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

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 B2C Business Models: Community
Provider
 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
 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 E-
commerce 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

 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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