Wall Street Journal 8 Aug. 2000 By Rebecca Buckman
A Web site called boats.com and its ties to recreational boating's two main trade groups are making waves in the clubby world of yachts, sailboats and Topsiders.
In an announcement that shows the Internet's effects on even the toniest of industries, San Francisco-based boats.com is expected to announce Tuesday alliances with the powerful National Marine Manufacturers Association, which represents boat makers, and the Marine Retailers Association of America, which represents boat dealers.
The 1,400-member NMMA and the 3,600-member MRAA also will receive warrants to buy minority stakes in boats.com, which hasn't yet switched on a much-hyped "marine portal" site that will include listings to help people buy and sell boats. Many of the company's 67 staffers, backed by $27 million in venture-capital financing, are working hard to meet a late-summer launch deadline inside a coveted bayside office on San Francisco's Pier 38.
The deals are a coup for boats.com, a well-connected company that has managed to stay afloat as some other marine sites have sunk amid the recent technology-stock correction.
Still, boating-industry players complain that the ties between boats.com and the trade groups could hamper surviving rivals seeking a piece of the lucrative market. Last year, the U.S. market for new boats, engines and accessories was $23 billion, according to the manufacturers' group.
The connection between boats.com and the NMMA "is a major conflict of interest," said Robert Alpert, chairman of Land'n'Sea Corp., which runs a Web site called iWaterways.com, a potential competitor to boats.com. The NMMA "is supposed to be an association, not a commercial enterprise," he said, adding, "They cannot possibly represent the industry fairly in that conflict position."
Boats.com's method of selling boats "is a referral model, and it's open to all comers," said Duncan Thomas, chief executive of Los Angeles-based Web site iicaptain.com, which sells marine supplies. "If that's the case," he said, "you could argue it's a neutral site. But then again, there are other sites out there as well, and they're just as neutral. So why would an industry organization back one over the other one?"
The NMMA says its relationship with boats.com shouldn't disadvantage anyone, since dealers listing vessels for sale on boats.com are free to offer their products on other Web sites.
"We [felt] we would be more effective in achieving our objective, which is to grow boating, if we concentrated our efforts behind a single [site]," said NMMA President Thom Dammrich. Ultimately, the group anointed boats.com because "their whole business model was the most industry-friendly, [and the company had] significant resources and just really high-quality people."
In some ways, the relationship could be compared to the National Association of Realtors' ties to realtor.com, the online home-listing site of Homestore.com Inc., Thousand Oaks, Calif., that has drawn scrutiny from antitrust regulators. But realtor.com has exclusive agreements with local realty boards. Boats.com's 56 agreements with boat makers, by contrast, don't preclude those companies from showcasing products on other sites.
Still, boat manufacturer Brunswick Corp. -- which makes the popular Maxum and Bayliner vessel lines -- is a significant financial backer of boats.com, according to people familiar with the matter. That could raise new questions about boats.com's ability to be an objective purveyor of boat information. Boats.com is now building an extensive database related to fishing vessels, sailboats and power boats that it hopes shoppers will consult before they try to find one to buy, says Rolando Esteverena, the company's CEO.
Mr. Esteverena said he couldn't confirm or deny Brunswick's backing; a spokeswoman for Brunswick, based in Lake Forest, Ill., referred questions to Vice President Kathryn Chieger, who couldn't be reached for comment. But boats.com did say when it announced its most recent round of funding that other, unnamed "marine, financial and technology businesses" had invested.
When customers are ready to make a purchase on boats.com, the site will refer them to local sellers such as boat dealers. The company makes money by collecting fees for listings, though it also will get a cut from loans, boat insurance and marine parts sold through Web-site partnerships. Other plans for the site include marina listings and even message boards through which fellow boaters can communicate.
According to Mr. Esteverena, the company is simply creating a "level playing field" to bring together boat information and listings from hundreds of manufacturers and thousands of boat dealers. He dismisses criticism of its relationship with the trade groups as mostly "sour grapes." When asked if the affiliation could give boats.com a competitive advantage, he said, "Absolutely."
Indeed, the endorsement from the NMMA, which already has been announced internally to association members, helped snare boats.com its $21 million second round of venture funding, led by Mayfield Fund and Trident Capital.
"Does the NMMA's decision hurt us? Yes, definitely," says Jay Wilkins, whose competing company, boatscape.com recently had to lay off half its staff. It recently sold itself to SailNet.com of Charleston, S.C. If boatscape.com had garnered the endorsement -- which could have brought more business from boat dealers -- "who knows" whether boatscape.com's fate would be different, he says.