Mike Hagan And Mike Mcnulty - founders of VerticalNet

They've increased publishers' awareness of the Internet's threat to established b-to-b markets.

In 1995, many publishers were still trying to decide whether a Web presence was worth the investment of time and money. But VerticalNet senior vice president Mike McNulty says the decision was clear to him: After a career in advertising sales--most recently at PennWell's WaterWorld--he was convinced that "more value could be provided to advertisers or manufacturers over the Net than on paper." That October, after hiring modest support staff and hiring away a print competitor's top editor, he and former college roommate Mike Hagan launched Water Online, a "trading community" for the wastewater industry.

Today, VerticalNet has grown to more than 30 industry-related sites; first quarter 1998 page views will be an estimated 10.4 million. It's not yet profitable--in 1998, the Horsham, Pennsylvania-based company lost $13.5 million on revenues of $31.3 million. But Wall Street's confidence is helping the newly public company muster the capital to sustain these losses; just weeks after a February IPO at $16 a share, the stock hit $120, and has hovered around $90 since.

Eric Vianello, former director of new media at Intertec Publishing and now COO of a fledgling Internet company, describes VerticalNet's impact on trade titles: "VerticalNet is in a position to potentially usurp publishers in markets that they've owned for some time," he says. "And publishers better wise up to that fact, or one day find their opportunities have been stolen from them."

VerticalNet's advantage over print publishers' sites, says McNulty, is that its model is "buyer-centric." Advertisers don't just place ads--they're in touch with buyers in real-time. For example, RFPs (requests for proposals) can be posted online, advertisements can be updated hourly, and advertisers can buy online storefronts or sponsor forums and chat rooms.

While traditional publishers have largely been playing wait-and-see on the Internet, VerticalNet has been aggressively capturing audience. "Those who are first in a market are in position to take advantage and make a name for themselves," Intertec's Vianello says. "All you have to do is look at Amazon.com and Barnes & Noble to know that the same opportunity might apply on a niche basis for a company like Vertical Net."

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