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 NEWSVitessa changes Net transaction model By Jack McCarthy April 20, 2000 3:07 pm PT CONTENT AND COMMUNITY Web sites that offer visitors links to shopping sites such as Amazon.com will be able to sell products themselves via an electronic-commerce merchandising service offered by Vitessa.
The exchange includes a Merchant Exchange portal that gives customers access to a suite of e-commerce tools, including utilities to find products, create customized offers, develop reports, and manage customer interactions. Web sites such as Eveo, a video-production community site, and Teamplay.net, a games site, have already signed up to Merchant Exchange, according to Vitessa officials. Vitessa believes giant shopping sites such as Amazon.com have held sway for too long. Community sites such as iVillage.com have a built-in customer base to whom they could be selling instead of passing visitors on through affiliate links to sites like Amazon's, Dave Mullan, Vitessa's chief operating officer, said in an interview earlier this week. "We are addressing a fundamentally broken business model in affiliate programs," Mullan said. "If you have a community site like Teamplay, you have all this traffic, but when the time comes to purchase something, you shoot them out to Amazon.com." Mullan said 78 percent of community and content Web sites rely on links to affiliate shopping sites who pay a small fee to the community site for the transaction. About one-half of all e-commerce site traffic, including traffic on Amazon.com, barnesandnoble.com, and Reel.com, comes from content site referrals, he added. "We say content and community sites should keep their customers, and we'll enable them to sell products," Mullan said. Several analysts said the time has come in e-commerce development. "As competition gets more fierce, the affiliate model has a limited lifetime," said Kirsten Cloninger, an analyst at Cahners In-Stat Group, in Newton, Mass. "This offers real value to the operators of Web sites and will reduce traffic in the clickthrough stream [to shopping sites]," she said. "They are going for a market that says, 'Our content and community is the most important part of what we offer, but we will also sell you stuff,'" said Marilyn Muller, an analyst at Summit Strategies, in Boston. "If Vitessa can come in and provide services, transactions, and catalog management, and integrate it into a community site, it allows the site to leapfrog other sites that do not offer value beyond e-commerce." The Merchant Exchange is built on Vitessa's eConductor transaction processing engine, the Vitessa Internet Product Code (VIPC), which bundles order-processing functions together, and its Transaction Stream Manager, which enables connections to fulfillment systems. The cost to set up a full-fledged e-commerce Web-based shopping site is estimated by Vitessa officials to be as much as $5 million, not including yearly operating and upkeep costs at 50 percent of startup costs. Vitessa charges a one-time, $100,000 set-up or connect fee to its e-commerce network; an annual subscription charge of about $100,000; and transaction fees of between 5 and 10 percent per transaction. In the affiliate sales model, a community Web site receives between 5 to 10 percent of each transaction, Vitessa said. Vitessa Corp., in Seattle, can be reached at www.vitessa.com. Jack McCarthy is a San Francisco correspondent for the IDG News Service, an InfoWorld affiliate.  RELATED SUBJECTS  E-CommerceSPONSORED WHITE PAPERS 
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