InformationWeek

Each of those sites, from Solidwaste.com to E-Hospitality.com, features one editor, one sales manager, and one industry manager who team up to provide news, facilitate E-commerce, and oversee community interaction.

Investors have been impressed. VerticalNet went public in February 1999 with a $65 million initial public offering, and when the business-to-business fever took hold, VerticalNet's stock took off: from $27 to $297 in the course of a few months.

Then, just as Walsh was steaming through a 17-company mergers-and-acquisitions binge for business exchanges and related technology businesses, as well as expanding into Europe and Japan, Nasdaq tanked, knocking VerticalNet's market value from $12 billion to $3 billion in five cruel weeks.

"I think March and April were actually good," says Walsh. "The rising tide was bringing all businesses and their valuations up to astounding levels. I think that's when folks like ourselves specifically start to shine."

That's the optimistic take, but the 46-year-old Walsh has good reason to be upbeat. VerticalNet's high-profile investors include business-to-business incubator Internet Capital Group, and this spring Microsoft invested a whopping $100 million and agreed to buy 80,000 "storefronts"-online brochures bought by vendors-that the software company will lace into its own services and then give away to businesses that fall within a given vertical. Walsh estimates the deal will bring in $200 million during the next three years.

The addition and integration of exchange and auction companies has dramatically diversified VerticalNet's sources of revenue. In 1999, it may have been viewed as the business-to-business poster child, but it garnered 83% of sales-about $21 million-the old-fashioned way: through advertising. However, with

the December acquisition of components exchange NECX.com, $14.6 million of the company's $27.4 million revenue in the first quarter came from exchange transactions, topping the $11 million-plus in advertising revenue, Walsh says. Total sales should reach in excess of $150 million in 2000, he says. "Most analysts believe that VerticalNet will be the first profitable business-to-business Internet company," he says.

Based on Securities and Exchange Commission filings, that goal still seems far off: In 1999, the company ran $53.5 million in the red, and in the first quarter this year, its operating loss ballooned to $37.3 million. Yet 18 of 19 analysts listed by CBS MarketWatch on June 13 rated VerticalNet a "strong" or "moderate" buy. "It's a model that consists of advertising, commerce, auction and services. In many respects that's what business-to-business is all about," says Eric Upin, business-to-business and E-commerce analyst with Robertson Stephens.

But Walsh says he's been around the block enough to appreciate the fickleness of market sentiment, adding, "I've been in the interactive services business for 15 years, so I've seen many movies on how this was supposed to be the future. Now, finally, it is."