Forget the IPOs, B2B Exchanges' Clout Is in Their Spending

Only a few months ago, online business-to-business exchanges seemed like the next way for investors to cash in on the Internet. By connecting buyers and sellers of industrial goods in an electronic marketplace, these exchanges would prosper by taking a sliver of thousands and thousands of transactions. When Ford Motor (F Quote) announced its auto-parts exchange, Internet investment bankers figured it easily could go public with a $50 billion valuation.

You don't hear that kind of chatter anymore. Thomas Berquist, who follows online exchange companies for Goldman Sachs in Menlo Park, Calif., reckons the chatter is gone for good because it looks as though the profits from such exchanges may not be as valuable as the function the services provide in protecting the incumbent industry's franchise.

He now questions whether the Ford-led project (since dubbed Covisint and expanded to include General Motors (GM Quote) and DaimlerChrysler(DCX Quote)) will actually go public. "There's a good chance [most of these companies] won't go public," says Berquist. The companies that sponsor them, he adds, are "really more interested in protecting their margins." ...