Exploring the Ariba Discovery Business Model for Suppliers (Part 2)

In the first post in this series, we touched on the new supplier-paid business model that Ariba has deployed with its Discovery solution, a useful capability for buyers (who do not have to use Ariba for P2P/eProcurement or e-sourcing) in their search for new suppliers. Yet it's clear to us from playing around with the system as well as comparing it to other similar models that Ariba is clearly playing by its own set of rules in creating what amounts to a closed network for supplier search (i.e., you have to be on it and logged in, to take advantage of it) rather than the more open business and individual (e.g., Linked-In) discovery tools in the market which take advantage of the broader network effect of the Internet. Like the Ariba network model for P2P connectivity which relies on a closed standard and taxes interoperability, this thinking represents a perspective which runs counter to others in the market.

It's surprising to us that Ariba Discovery has not followed the lead of other online supplier discovery marketplaces like MacRae's, Surplus Record (owned by Ariba, in fact) and MFG.com in mastering the search engine component of Google -- optimizing supplier profiles and listings as a benefit to suppliers trying to reach buyers on the site. All of these services do a commendable job at coming high in Google search results when someone searches for a specific type of capability or item (e.g., type in "CNC punches Iowa" in to Google and see what comes up). However, the benefits of Google search returns do not appear to be a component of the Ariba Discovery value proposition for suppliers.

Still, the more costly versions of Ariba Discovery for suppliers include a number of other features outside of the lacking Google search component: the ability to come out on top of others in "prioritized rankings in buyer previews of matched sellers," as well as the ability to provide "enhanced company profile" details in one's directory listing. In addition, those who pay an upfront fee are also able to send direct messages to buyers using the site and see a list (as one can see on paying versions of Linked-In) of who specifically is viewing your profile. In short, it includes a number of features that are likely worth paying for. The question, of course, is what amount. This is something that, given Ariba's track record in raising prices for transactional connectivity, is likely to increase over time if the value proposition is proven for anything close to a majority of suppliers paying to use Discovery.

We'll conclude this series by stating that we believe Ariba has an outstanding opportunity with Discovery to build something that can truly take advantage of both the scale of Ariba, including their current user base (and their total spend), as well as the broader Internet. However, until Ariba becomes less walled-off in it's thinking (i.e., leveraging the broader Internet and Google results as a core benefit for paying supplier members), the value proposition to suppliers will be more limited than it could be. Suppliers considering paying for Discovery should ask Ariba the percentage of suppliers -- ideally in their category -- thus far that have been able to recoup their fees in participation. Even though it is early going, if this number is <15%, it would suggest that participating on a smaller scale is likely to be a less risky proposition than spending the $3K for complete and unlimited access, at least at first.

Jason Busch