Mark Twain's saying about a greatly exaggerated demise rings true for
e-marketplaces. Despite the burst of the dot-com bubble, the global recession and an unsavory association with the name Enron, online business-to-business trading exchanges continue to expand in reach. Whether they target specific industries or specific functions, such as foreign exchange (fx) trades, online marketplaces have remained resilient by providing valuable benefits over offline transactions, including lower costs for buyers, greater access to customers for suppliers and increased transparency throughout the supply chain for all participants.

The total sales reported among members of the Global Trading Web Association (GTWA), the world's largest independent organization of electronic marketplaces, surpassed $6 billion last year. In 2000, that volume was less than $500 million. This enormous growth occurred at the same time that dozens of dot-com start-ups -- including many public e-marketplaces -- ran out of steam.

Hundreds of Web-based marketplaces
appeared in 1999, when entrepreneurs and venture capitalists bet that they could use new Internet technologies to streamline the intricate process of locating suppliers, negotiating prices, agreeing on product specifications, billing and collecting payments. Public exchanges typically charged a transaction fee to participants. They made additional money as a venue for online advertising, but that revenue stream petered out for many because they failed to attract enough paying buyers and suppliers.

As a result of the industry's economic woes, many large public marketplaces have undergone wholesale changes in the past 24 months. "Those independent trading exchanges were going to insert themselves into the middle of industry supply chains and provide all kinds of wonderful services," says Bob Parker, vice president, research fellow, with AMR Research in Boston. "They were very well-funded by VC [venture capital] money. And most of those are now out of business or, at a minimum, have shifted their model."

However, exchanges that took a more conservative line -- focusing on narrow functions, such as fx trading -- have posted a gradual but continuing growth curve. "The fx marketplaces have an opportunity to provide benefits by bringing providers and users together," says Nancy Atkinson, first vice president and e-commerce strategist for Mellon Financial Corp. in Boston. Mellon has Web-enabled its foreign exchange products and joined two fx marketplaces, Atriax and FXall, so that its customers can choose the method that meets their needs. Atkinson believes that fx marketplaces will significantly evolve in coming months and years. Their development right now is focused on security, efficiency and other enhancements that will increase their value for companies that execute trades online.

"I don't think the fx marketplaces have been significantly affected by the dot-com issues over the past couple of years," says Mellon Financial Corp. vice president Frank Cook. "These fx marketplaces are still in their infancy. Everyone is looking at them and analyzing their
development. But without a doubt, there has been a growing interest in foreign
exchange marketplaces over the past year from our customer base and from what I see in the marketplace."