Business Models

E-commerce Business Models— Introduction   

Business model – set of planned activities designed to result in a profit in a marketplace Business plan – document that describes a firm’s business model E-commerce business model – aims to use and leverage the unique qualities of Internet and Web

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Key Ingredients of a Business Model Table 2.1, Page 62

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Revenue Model 

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Describes how the firm will earn revenue, generate profits, and produce a superior return on invested capital Terms financial model and revenue model often used interchangeably Major types:  Advertising revenue model  Subscription revenue model  Transaction fee revenue model  Sales revenue model  Affiliate revenue model

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Advertising Revenue Model 

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Web site that offers content, services and/or products also provides a forum for advertisements and receives fees from advertisers Example: Yahoo.com

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Subscription Revenue Model 

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Web site that offers users content or services charges a subscription fee for access to some or all of its offerings Examples:  Consumer Reports Online  Yahoo! Platinum

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Transaction Fee Revenue Model  

Company that receives a fee for enabling or executing a transaction Examples:  eBay.com  E-Trade.com

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Sales Revenue Model  

Company derives revenue by selling goods, information, or services to customers Examples:  Amazon.com  LLBean.com  Gap.com

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Affiliate Revenue Model 

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Sites that steer business to an “affiliate” receive a referral fee or percentage of the revenue from any resulting sales Example:  MyPoints.com

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Five Primary Revenue Models Table 2.2, Page 66

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B2C Business Models Table 2.3, Page 72

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B2C Business Models: Portal  

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Offers powerful search tools plus an integrated package of content and services typically utilizes a combines subscription/advertising revenues/transaction fee model May be general or specialized (vortal)

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B2C Business Models: E-tailer  

Online version of traditional retailer Types include:  Virtual merchants (online retail store only)  Clicks and bricks (online distribution channel for a company that also has physical stores)  Catalog merchants (online version of direct mail catalog)  Manufacturer-direct (manufacturer selling directly over the Web)

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B2C Business Models: Content Provider   

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Information and entertainment companies that provide digital content over the Web Second largest source of B2C e-commerce revenue in 2002 Typically utilizes an subscription, pay for download, or advertising revenue model Syndication a variation of standard content provider model

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B2C Business Models: Transaction Broker    

Processes online transactions for consumers Primary value proposition – saving of time and money Typical revenue model – transaction fee Industries using this model:  Financial services  Travel services  Job placement services

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B2C Business Model: Market Creator  

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Uses Internet technology to create markets that bring buyers and sellers together Examples:  Priceline.com  eBay.com Typically uses a transaction fee revenue model

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B2C Business Model: Service Provider  

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Offers services online Value proposition – valuable, convenient, time-saving, low-cost alternatives to traditional service providers Revenue models – subscription fees or onetime payment

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B2C Business Models: Community Provider 

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Sites that create a digital online environment where people with similar interests can transact, communicate, and and receive interest-related information. Typically rely on a hybrid revenue model Examples:  Epinions.com  Oxygen.com  About.com

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B2B Business Models Table 2.4, Page 82

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E-distributor   

Company that supplies products and services directly to individual businesses Owned by one company seeking to serve many customers Examples:  Grainger.com  GE Electric Aircraft Engines (geae.com)

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E-procurement Companies  

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Create and sell access to digital electronic markets B2B service provider is one type – offer purchasing firms sophisticated set of sourcing and supply chain management tools Application service providers a subset of B2B service providers Examples:  Ariba  CommerceOne

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Exchanges (B2B Hubs)     

An electronic digital marketplace where suppliers and commercial purchasers can conduct transactions Usually owned by independent firms whose business is making a market Generate revenue by charging transaction fees Usually serve a single vertical industry Number of exchanges has fallen to around 700 in 2003

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Business Models in Emerging Ecommerce Areas Table 2.5, Page 88

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Consumer-to-Consumer (C2C) Business Models  

Provide a way for consumers to sell to each other, with the help of a online marketmaker Best example: eBay.com

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Peer-to-Peer (P2P) Business Models   

Links users, enabling them to share files and common resources without a common server Challenge is for P2P ventures to develop viable, legal business models Example: Kazaa; Groovenetworks

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M-Commerce Business Models 

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Takes traditional e-commerce business models and leverages emerging new wireless technologies Key technologies are telephone-based 3G; Wi-Fi; and Bluetooth To date, a disappointment in the U.S. However, technology platform continues to evolve

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