- 4 - Does the evolution of Financial Exchanges point the way for B2B? Andy Gueritz, March 2001 © 2001 Sixhills Consulting Ltd & Author Global sales transactions are estimated to be $105Tn4, according to Gartner Group with $7.3Tn forecast to be on-line by 2004. To understand how B2B exchanges might generate revenues using the financial exchanges as a model we need to make some initial assumptions, say, that 1/3 of the online business is very liquid, high volume trading and so can be supported by major exchanges, with the remaining 2/3 being supported by other arrangements (e.g., 1:1 bilateral negotiation systems). In the limit, the high liquidity markets supported by B2B exchanges may produce similar ‘exchange’ revenue proportions (say, 1-2bp), between $260m and $520bn. The remaining trading could produce revenues at ratios of 4bp, or $2bn. In total B2B trading ‘exchange’ revenues would represent between $2.3bn and $2.5bn, three orders of magnitude less than the value of sale transaction forecast by Gartner to be captured by net market makers in 2004 ($2.7Tn). There are a number of possible reasons for this discrepancy, one being timing, another being that Gartner simply wildly over-estimated the potential value. If the analogy between financial and non-financial trading holds true, then the implication for B2B E-Commerce in the long term is that B2B exchanges will not be key revenue generators in non-financial trading but mere venues, where the real players, suppliers and buyers, will create and retain the value for themselves. Andy Gueritz, March 2001 Sources: FIBV, TradeDATA, Gartner, The Bond Market Association 4 Approx. 2.3 times GDP which represents value added (Gartner) B2B Exchange Business ModelsHighLowLowHighSpecialisation/Product ComplexityLiquidity• Bilateral Negotiation system s• Major exchanges• Existing Telephone markets• Private exchanges/ auctionsB2B Exchange Business ModelsHighLowLowHighSpecialisation/Product ComplexityLiquidity• Bilateral Negotiation system s• Major exchanges• Existing Telephone markets• Private exchanges/ auctions
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