Business Models in Ecom

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Overview Lecture 2 E-Commerce Business Models
Boriana Koleva bnk@cs.nott.ac.uk C54 Key components of e-commerce business models Major B2C business models Major B2B business models Business models in other emerging areas of e-commerce Benefits and Problems with E-Commerce

E-commerce Business Models
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

Key Ingredients of a Business Model

Five Primary Revenue Models

Categorising E-commerce Business models
No one correct way We categorize business models according to e-commerce sector (B2C, B2B, C2C) Type of e-commerce technology used can also affect classification of a business model Some companies use multiple business models

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B2C Business Models
E-tailer/Storefront model Portal model Content Provider Transaction Broker Market Creator Service Provider

E-tailer/Storefront Model
The customers and the seller interact directly, e.g. amazon.com, dell.com, play.com Organise an online catalogue of products Take orders through Web site Shopping cart technology

Accept payments in a secure environment Send merchandise to customers Manage customer data Market Web site to potential customers

Revenue through product sales Low barriers to entry -> very competitive

Portal Model (1)
Portal sites give visitors access to a variety of information in one place News, sport, weather, online shopping, searching

Portal Model (2)
Horizontal portals – aggregate information on a broad range of topics, e.g. search engines Yahoo! , Altavista.com, About.com

Revenue through charging advertisers and charging for premium services Charging strategies for portals: charge merchants for a link per customer “click-through” reserve best areas for paying customers

Vertical portals (community sites) – large amount of information in one subject area www.webmd.com, Bolt.com, IVillage.com

Content Provider
Content providers distribute digital content (news, music, video, artwork) over the Web WSJ.com, Rhapsody.com, CNN.com

Transaction Broker
Sites that process transactions for consumers
E-Trade.com, Ameritrade.com Monster.com

Second largest source of B2C e-commerce revenue in 2002 Revenue generates through subscription fees, pay for download, or advertising Syndication a variation of standard content provider model

Primary value proposition – saving of time and money for customers Typical revenue model – transaction fee Based on frat rate or sliding scale

Industries using this model:
Financial services Travel services Job placement services

2

Market Creator
Uses Internet technology to create markets that bring buyers and sellers together Where they can display products, search for products and establish prices Priceline.com (reverse austion), eBay.com

Service Provider
Offers services online
xDrive.com – information storage Mybconsulting.com – consulting for small businesses

Typically uses a transaction fee revenue model
Usually a commission on sales is collected and sometimes a submission fee

Value proposition – valuable, convenient, timesaving, low-cost alternatives to traditional service providers Revenue models – subscription fees or one-time payment Mixing services with products – powerful strategy

A middleman – no inventory and production costs, not involved in payment and delivery

B2C Business Models Summary B2B Business Models
E-distributor E-procurement Exhanges (B2B hubs) Industry Consortia Private Industrial Networks Net marketplaces

E-distributor
Company that supplies products and services directly to individual businesses Grainger.com GE Electric Aircraft Engines (geae.com)

E-procurement
Create and sell access to digital electronic markets
Ariba CommerceOne

Owned by one company seeking to serve many customers...
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