Helping Content Sites Make Money

CrossCommerce automates merchandising for sites lacking e-commerce infrastructure

Web sites that serve up content and community, such as AltaVista.com, iVillage.com and Salon.com, have struggled with the issue of how to make money.

Such businesses need to "monetize" their prodigious traffic, and San Francisco-based CrossCommerce Inc. thinks it can help them do that by giving them tools that enable them to sell products from inside their sites while relieving them of the cost and hassle of maintaining an e-commerce infrastructure.

To accomplish this, CrossCommerce does three key things: It runs all the back-office security and transaction processing from third-party data centers, behind Web addresses on customers' sites; it maintains the necessary relationships with shippers and suppliers, relieving customers of inventory risk; and it tells sites how to merchandise in a way that complements their unique content.

CrossCommerce boasts a strong management team. Co-founder and President Peter Nordberg was the visionary and president of WebLogic Inc., now the largest application server vendor. Co-founder and Chief Technology Officer Raj Sarasa is an e-commerce infrastructure expert who helped design Pacific Bell's billing systems. Vice President Jim Oliver holds a doctorate from the University of Pennsylvania's Wharton School and he has worked at Andersen Consulting and Hewlett-Packard Co.

After BEA Systems Inc. bought WebLogic in 1998, the WebLogic founders pondered the opportunities in content-oriented Web sites. "It was apparent to us that a lot of sites were going to begin to need to monetize traffic," Nordberg recalls. "There seemed to be a divide between content providers and commerce sites. We began to run some focus groups trying to understand what their needs were."

They noticed two trends. One was that banner advertisements weren't working; click-through rates, according to Cambridge, Mass.-based Forrester Research Inc., had fallen from 10% in 1994 to half a percent in 1998. The other was that affiliate marketing programs, in which sites pay to have their links displayed on other sites, were growing in popularity but had a conversion rate of only 2%, according to CrossCommerce.

The founders started to build their E-Merchandising Platform in March 1999. One component, the Adaptive Intelligent Merchandising application, provides the transaction, payment and site-serving software, as well as algorithms for matching products to content. The Virtual Product Warehouse provides links to middlemen that maintain relationships with thousands of manufacturers and provide the fulfillment and customer service behind every sale. The Merchandising Intelligence component tracks customer behavior, traffic and revenue patterns and provides access to merchandising experts at CrossCommerce.

The firm promises customers product revenue above wholesale prices and then shares the margin with them. Merchandisers come for standard consulting fees of around $1,500 per day, and some customers pay monthly subscription fees of roughly $10,000.

High Aspirations

Several customers will go online when CrossCommerce ships the platform this month. AltaVista.com Inc., based in Palo Alto, Calif., is the company's highest-profile customer.

Another, USAGreetings.com in San Francisco, a purveyor of free and inexpensive greeting cards, uses CrossCommerce to sell gifts and related items. "It is very hard for us to be a fulfillment agent for any products we provide," says USAGreetings.com Vice President Santanu Dasgupta. The CrossCommerce system was easy to set up, he says, and customer service is superb. "So far, we're really happy with it," he says.

David Cooperstein, a research director at Forrester, says content sites are demanding new revenue sources, but CrossCommerce faces tough competition. "The issue they have is (that) they have a hard time differentiating themselves," he says, chiding the company for not directly targeting manufacturers.

Nordberg has put off such opportunities, at least for now. CrossCommerce wants a piece of consumer sales at content sites, a market that could total $184 billion by 2005, according to some analysts' forecasts.

"I fully expect to own the lion's share of that marketplace," Nordberg says.

Essex is a freelance writer in Antrim, N.H.

Copyright © 2000 IDG Communications, Inc.

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