E-Commerce Business Models

What is a Business Model

“A description of how a business plans to make money using the Intenet”

What value (product, service, information) the business offers to customers

A description of how that value is delivered to the customer.

What each party (supplier, customer, third parties) does. How product, service, information flows Who owns data, transaction, relationship

Which customers are targeted Pricing strategy A charging (revenue) strategy A set of key strategic resources

New Thinking Traditional Business Approach

Develop Business Model How can IT support it?

E-Business Approach What can Internet enable the

company to do? Develop Business Model

Rappa’s E-Business ModelsBrokerage Facilitate transaction between supplier &

customer

Advertising Provides content mixed with advertising

Infomediary Facilitate the exchange of information

Merchant Internet-based Wholesalers and Retailers

Manufacturer

Direct selling

Affiliate Sites which direct consumers to other e-business for a fee

Community Hosting of communication between parties with common interests

Subscription

Users pay for access to content

Utility Metered use of services

E-Business Models(1): Brokerage

B2B Catalogues, Exchanges, Auctions Ariba, E-steel, FreeMarkets

Buyer Agregator Volumebuy

Virtual Mall Yahoo! Stores

MetaMediary Amazon’s zShops

Auctions eBay

Reverse Auctions Priceline

Classifieds Trading Post

Shopping Agents RoboShopper

Bounty Brokers BountyQuest

Brokerage models: Buy-sell fulfillment

Examples: Online financial brokerages such as e-trade Online travel agents: broker charges buyer

and/or seller transaction fee Using volume and low overheads to deliver

best negotiated prices such as CarsDirect.com

Brokerage models: Market exchange Most common B2B market model Revenue proposition: transaction fee

based on value of sale Market mechanisms:

Offer – buy Negotiated offer-buy Auctions

Example: ChemConnect.com

Brokerage models: Business trading community Comprehensive sources of information for a

specific vertical market Example: VerticalNet.com’s vertical market

support: Product information in buyer’s guides Supplier and product directories Industry news and articles Job listings & classifieds

Revenue proposition ?

Brokerage models: Buyer aggregator Exploit benefits of demand-side

aggregation Revenue proposition: transaction fees Examples: VolumeBuy.com, Etrana.com

Brokerage models: Distributor Catalogue aggregator model Buyers get additional support in the

form of buyer-specific quotes from preferred suppliers, lead time, recommended substitutions

Value and revenue propositions ? Examples: QuestLink.com

ConvergeTrade.com

Brokerage models: Virtual mall A site that hosts many online merchants Revenue proposition: setup, monthly

listing and per-transaction fees Best tied with a generalized portal Examples: Yahoo!Stores, Stuff.com

Brokerage models: meta-mediary A virtual mall that will in addition,

provide the following services: Process transactions Track order Billing and collection services Quality assurance for customers

Examples: Amazon.com zshops

Brokerage models: Auction broker Revenue proposition: transaction fees Examples: eBay, AuctionNet

Brokerage models: Reverse auction Prospective buyer makes a final

(sometimes binding) bid for a good or service – broker seeks fulfillment

Revenue model: processing fee, spread between bid and fulfillment price

Frequently aimed at high-price items such as cars and airline tickets

Examples: Priceline.com, Respond.com, eWanted, myGeek.com

Brokerage models: Search agents Example: DealTime.com, MySimon.com,

RoboShopper.com

Brokerage models: Bounty brokers Offering rewards for locating people,

documents, ideas etc. Revenue proposition: Broker charges

flat listing fee plus percentage of bounty for successful transactions

Example: BountyQuest.com

E-Business Models (2): Advertising Model

Portal Yahoo!

Personalised Portals My.Yahoo!

Vortals

Incentive Marketing CyberGold

Fee Model HotMail

Bargain Discounter Buy.com

E-Business Models (3) : Infomediary

Businesses based on selling information about websites or web users

Recommender System Deja.com

Registration Model NYTimes.com

E-Business Models (4): Merchant Model

Pure Play Amazon

Clicks and mortar Barnes and Noble

Bit Vendor Eyewire

E-Business Models (5): Manufacturer Model

Producer of goods sells direct to consumers O’Reilly (IT publisher) Intel Dell

E-Business Models (6): Affiliate Model

Commission-based click through to another e-business Banner Click-throughs Referal to Amazon

E-Business Models (7): Community Model

Voluntary Contributor Model Public Broadcasting

Knowledge Network User questions answered by volunteer

(e.g. ExpertCentral) or fee-charging expert (e.g. Guru.com)

E-Business Models (8): Subscription Model

Users pay for high value content Economist on line Accu weather

E-Business Models (9): Utility Model

Pay as you go Authentica Fatbrain.com

Weill and Vitali’s E-Business ModelsContent Provider Provides content (information, digital product,

services) via intermediaries

Direct to Consumer Provides goods or services direct to the consumer often bypassing traditional channel partners

Full Service Provider

Provides a full range of services (eg. financial, health) directly and via complementors attempting to own the primary consumer relationship

Value Net Integrator

Coordinates the value net (or chain) activities by gathering, synthesising and distributing information

Intermediary Brings together buyers and seller by concentrating information (eg. search engines, actions)

Shared Infrastructure

Brings together multiple competitors to cooperate by sharing common IT infrastructure

Virtual Community Facilitates and creates loyalty to an online community of people with a common interest enabling interaction and service provision

Whole of Enterprise/Government

Provides a firm-wide single pint of contact consolidating all services provided by large multi-business organisation

What can you sell?(Value Proposition)

Content Goods and Services Access to products Convenience Integration / Coordination Infrastructure Community (access to like people) Empowerment (aggregation) Entertainment

How can you charge?(Revenue Proposition)

Payment for goods, service, content Commission on transactions Subscription (one-off or recurrent fees) Voluntary contributions Advertising Sponsorship Reputation capital Referral (click-through charge) Sell information about users Charge for placement (Yahoo auction) Meter usage Barter Bounties Indirect

Channel Conflict

Type one: business establishes two channels direct to consumer Say, shop-front and internet

Conflict arises when one channel “cannibalizes” (takes away sales from) the other rather than complementing each other Space Wine case Levy jeans

Business Consumer

Channel Conflict

Type two: business disintermediates its own dealers Avon Direct sales of automobiles

Can be in response to pure play competitors Can be part of a strategy transition to pure

play

Business Consumer

Dealers