Ariba

(ARBA)

set the pace. On Monday,

FreeMarkets

(FMKT)

showed that it could keep up.

After the close of trading Monday, the business-to-business online auctioneer reported $19.4 million in net revenue, up 80% from the previous quarter. While that wasn't the 101% sequential growth that Ariba handed in on July 12, it was enough to have analysts talking about an "inflection point" in the business. (

TSC

wrote earlier Monday about the results.)

That, along with the $2.2 billion in auctions that FreeMarkets ran in the quarter, could translate into analyst upgrades Tuesday morning, especially because questions surrounding the stock have made it less buoyant than other B2Bs.

Monday night, investors already were upgrading it. In after-hours trading, FreeMarkets was up 1 1/2 to 55. After trading down for most of the day Monday, it jumped at the regular session's close to end up 1 1/4 at 53 1/2.

Delivering on Promises

Chris Vroom, an analyst with

Credit Suisse First Boston

, who rates the stock a buy, said FreeMarkets delivered on Monday. (His firm hasn't performed recent underwriting for FreeMarkets.)

"The quarter was astounding in every respect. The company exceeded revenue forecasts while beating gross margins estimates

43% vs. 41% in the first quarter and controlling costs," Vroom said. "Following on strong results from Ariba and

Commerce One

(CMRC)

, this just further underscored the fact that everyone's doing it."

Well, not everyone. Last Thursday,

Ventro

(VNTR) - Get Report

served up some disappointing revenue numbers in analysts' eyes, and the stock got pummeled Friday. (

TSC

wrote last week about Ventro's disappointment.) It regained 3/16, or 1.4%, to close at 14 1/8 Monday. Because Ventro said much of its shortfall was due to slower-than-expected transaction growth, or the amount of money companies spend through its Web site, some investors questioned whether FreeMarkets would suffer the same fate.

"Because of the Ventro conference call, there was some additional focus on where the auction volumes were going to be," said John Ederer, an analyst for

E*Offering

, who rates FreeMarkets a buy and whose firm hasn't done any underwriting for the firm. "That ended up to be a big, big number for them, so I don't think we're going to see the same concern here."

Ederer says he's considering raising his rating on FreeMarkets.

Top Tier?

Though FreeMarkets can now boast $7.6 billion in auctions to date through its network -- likely the most of any B2B marketplace by far -- the stock hasn't gained the top-tier status of an Ariba or Commerce One. That's because investors have been concerned that large industrial exchanges being formed in countless industries by the corporations that want to buy and sell through them will steal business from FreeMarkets.

But on his conference call Monday night, FreeMarkets Chairman and CEO Glen Meakem highlighted the fact that companies such as

BP Amoco

(BPA)

and

Honeywell

(HON) - Get Report

are participating in these industrial consortiums, as they're called, while still funneling dollars through FreeMarkets' system.

"We actually see the consortium as a huge opportunity for us," Meakem said. "It's interesting, many of the best companies out there are not putting all their B2B eggs in one basket."

Other thorns in FreeMarkets' side: It lost a high-profile deal to Commerce One earlier this year to power

General Motors'

(GM) - Get Report

business-to-business exchange. And while $2.2 billion is a lot in auctions, it translated into only $19.4 million in net revenue -- not exactly a huge payoff.

Still, Eric Upin, an analyst with

Robertson Stephens

who points these issues out, said the second-quarter numbers show that B2B is real, and that FreeMarkets has opportunity to capitalize on it.

"Seeing these numbers is great, because until now, we've been talking about concepts," Upin said. "But that $2 billion number is a big number. This thing is clearly starting to turn on the afterburners in terms of growth."

Upin, who rates the stock a buy and whose firm has done no underwriting, says he planned "pounding the table" on the stock Tuesday.

Moving Into Software

Meakem also said his company had struck deals to sell its software platform to four independent exchanges, a step that takes it into the software-licensing space, akin to Ariba and Commerce One. He also highlighted efforts to target small- and medium-sized businesses, the market on which

PurchasePro.com

(PPRO)

concentrates.

But in an interview after the conference call, Meakem also said his company would continue to concentrate on its core "sourcing" business. That's where FreeMarkets has made its bread-and-butter so far, targeting buyers at large corporations with millions of dollars to spend on things such as steel for building cars. Its average transaction size, for instance, is $1.56 million. Given its numbers, Meakem said it's just a matter of time before investors start seeing FreeMarkets for what it is -- at least in his mind.

"We've got a model that works. It's just that simple," Meakem said. "But we went public six to 12 months after some of the other major players, so I think the market has overlooked us to some extent."

He'll see Tuesday whether his numbers can get investors' attention.