Metropolis quits B2B market, closes vertical portals

Johannesburg, 18 Sep 2000

Metropolis Transactive Holdings today announced that it will be shutting down its business-to-business (B2B) portal Web sites, in what has been described by one employee as the "first real SA dot-bomb". The eight vertical sites, including techafrica.com, commsafrica.com and sheafrica.com, will wind down by the end of October, as will auctionsafrica.com, which was launched in August.

The portals will be taken over by VerticalNet, the American partner on whose platform they are operated, in lieu of royalty payments still owing. VerticalNet will also take on the obligation of clients who bought storefront space from the portals. It is not yet clear if VerticalNet will establish a local presence to run the business, but Metropolis expects the sites to be hosted in Philadelphia.

Metropolis will focus all its attention on the iafrica.com consumer portal, with no other business expansion planned for the immediate future.

The fate of Metropolis employees is not yet certain, but Metropolis and major shareholder Primedia say internal appointments will be made before retrenchments begin.

Metropolis and Primedia admit they burnt their fingers in the B2B market where revenue was hard to come by.

"Revenue from B2B has turned out slower than anticipated and the cost of building the infrastructure was higher than we anticipated," says newly appointed executive chairman Jason Xenopoulos, previously the company CEO. "But the most fundamental thing has been a seismic shift in the way dot-com companies are seen all over the world and high developmental costs have fallen out of step with the investor climate. The amount of money it would cost to drive that business into the future is out of kilter with the investor support."

Robin Nicholson, Primedia`s chief financial officer, says the adopted VerticalNet model could not succeed locally. "The American VerticalNet model requires a larger market than SA currently has and is likely to have in the future," he says. "We have seen that for a while and tried to dispose of it [the business]. Those discussions did not bear fruit."

Xenopoulos says a deal was almost reached with a potential funder last week, but fell though because of "prevailing international conditions".

He does not see the company returning to the B2B market.

"We will be entirely focused on the business-to-consumer space and will do that only through iafrica.com. We believe iafrica is the most valuable and the most recognised Internet brand in SA and to continue to undermine the business with an unviable business-to-business side was not a good idea."

An anonymous source within the company says staff members were informed of the shutdown this morning and describes the general feeling as "relatively devastated". "But personally I think the problem is that we were too early to market [with the business model]," says the source, who believes everyone understands the risks inherent to Internet start-ups.

VeritcalNet Europe, a joint venture between the US company, British Telecommunications and the Internet Capital Group, was launched in February. At the time, VerticalNet described the Southern African operation as a model for future expansion.

"After the success of our first international joint venture alliance with Metropolis in SA, we have continued to seek partners and acquisitions to develop and market online vertical communities worldwide," said Mario Shaffer, then VerticalNet VP of business development and acting CEO of the European division. "With our presence in Africa, and now in Europe, we are creating the ultimate marketplace for our customers."