The Appeal

Many Net entrepreneurs agree that they're only too willing to include the buzzword du jour in their pitches. "If your audience wants to hear a little b-to-b, you tell them that," says Soon-Chart Yu, president and CEO of allergy site Gazoontite.com and founder of a yet-to-be-named music site that will, you guessed it, cater to both consumers and businesses.

As for investors, they say any venture capitalists worth their salt can see through these transparent b-to-b pitches from companies with little expertise in the area. Major firms say they receive a dozen pitches every week from companies claiming to be both b-to-c and b-to-b. Most wind up in the circular file.

"For a venture capitalist, it's disconcerting," says Bill Burnham, general partner at Softbank Capital Partners. "It shows you that there are a lot of entrepreneurs out there who are only passionate about their business because the stock market is."

Backers tell would-be entrepreneurs that focus is the key to a successful business plan, not spreading oneself thinly over several ill-conceived markets. But at the same time, many investors acknowledge that any Net startup that won't eventually produce annual revenues of at least $1 billion is unlikely to capture their interest. That's a goal most fledgling consumer sites, which spend millions to advertise their brand name and generally have low gross margins, are unlikely to reach.

Software superstore Beyond.com faced this billion-dollar barrier last year. Rick Neely, Beyond's interim CEO, realized that with revenues of about $30 million a quarter, his company would never make it to the big leagues. So Beyond canceled a $10 million Christmas advertising campaign and went b-to-b. It is now focusing on selling its products to businesses, and also on running some computer-related Web sites for software and hardware companies.

That's a legitimate b-to-b play. Nevertheless, Neely still expects margins around 20 percent – higher than before but well below the expected 40 percent range for genuine b-to-b companies.

The b-to-b ploy looks particularly appealing to companies in crowded sectors that are likely to shake out. Among the plethora of beauty sites, for example, Beautyjungle.com is hoping to distinguish itself by publicizing a b-to-b initiative later this month. By July, Beautyjungle plans to launch a Web site that will bring together wholesalers, distributors and retailers in the beauty industry – an Internet exchange for the fashion crowd. It also will provide Web development and content services to other Net companies.

The new site will sell many of the same products the original Beautyjungle carries – lipstick, shampoo and so on – but to retail outlets instead of to individuals. Ed LaHood, CEO of Beautyjungle, says the company will partner with both wholesalers and retailers. "In this case, we're adding value to a different component of the beauty market," he says. "There will be selling done to the retailers."

Whether Beautyjungle's strategy would have qualified as b-to-b eight months ago is an open question. But LaHood admits that he would hesitate to go public without a b-to-b angle: "Given the state of the markets right now, we feel that a b-to-b strategy positions us much better."

New Age musician and former Entertainment Tonight host John Tesh agrees. His alternative-medicine site, HealingMD.com, is slated to launch on Mother's Day. Its b-to-b play involves recommending specific caregivers to consumers and providing alternative-medicine advice to corporations. Another site making the shift is Www.com, which pipes music onto corporate Internet sites as well as Webcasting millions of songs on its own site.

It's not only e-commerce entrepreneurs who fear missing out on the b-to-b wave – analysts are adopting the buzzword, as well. Both Jupiter Communications and Gomez Advisors have started to market their b-to-b expertise. In February, Jupiter bought two stars in the b-to-b coverage arena, Internet Research Group and Net Market Makers.

A fair number of these ventures will fare no better than their b-to-c predecessors. "It's only the folks that have nailed what they do on the consumer side that can move over into the business side," says Michael Rolnick, general partner at ComVentures.

But it's possible that this sheep-in-wolf's-clothing phenomenon might have some positive consequences, such as blurring Wall Street's sharp separation of the two strategies and producing new and viable business models.

"The whole categorization of life on the Internet as either b-to-b or b-to-c is really not the way we see the world," says AdventureSeek's Wheelan, "other than when we're looking for money."