Software giant Microsoft Corp. (Nasdaq: MSFT) has announced plans to invest $100 million (US$) in VerticalNet, Inc., an owner and operator of 55 industry-specific Web sites that function as online business-to-business (B2B) vertical trade communities. The new partnership is intended to help small and medium-sized businesses do business online.
As part of the agreement, Microsoft will provide VerticalNet with distribution and marketing support through multiple Microsoft properties, including the Microsoft Network (MSN). Additional support will be provided through the Microsoft bCentral small business portal and Microsoft.com.
VerticalNet will work with Microsoft to adopt key Microsoft technologies as the underlying platforms that support VerticalNet’s extensive community architecture.
Mutually Beneficial Move
The new alliance fits neatly with Microsoft’s already-established model of partnering, and allows some of bCentral’s customers to participate in trading communities for the first time.
“This alliance will allow Microsoft to accelerate the benefits of e-business for businesses of all sizes,” said Laura Jennings, vice-president of Worldwide Strategic Planning for Microsoft. “VerticalNet will be a great showcase for Microsoft’s Next Generation Windows Services and will demonstrate the scalability and flexibility of Microsoft’s platforms.”
For VerticalNet, the new deal will add credibility and value to its businesses. “The growth in trading partners Microsoft can bring adds enormous value to our global buyers and suppliers,” said VerticalNet president and CEO Mark Walsh. “These tools give companies a commerce platform and instant access to communities of targeted buyers in any of our vertical markets.”
For their part, buyers will now be able to reach VerticalNet communities handily through Microsoft’s bCentral, a portal that was designed specifically for small companies.
Busy Week for VerticalNet
The announcement of a new alliance with Microsoft comes just days after VerticalNet unveiled a new joint venture with Softbank Commerce Corp., a unit of Softbank Corp., to launch B2B Web sites in Japan.
After the announcement on Wednesday, shares of VerticalNet rose 17 percent, closing at $163.50.
The new venture will be called VerticalNet Japan Kabushiki Kaisha, which translates to VerticalNet Japan, Inc. The Web sites will be presented in English initially, but will be offered in Japanese within three to six months.
The endeavor addresses one of the major issues that has stymied the growth of e-commerce in Japan — the lack of Web sites available in the Japanese language.
Michael Hagan, founder and executive vice-president of VerticalNet, said that he hopes the company will have Web sites for 10 industries in Japan by the end of this year. Under the terms of the agreement, Softbank will provide 60 percent of the $3.8 million in start-up capital for the venture. VerticalNet will provide the remainder.
Pending Earnings Report
VerticalNet is set to reveal its Q4 earnings next week. Hagan expects that 10 percent of those revenues will have come from transaction-related fees, which may calm investors who have expressed concern that VerticalNet relies too heavily on advertising revenue.