InformationWeek

March 27, 2000

Online Marketplaces:
Insiders Are Key For Boats.com
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Illustration by Dennis Harms Boats.com's technical staff is working with about eight developers at Scient to build the marketplace in Java and Unix environments, with Sun servers and an Oracle database as the key platforms. Development tools include TogetherSoft LLC's Together/J object modeling software and Embarcadero Technologies Inc.'s ER/Studio relational database modeling toolkit.

Site operations are outsourced to MimEcom Corp., a provider of systems management services. "I see us as an application integration house, and we're happy to outsource the actual operations," says Jorge Bracer, Boats.com chief technology officer.

For content, Boats.com acquired YachtWorld, a publisher of broker-to-broker listings of $7 billion worth of marine inventory. Boats.com now links to the YachtWorld site, with full integration and transaction capability coming at the summer launch. Two other recent acquisitions, BoatShow .com and Powerboat Guide, provide listings of thousands of boats for sale.

Boats.com is hardly alone in offering a marine online marketplace. Potential competitors are launching at a rapid pace, among them Acacia Marine LLC's iiCaptain.com, Boating .com, Boatscape.com, and iWaterways.com. "We're always kind of humble in regard to competition," Van Alstine says, "but we don't think anyone else has the same core focus around the boat itself, whether business-to-business or business-to-consumer."

Like marketplaces in other industries, Boats.com's goals--aggregating content, simplifying the supply chain, and eliminating the inefficiencies caused by fragmentation--sound like motherhood and apple pie. But there's always another side, and it's the "D" word--the threat of disintermediation to existing middlemen in the chain. Esteverena says the company is out to empower, not replace, the existing networks of marine brokers and dealers, at least those that add value. But he acknowledges that the perceived threat is a real issue.

"When you ask them what the Web means for their businesses, the first response may be a blank stare," he says. "But if you get them to be honest, many will say they're petrified. We're not coming to replace them, but some consolidation will occur, because that's what happens when supply chains become more efficient."

Boats.com expects to earn revenue from a variety of sources, including transaction fees from boat sellers, affiliate and referral fees from relevant Web sites to which Boats.com will link, and, to a lesser extent, sales of banner ads and sponsorships. The company also gets a form of subscription revenue--the 900 brokers who list inventory on YachtWorld.com pay a monthly fee for the listings and for creation of their own Web sites within YachtWorld.

But nothing is cast in stone. "To a large extent, we're testing our way into revenue models," Van Alstine says. "The market will tell us what it's willing to pay."

Boats.com won't say how much it's spending to build the marketplace, but says the price tag is in the mid-seven figures. "This is clearly not a $500,000 project," Bracer says.

Boats.com has received $6 million in venture funding from Mayfield Fund and Trident Capital, and it's seeking more money. Esteverena has founded several Silicon Valley companies, but knows he's in a different world now. "The major differences, by far, are time and speed," he says. "In the computer industry, it takes 12 to 18 months to develop a new chip or operating system, no matter how hard you work. We're taking Boats.com from idea to launch in less than 12."

Working at Web speed also means casting aside conventional wisdom about building a company. "It used to be that you tried to have 'perfect information' to make a decision," Esteverena says. "In building a Web marketplace, it's better to make an educated guess and just go. If you fail, at least you fail fast, so you can learn from that mistake and quickly move on."

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