MetalSite had grown rapidly. With more than $35 million of investors' money, MetalSite was able to sign up 24,000 registered users and by mid-2001, was trading about $30 million worth of steel each month. However, its commissions of between 1 percent and 2 percent on each trade did not yield cnough money to cover operating costs. The steel business was in a downturn along with the rest of the U.S. economy, and the downward pressure on commissions from competing exchanges was increasing rapidly. The major steel companies were discussing ways to from alliances to operate their own exchanges. After three years of operation and a desperate last-minute search for new investors, MetalSite closed in August 2001.
MetalSite had entered a business that could not supply more then a few companies, and it was unable to become one of the survivors. The lesson from MetalSite's experience is that a reintermediation strategy must add significant value to the supply chain, and the company pursuing that strategy must be able to construct significant barriers that competitors must overcome to enter the business. MetalSite was unable to do either and thus failed. Many other B2B exchange sites that found themselves in similar competitive situations have also failed.