In an industry awash with buzzwords, acronyms and jargon, one of the hottest topics of debate in the internet world right now is the relative value of being "vertical" against being "horizontal". And it's got nothing to do with dating habits.
In the lingo, horizontals are companies that offer as broad a line of products or content as possible across numerous markets. Examples include search engine Yahoo and internet service provider America Online.
Verticals are companies that focus on a particular, specialized market. Their aim is to go deep, providing a link between suppliers, buyers, retailers and consumers in a specific industry.
"As the internet evolves, I believe verticals will become more and more important and more and more the focus of attention," says John Isacs, founder and chief executive of Taiwan-based GourmetNet.com, a food and beverage website that provides users with online restaurant-reservations, news, menus, recipes, online gourmet-shopping and other services across Greater China.
Isacs is not alone in his views.
"In the US, we are seeing a total change away from the value of portal sites," says Alan Meckler, chairman of Nasdaq-listed internet.com, a news and information site focusing on the internet industry. "The whole internet is going to be vertical."
Message from above
Meckler points to Walt Disney's decision at the beginning of the year to transform its Go.com from a general-interest web portal to one focusing on the entertainment industry.
"I really believe that announcement was like a message from above about the way the whole internet is moving," Meckler says. "One of the main reasons for the existence of a horizontal site is its ability to search, but the word search is rapidly becoming a joke. So much is on the net that the broad-based search engines can't keep up."
Unlike successful horizontal sites, verticals can't depend on advertising or subscription fees for revenue. They don't, by definition, attract the same number of users. Instead, they must generate revenue from commercial operations - sales, marketing, business services, event-management, promotions, partnerships.
"If you're more in tune and closer to the industry you're involved with you're in a much better position than a horizontal is for e-commerce," says Isacs.
Investors are beginning to think so too.
"Business-to-consumer companies don't scale beyond their specific supply categories, so we have very little appetite for them," says Brian Doyle, managing director of venture capital company JH Whitney & Co in Hong Kong.
On the other hand, Whitney was happy to provide seed capital and help start Hong Kong-based Pacific NetMarkets, which builds meeting places online for suppliers and buyers in defined business areas to meet and transact on the internet. The company's Printpacific site, for example, provides a transaction forum for the printing industry. The company takes a job from a printer, online, assigns it and follows it through to completion.
"It allows customers to access printers directly, rather than going through various intermediaries, which is much cheaper," Doyle says.
In Asia particularly, where many markets such as manufacturing, shipping, food distribution and construction supplies are highly fragmented, there could be more opportunities for successful business-to-business companies than there are in the US, analysts say.
"The next business-to-business frontier is the small to medium-sized enterprises," says Matei Mihalca, head of Asia Pacific internet research at Merrill Lynch.
One vertical portal that is already hoping to benefit from the model by listing its shares on Hong Kong's Growth Enterprise Market is iSteelAsia.com, which counts tycoon Li Ka-shing, iMerchants, and Indian companies ISPAT and Temcor as strategic investors. If it succeeds in its goal of placing 100 million shares at a planned issue price of HK$1.08, it would become the world's first vertical steel portal.
