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"Infomediaries" bring together industrial-strength buyers and sellers.
A fundamental but little-noticed truth of the new economy is that middlemen matter more than ever. They're the ones, after all, who will be making sense of the Web's information glut for buyers and sellers, applying careful layers of digital Teflon to each virtual gear and cog in increasingly frictionfree transactions.
The real power, and much of the gold from the new economy, will go to these new middlemen-online distributors and market makers that are bringing together widely dispersed buyers and sellers in virtual trading bazaars. Creating order out of chaos in industries ranging from trucking to classified ads to steel and research chemicals, these businesses have failed to generate much buzz outside their particular industries. In their niches, however, these intermediaries, called infomediaries or market makers, are gaining traction. They can help clients streamline product research-and buying and selling-and take a nice cut of the action for their trouble.
Estimates regarding the size of the market for online market makers' services are guesswork at this point, says Roy Satterthwaite, research director for e-commerce and extranet applications at Stamford, Conn.-based Gartner Group Inc. "These sites are all in their early stages," he says, "so in-depth market sizing isn't that useful." However, Satterthwaite is optimistic about their future: "We know there's a market maker site in operation, or getting into operation, in every industry [segment]. We think these seeds will blossom in the next five years into one of the predominant models of e-commerce."
Adds Bill Gurley, a partner with San Franciscobased venture capital firm Hummer Winblad Venture Partners, "The home runs [for online market makers] will come from people who understand all aspects of a particular industry and use the Net to capitalize on that."
NECX moves online
Some of the new online intermediaries are well-established trading groups. For example, NECX (the company's legal name is New England Circuit Sales Inc.) has run a trading network for 18 years in Peabody, Mass., where 1,600 suppliers and 20,000 additional sources make a market in excess inventory and component sales for 2,000 computer and component manufacturers, resellers and integrators. NECX The Exchange, one of the company's two business units (the other is NECX Home and Office Computer Center),...