Microsoft and FairMarket Debut B2B Auction Site

Software titan Microsoft Corp. (Nasdaq: MSFT) and online auction hosting company FairMarket announced the launch today of a business-to-business (B2B) auction site for Microsoft’s new small business portal.

The companies said that the auction site for Microsoft’s bCentral portal will offer small business owners the opportunity to buy and sell goods and services from across FairMarket’s expansive auction network.

According to Microsoft, bCentral was designed to meet the demands of small and growing businesses, a fast-growing segment of the American work force. Its services are geared toward getting a business started online and promoting and managing the business effectively.

The auction site for the portal will complement Microsoft’s existing MSN auction site, which is also linked to FairMarket’s network.

“The launch of the new auction capability from bCentral provides members with the opportunity to buy and sell items their companies need at prices they want to pay,” said Deborah Whitman, Microsoft’s director of marketing.

A Preoccupied Host

The Woburn, Massachusetts-based FairMarket continues its push to gain a foothold in the crowded auction hosting business. Up against competition from the likes of Auctions.com, Bid.com, OpenSite and others, FairMarket filed for an initial public offering last month and hopes to raise $40 million (US$).

The company hosts 90 members on its network, including MSN, Excite@Home and TicketMaster Online-City Search. It charges service fees and network fees for set-up and hosting and also makes revenue from transaction fees.

The Long Shadow of eBay

Despite the size of its customer base, FairMarket by no means approaches industry leader eBay in terms of the number of items listed and sold. On any given day, eBay might have nearly two million items for sale, while the MSN auction site has 200,000.

FairMarket acknowledged the difficulties that it faces in its SEC filings. The company noted that many potential customers might be put off by the fact that their products would be listed with a competitor’s products. Still, the company knows that it has to drive traffic to its site and increase the number of product listings. Today’s deal with Microsoft will help accomplish that end.

The company lost $5.8 million in the first nine months of last year, while taking in a mere $891,000 in revenue. It anticipates losing more as marketing and infrastructure costs increase.

FairMarket’s deal with Microsoft and Excite will cost an aggregate minimum of $5.8 million this year and as much as $24 million by 2004.