Just a year ago B2B online exchanges were being launched at an alarming rate. Before the fad cooled off there were more than 1,000 exchanges on the internet specializing in everything from dairy supplies to computer components.

After some $25bn of venture capital investment during 1999 and 2000, the independent B2B exchange is rapidly going the way of the dotcoms. By some estimates, 80 per cent of independent exchanges will be out of business by the end of this year.

A study conducted by McKinsey & Co, in collaboration with Stanford University, tells it all. The research team analysed the operational performance of 60 independent B2B marketplaces that topped the lists in their sectors, over a recent four month period. Among the most shocking findings of the study: the median number of transactions handled by each independent exchange in September was just one.

In other words, the B2B exchange experiment failed.

One of the reasons for the demise of independent B2B exchanges is that they are not attractive to sellers. While B2B exchanges may have offered an opportunity for buyers to lower costs, they did so to the detriment of suppliers.

Leaving internet wizardry aside, these open marketplaces were expecting sellers to line up their products next to those of their competitors and watch buyers bid down prices. Quite rightly, suppliers concluded that this was not a good way to do business. Only in industries where buyers have ganged together to force the hand of sellers have the independent exchanges survived.

Today "private marketplaces" are in vogue. These enable a single buyer ¤ typically a large corporation ¤ to streamline purchasing of both direct and indirect goods as part of a broader supply-chain management strategy.

The private marketplace is a less hostile environment for sellers than the open forum of an independent exchange, but sellers are still the underdogs, says Daphne Carmeli, chief executive of Metreo, a one-year old Silicon Valley company that has developed sell-side e-commerce tools.

"Suppliers of manufactured goods are inundated with requests for quotations,Πshe explains. "They need to know whether, and how, to respond to these requests."

Variables may including price, delivery date, the profit margin on a specific product, the quantity of goods ordered and so on. "The seller must manage a set of complex tradeoffs in real time, while ensuring that any deal he strikes meets his business goals."

Too often, sellers do not really know whether they are doing profitable deals, or whether they are maximizing the profitability of the deals they are striking. These pressures have been exacerbated by the pace of e-commerce, which forces rapid responses from suppliers.

Metreo¡s tool set, which is based on a mathematical model originally designed for use in network bandwidth optimization, automatically ranks and scored requests for proposals according to a company¡s predefined criteria.

The system can recommend whether to approve a deal and how to improve the terms of the deal. Records are also created of negotiations so that a company can learn how they are winning deals and what may be causing them to lose business.

While it may be too soon to tell whether Metreo can carve out its own market niche, the startup company has identified two very important issues. First, trade is a two way street and unless sellers and buyers are comfortable in a new marketplace, they will not participate. Secondly, Metreo is a pioneer in recognizing that real-time information is the true advantage of online marketplaces, and indeed of all aspects of e-business.

The name of the next game in B2B is "real-time" or dynamic business process optimization.

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