FreeMarkets

1
FreeMarkets

• Bryan Culp
• Ryan Fell
• Roger Lai
• Dan Rodriguez
• Jonathan Schuster

2
Current Business Model

• A market place that brings buyers and sellers
  together
• Process steps
• Identify savings opportunities for customers
• Prepare total-cost-RFQ
• Identify, screen, and support suppliers
• Conduct on-line competitive bidding events
• Provide post-bid analysis and award support
• Revenue model
• Up-front consulting fees--Buyers
• Sales commissions--Suppliers

3
Value-add to customers

• Buyers
• Access to additional suppliers
• Quality audit of suppliers
• Reduces search costs in fragmented industries
• The right product at the right price
• Suppliers
• Service is less expensive then developing (or
  increasing) sales force (sales reps or direct
  sales staff)
• Sales commissions are typically less than rep
  firms commissions
• Improves their range of distribution

4
Business Model

• Transaction Model
• Strengths
• Up-front cash flows consulting fees
• Up-side potential
• Sales commissions enables the company to create
  continuous large cash flows
• Service provided is cost effective for both
  customers
• tangible, quantifiable benefits
• Weakness
• Transactions could be set up outside of
  market-place to avoid costs
• Lack of Value-added services
• Provides a total purchasing solution
• Improvements
• Offer value added services
• Escrow, ACH, and logistics

5
Horizontal Market Expansion

• Large customer-base that wants goods in
  additional markets---a total supply solution
• Total supply solution increases customers
  switching costs
• The more suppliers and buyers a market maker
  brings together, the more value you provide your
  customers
• Transferable market-making skills and technology
  can be utilized to dominate additional markets

6
Horizontal Market Expansion

• More opportunities and transaction s with
  horizontal expansion
• A vertical market expansion strategy leaves
  opportunities for competitors
• Strategy - combine excellent vertical market
  information and knowledge across wide range of
  products and markets.

7
Licensing

• Licensing
• Broaden reach of brand/software
• Legitimize business model, establish standard
• Much-needed additional revenue streams
• Paradox
• Licensees poor service bad reputation
• Licensees good service tough competition
• Choose carefully!
• License to partners in commodities markets
• Powered by FreeMarkets
• Linked to network, but not core brand

8
Networking Purchasing Information Systems

• NPIS Sharing data about purchasing
• Customers want this type of information to
  improve their decision-making processes
• inventory planning
• budget planning
• Offer this as a value-added services similar to
  an escrow, ACH, and logistics
• Outsource/Partner keep focus on core business!

9
Summary

• Improve service offering and revenue
  opportunities gt Value-added services
• Grow horizontally instead of vertically
• License Carefully
• Offer network purchasing information systems as a
  value-added service through partner