atch an hour of prime-time television this weekend and you might conclude that retail is at the heart of today's Internet world.
Toys, books, sporting goods. The unprecedented barrage of broadcast and print ads from Internet retailers is only going to intensify between now and Christmas. But as the Web's ''e-tailers'' spend millions on media ads trying to woo the consumer this holiday season, the smart money is moving in another direction.
Investors, both venture capitalists and public stockholders, are throwing huge sums of money at business-to-business Internet companies.
Web companies that serve commercial rather than retail customers are the latest hot thing because they sell into a much larger market, often face less competition, and are more likely to hold onto a customer.
''The business-to-business side is just going to be so much bigger,'' said Stephen Demirjian of Westfield Capital Management, a Boston investment firm with large technology holdings.
The idea: Use the electronic medium to order and deliver most things businesses buy from their suppliers, from paper clips to industrial steel.
Staples Inc. has separated the part of its business that delivers office supplies over the Web and created a tracking stock to follow its progress. RoweCom Inc. of Cambridge, which went public this spring, organizes companywide purchases and subscriptions to periodicals over the Web.
The best example of Internet money shifting around may be the stocks of two companies known for their Web investing, CMGI Inc. of Andover and Internet Capital Group Inc. of Wayne, Pa.
CMGI, a much more established company with huge investment wins like Lycos Inc. and GeoCities under its belt, is valued at $16.8 billion by the stock market.
Internet Capital Group, which went public just three months ago, has a market value of $21 billion.
The difference: Internet Capital Group targets business-to-business ventures exclusively when it writes checks. CMGI's investment portfolio of 50 companies is divided about equally between consumer and commercial businesses.
Few companies have a track record for sensing the shifts in the Internet world like CMGI. This week it announced plans to launch a $1 billion investment pool, called the CMGI @Ventures B2B fund, taking dead aim at the commercial world.
Meanwhile, Internet Capital Group took steps to make the most of its own staggering stock performance. This week the company said it would split its stock 2-for-1 and sell 6 million new shares to the public.
Internet Capital Group shares, which went public in August at 12, traded at 165 1/2 this week.
CMGI and Internet Capital Group are hardly alone. Venture capital firms targeting the Internet, many of them raising new pools of as much as $1 billion each, are spending much more money on commercial Web ventures. As those small companies mature, the business-to-business theme will become even more pronounced in the flow of initial public stock offerings.
''The majority of the dot-com stories will have a business-to-business angle for the foreseeable future,'' said Michael Halloran, a Boston-based investment banker and managing director of Deutsche Banc Alex. Brown.
Retail Internet businesses certainly continue to grow, but most of the fattest consumer markets are served by a dozen or more competitors today. What are the odds that the latest new bookseller or stock brokerage is going to make it?
''It's becoming increasingly difficult for companies in the consumer space to rise above the noise,'' said Brad Garlinghouse, a general partner at @Ventures. ''There are a lot of Internet companies clamoring for the customer's attention.''
Garlinghouse said the new @Ventures B2B fund is looking for companies where conventional methods of delivering goods and services to businesses are cumbersome or less efficient. ''The Web is a great medium to eliminate some of those pains,'' he said.
Bigger markets, less competition, better customer retention. It sounds like Web nirvana. Don't get too carried away, said Bill Burnham, a general partner at Softbank Capital Partners.
''The business-to-business market is a big opportunity but it's going to follow the same, predictable cycle,'' said Burnham. ''There are going to be a few big winners, but there will also be a lot of substandard companies that people will quickly forget about. There's so much [Internet investment] money floating around looking for the next big thing.''
Zefer Corp. of Cambridge would seem to be a shining example of the rush to capitalize business-to-business Internet companies, the recipient of a record $100 million in venture funding this year.
Zefer, which advises firms moving out and expanding on the Web, is in a prime position to measure where actual commerce is moving. President William Seibel said Zefer's current clientele is split between commercial and retail.
That mix is expected to shift toward commercial work this year. ''But consumer business is doing nothing but growing at a 59 percent annual compound rate,'' said Seibel. ''That's not a market to walk away from.''
Steven Syre (929-2918) and Charles Stein (929-2922) can also be reached by e-mail at boscap@globe.com
