B2B site likes Honesty's policy
By Christine Tatum
Tribune Staff Writer
July 18, 2000

Are Web auctions little more than virtual garage sales? A merger of two software firms suggests far greater potential for online auctions in the business world.

What started out for Scott Samuel as a hobby buying and selling on Internet auction sites has developed into the merger announced Monday between his Northbrook-based Honesty.com and Andale.com of Mountain View, Calif.

Samuel said online auctions have become avenues for small business owners with few tech resources to reach customers they wouldn't otherwise. He and Andale officials said their research indicates that 4 percent of eBay's registered users are small business owners making 80 percent of all the site's sales.

"People think (auction) sites are consumer-to-consumer, but they're not," Samuel said. "And they're also not fads; they've revolutionized the way we do business." Company heads boasted that the merger would unite 600,000 online sellers and generate $1.6 billion in annual online auction sales. The companies will have a combined workforce of 150 but maintain separate offices and Web sites. Terms were not disclosed, but Samuel said the arrangement consisted of an exchange of "mostly stock options and some cash." Honesty.com is largely responsible for the automated real-time auction counters and listing tools used by sellers on sites such as eBay, Amazon.com and Yahoo!. Samuel said he developed the tools to monitor online interest in his own goods, right down to the best minute to put an item up for sale, and gave them away. Since its launch one year ago, sellers have flocked to Honesty's site to download the free tools; the company estimates that its counters and hosted images are placed on 2.1 million new auction ads each week. To keep users coming back, the company has posted message boards and developed the Online Traders Web Alliance, the industry's first professional organization, which provides trade news and instruction on everything from coding Web pages to cleaning a sealed seltzer bottle. Honesty sells ads on its site, a revenue model that couldn't guarantee the company a sound future, Samuel said.

Andale is known for applications that speed up and standardize the online sales process and allow businesses to track customers and inventories. The company, which has raised $62 million in venture capital since its launch last summer, offers an array of support services, including database construction and software that allows multimillion-dollar B2B sales. Sellers pay for the services they use.

Honesty's customer service has developed a loyal following that Andale found irresistible. CEO Munjal Shah hopes to attract Honesty's free-software clients to Andale's paid services. Even more impressive to Shah is that Honesty has risen to success on a shoestring budget by tech-world standards: The company has raised only $2.5 million from investors, Shah said. "It just goes to show that it doesn't matter how much money you raise," Shah said. "The customer loyalty and community that Honesty has built are the results of hard work and incredible customer service."