New online marketplaces built on peer-to-peer networking technology may face an uphill climb because of established veterans, but a handful of companies—including FirstPeer.com, Thinkstream and Netrana.com—believe they can pull it off.
In a P2P marketplace, buyers and sellers connect their systems directly by trading database inserts rather than linking through a central server. As a result, trade negotiations can be carried out without a lot of extraneous rules imposed by the marketplace operator, P2P advocates say.
At the same time, a P2P exchange can provide a directory service function that keeps track of IP addresses of the various participants, a workflow function to automate deal-closing procedures once negotiations are complete and an archiving function to preserve the terms of deals once they are consummated.
"Peer-to-peer has not been successfully deployed in B2B [business to business]; however, a center-based exchange has not been successfully deployed in most markets, either," said Rusty Braziel, president and CEO of P2P startup Netrana. "Our view is there doesnt have to be a company in the middle to orchestrate" every transaction.
FirstPeer last week rolled out its first distributed marketplace, called GnuMarkets. The site enables businesses and consumers to buy, sell and trade items in a secure environment without the use of a central server.
GnuMarkets is built on FirstPeers Personal Servant, which allows users to search for and share information in a secure and personalized environment, said officials of the San Diego company. People who have items to sell on the Internet have the ability to tie their information directly into GnuMarkets using the Personal Servant.
FirstPeer provides a set of applications and services that enables GnuMarkets to distribute information retrieval, routing and searching to the edge of the network. GnuMarkets uses the bandwidths, data storages and CPUs of each participant, which eliminates the need for central servers and lowers costs, officials said.
DDS Technologies, of San Diego, is using FirstPeers Personal Servant to connect directly to sellers databases. This is an improvement over the practice of housing the data on a central server in an e-marketplace, said Lori Biggs, project manager at DDS.
"When a buyer searches a DDS marketplace, were distributing that search out to all of the dealers Web sites and can pull inventory from dealers databases—tap into certain fields such as price, description and product name," Biggs said. "The inventory is a lot more live than before.
"We can hook dealers and buyers together faster," she added. "Users experience has improved because its much easier for the sellers to interact with the marketplace, and this creates a much larger inventory for buyers to search through."
Early next month, Thinkstream will launch Tadaaa.com, an information portal and shopping community that allows consumers to search for the exact product information they need from primary sources, not simply from a list of URLs. Tadaaa also provides product feature comparisons, pricing, availability status and ratings from vendors.
Tadaaa is built on Thinkstreams Distributed Information and Commerce Engine, which searches for data from Web sites, file servers, databases, desktops, images, and video and music files in real time without changing the nature of the data itself, said officials of the Tigard, Ore., company.
The engine facilitates applications in e-commerce exchanges and content management systems. Thinkstream hopes to license the engine as a medium for hosting industry exchanges on the Internet and on private networks run by companies such as Ariba Inc., Oracle Corp. and Commerce One Inc.
Houston-based Netrana this summer will roll out its P2P exchange engine, called SpotDealMaker. Like Thinkstream, Netrana expects to develop relationships with traditional exchanges to add capabilities that could make trading niche commodities a viable business for exchanges.
"A lot of marketplaces today have attempted automating [the entire trade] and are having difficulty or have withdrawn," Braziel said. "I dont believe there are a lot of spot markets that can deliver liquidity through a center-based exchange."
Industry observers said it will be difficult for marketplaces built on unproven P2P technologies to compete with trusted and targeted communities such as eBay Inc. or those built on Ariba or Commerce One platforms. "How do you determine who is a credible person or company to do business with when there is no central authority like eBay?" asked David McNett, a software engineer at United Devices Inc., of Austin, Texas. "[Peer-to-peer is] a more unregulated system, so its difficult for consumers to feel comfortable and complete successful transactions."
P2P exchanges will face a challenge when it comes to liquidity, said Mitchell Shapiro, an analyst at Street Science Inc., in Morgan Hill, Calif. "Its a cool technology, but if you want your inventory in a marketplace, you can already get it there through auction bulk loaders," Shapiro said.