue
business and the breakdown of that revenue may surprise those still
muttering about "dead trees":

  • Trade Shows $11.3 billion (36%)
  • Print Magazines $10.9 billion (35%)
  • Online “eMedia” $4.3 billion (14%)
  • Other (mostly databases) $4.6 billion (15%).

The growth (28%) and the margins (25%) are in online. If you ask a
random sample of B2B Media CEOs about their priorities, it is very
clearly “online, online and online”. Many now describe their businesses
as online with print extensions. In some cases this is delusional, in
some cases aspirational, and in a very small number of cases it is
already fact. Private Equity money is pouring into the industry and
smart, aggressive new management teams are ensuring that the transition
to online is real.

This leads to a lot of partnership opportunities. Web 2.0 startups
want access to this market and B2B Media want more online traction.
However this is not the environment for bleeding edge technology. In
Chasm terminology, you will find a few Visionaries and a lot of Early
Majority, but not a lot of Early Adopters.

This relative conservatism suits the B2B Media audience demographic,
which tends towards the Baby Boomer “digital immigrant” that still
likes print but also uses new technologies that cross into the
mainstream. RSS is an example. RSS is not a subject to quicken the
pulse of a Read/WriteWeb reader, but the opportunities created for
startups when something as fundamental as RSS becomes mainstream are
significant. The future clearly belongs to the digital native
generation that grew up with MySpace/Facebook, but in the B2B world the
checks are still signed and deals decided by the Baby Boomers with
bifocals scanning a print magazine.

Conclusion: B2B could be the answer for Web 2.0 startups

B2B Media executives do not expect a silver bullet; no single
feature will transform their business. They do need lots of new
features that in aggregate make a difference to their mission of
connecting buyers and sellers. This may suit the reality of many
smaller, younger Web 2.0 startups that get referred to as a feature
(not a product and certainly not a company).

These may not be the transformational deals that startups dream
about, but they may be the niche market ”bowling pins” through which a
sustainable business can be created.

Pic credit: Marshall Astor

>BackTrack

Leave a Reply