Much has been said about the "theoretical" opportunities offered by e-marketplaces in improving the results of companies.

But the reality is that e-marketplaces currently offer more "promises than reality." Anyway, a concept must be clear: although there is a hard road, e-marketplaces will be implemented in the daily life of companies.

Let us therefore go on to develop the different problems that have been found in the e-marketplaces, both from the perspective of the promoter and the participating companies.

1. Profitability of business models of public e-marketplaces

If we analyze the listing of some of the most important initiatives such as Verticalnet.com, we see that the falls have been spectacular.

According to Forrester, 88% of European e-marketplaces are not profitable. In 2001, the income of 40% of them was less than 10 million euros. Similar conclusions can be extrapolated to e-marketplaces worldwide.

The logical question is why?

Clearly there are two components: one the ".com" phenomenon (expectations vs. reality) and the other one of business model viability. As there has been a lot of talk about the «.com» phenomenon, below we develop doubts about the business model.

Initially, the income from the e-marketplaces came (and comes) mainly from a commission of the transactions carried out in the e-marketplace. In some cases, there were also fees for participating in the e-marketplace.

Obviously, to reach the break-even point, the income from the different concepts must cover both the initial investments and the expenses of the e-marketplace. Therefore, the promoters of the e-marketplace must attract a sufficient mass of participants to reach the equilibrium level. Thus, for the e-marketplace to be profitable, it must be achieved that:

> (Expenses of the e-marketplace + amortizations investments of the e-marketplace).

Analyzing this phenomenon in a global way and giving typical values ​​to each of these elements, it is obtained that profitability is only possible for a few e-marketplaces. In a Bain study, it follows that there could be 84 e-marketplaces in Europe (including private e-marketplaces and consortia).

This model was the one that was initially proposed before the emergence on the scene of private e-marketplaces and consortia. The problem encountered by public e-marketplaces is that large companies –which provide a large volume of transactions- have their consortia or private initiatives, with which the target audience for transactions has decreased.

A clear case is that of General Motors with Freemarkets.com. General Motors started in the B2B world in 1998 using Freemarkets on some of its purchases. For Freemarkets, GM was very important, accounting for 19% of its revenue in 1998 and 15% in 1999. When GM announced that it was going to use its own platform, Freemarket shares fell 55% in two weeks.

The concept of critical mass that is basic in public e-marketplaces, however, is not important in the case of private e-marketplaces or in consortiums since the same promoters are the ones that contribute this mass of transactions. In these cases, the situation is much simpler since it is the promoters themselves who "invite" their suppliers (and customers) to participate.

For their viability, some public e-marketplaces will seek income around the basic business model based on transactions offering services and content. This is how the previous formula will be redefined to the following:

> (Expenses of the e-marketplace + amortizations investments of the e-marketplace)

Regarding its value proposition, it must be focused on a complementary proposal to the private e-marketplaces and / or consortiums as well as the attraction of SMEs (Small and Medium-sized Enterprises).

However, the number of public e-marketplaces will decrease and there will be a clear concentration of the sector, surviving only those that provide a clear value to the market. AMR Research predicts that there will only be 2 or 3 e-marketplaces per industry worldwide. In Spain there is a clear recent example: the merger of E-difica and Build2Build with the creation of Obralia

2. Unclear return on investment for buyers and sellers. Initial costs of change, integration and consulting.

The return on investment is often not too clear. Faced with improvements that are always "to come", companies that want to participate in e-marketplaces have initial external and internal costs due to consulting, training, integration and development.

In a Forrester study from March 2001, he points out that the cost of integrating a large buyer into an e-marketplace needs between $ 5.6 and $ 22.9 million.

Obviously, there is always the possibility of participating in e-marketplaces without full integration, so the cost decreases (although the improvements obtained in the processes also decrease). The clear recommendation is to make an analysis in each case of the interesting equilibrium point as well as the level of integration with each of the e-marketplaces in which it participates.

Within the range of technological issues, the major problems of catalog management and documentation are especially important.

SMEs are not massively using e-marketplaces. Typically, their use is focusing on cases in which their customers require their presence in them.

The basic reasons for this are:

1. Total or partial ignorance of the important opportunities that e-marketplaces offer them. Unclear return on investment. Lack of qualified personnel in the IT area. Company processes are not being remodeled for the correct adaptation of the business. It has as priority. Resistance to change. Lack of methodology in the development of the project.

A qualitative study carried out by EspacioPyme among Spanish SMEs reaches the following conclusions:

Theoretical advantage provided	SME perception
Lower purchase or sale transaction costs	SMEs do not consider the integration of systems that would allow it
Concentration of products and services	If we talk about e-procurement, they see no value; in strategic sourcing, they are highly skeptical
More and better suppliers.	The response of SMEs is emphatic: they have the best suppliers, they are very satisfied with the prices obtained and In addition, they mention binding emotional factors
Better purchasing planning	They are satisfied with their current management
Lower prices	High skepticism.
Access to a greater number of clients	High skepticism.