The FreeMarkets Legacy: Ariba's Gain, Accenture's Loss

The FreeMarkets Legacy: Ariba's Gain, Accenture's Loss

In the late 1990s, FreeMarkets emerged as a promising B2B/Internet company with a focus on optimizing offline sourcing processes and introducing competitive reverse auctions online. Despite its initial success and real demand for sourcing services, FreeMarkets failed to transform its services into a sustainable enterprise software or SaaS business model. The company's sourcing platform, QuickSource or QS, never accounted for more than 10% of its revenues. This failure turned out to be Ariba's gain, as they acquired FreeMarkets and its intellectual property for a relatively low cost.

The story of FreeMarkets highlights the importance of adapting and evolving business models to meet market demands. While the company excelled in its offline sourcing processes and online auctions, it failed to capitalize on these successes and create a sustainable software platform. This oversight allowed Ariba, a competitor, to acquire FreeMarkets and leverage its resources for further growth.

On the other hand, Hopper, a disruptor in the global online travel market, took a different approach to success. Hopper recognized the consumer anxiety and limited information that characterized the travel industry and aimed to address these issues through transparency and trust. Unlike other online travel businesses, Hopper focused on aggregating an unprecedented amount of information and providing valuable insights to consumers before attempting to sell anything.

Hopper's strategy paid off as they discovered that people had an unlimited amount of anxiety around when to purchase a ticket. By correctly predicting airfare up to a year in advance, Hopper was able to alleviate this anxiety and provide consumers with valuable advice. Instead of solely focusing on transactions, Hopper prioritized building trust and transparency with its users. This approach resulted in over a billion push notifications sent to app users, advising them on when not to buy and providing updates on price changes.

The success of Hopper can be attributed to its use of data to create trust and transparency. By positioning themselves as a reliable source of information, Hopper gained the trust of consumers, leading to increased commerce and revenue. Interestingly, approximately 70% of the notifications sent by Hopper advise users not to make a purchase, showcasing the company's commitment to consumer value over immediate sales.

One key insight from Hopper's approach is the importance of building trust with consumers. By positioning themselves as experts and leveraging data to provide valuable insights, Hopper was able to establish trust and encourage users to rely on their recommendations. This trust-building process resulted in longer planning periods for users and increased engagement with the Hopper app before making a purchase.

In conclusion, the stories of FreeMarkets and Hopper highlight the significance of adaptability, innovation, and trust-building in the business world. FreeMarkets' failure to transform its successful services into a sustainable business model allowed Ariba to capitalize on the company's resources. On the other hand, Hopper's focus on transparency, trust, and data-driven insights enabled them to disrupt the global online travel market successfully.

Actionable advice:

1. Embrace change and continuously evaluate your business model to ensure it aligns with market demands.
2. Leverage data to provide valuable insights and build trust with consumers, prioritizing their needs over immediate sales.
3. Invest in long-term trust-building strategies to establish a loyal customer base that relies on your expertise and recommendations.