Nearly every major industry has felt some level of impact from online exchanges, regardless of whether it's B2B or B2C; and regardless of whether it’s about exchanging products, services, data or content.


Online exchange growth has been dramatic. Consider Amazon. Five years ago, Amazon had revenue of just under $50 billion. Today it is generating over $100 billion. Priceline has grown its top line at a compound 41% over the same period of time.  Just as Uber disrupted the taxi business, Airbnb is disrupting the accommodation business and valuations have grown accordingly. With an estimated valuation of $25.5 billion, Airbnb has already achieved nearly half the market capitalization of Priceline.



This disruptive capability has been facilitated by ubiquitous Internet coverage coupled with dramatic gains in inexpensive computing power that has made it possible to connect buyers and sellers in ways that were previously unimaginable. Today, the huge number of connections already available means that many new kinds of specialized exchanges have become possible.

Earlier this year we talked about the increasing specialization that we are seeing in online exchanges and the potential for value creation that this disintermediation represents. For B2C, there’s no better example than Microsoft’s $26 billion dollar acquisition of LinkedIn, which has leveraged its hundreds of millions of users to become a premier online exchange for recruiting, with many more opportunities in the wings.


In the B2B world, the exchange concept is driving innovation and deals in the procurement realm, something Accel-KKR is looking to leverage with their half-billion dollar acquisition of SciQuest. Companies of all sizes are establishing communities of buyers and sellers and therefore have the opportunity to realize significant value in today’s M&A market.


All of this M&A activity prompts the question, how long is this trend likely to last?


The answer seems to be “for quite some time.” This is because the ultimate drivers of online disruption are rooted in fundamental changes in consumer behavior, and these behavioral trends are typically long-lived. They include the following:


·         Increasing interest in near-term gratification.  “I want it when I want it, and I will get it when it suits me.”  Online exchanges put the consumers in charge and they have the buying power.

·         Consumers’ increasing intolerance for being sold things he or she doesn’t want. Online exchanges permit the consumer to focus on what is of interest with laser-like precision.

·         Increasing convergence of home and work, resulting in consumers that are rarely “unplugged” and so can shop whenever convenient for them.

·         The increasing prevalence and social acceptability of multitasking (texting, computing, chatting on social media, etc.) that is driving the trend towards faster and shorter transaction times. Online exchanges are very efficient.

·         Increasing on-line addiction, especially with mobile technology. That is, wanting to be constantly connected with the world and know what’s going on every given second.


Being on the right side of these technological and behavioral trends means that it’s a good time to be in the online exchange business. Assuming of course that exchange operators can garner the required critical mass of buyers and sellers needed to make these exchanges commercially competitive, the online exchange model is likely to continue to deliver both earlier and higher value exits for quite some time.