EBusiness Lecture 2 - Revenue Models. © NCC Education Limited V1.0 eCommerce Revenue Models Lecture 2 - 2.2 Introduction to Lecture 2 Topics covered:

eBusiness

Lecture 2 - Revenue Models

© NCC Education LimitedV1.0

eCommerce Revenue Models Lecture 2 - 2.2

Introduction to Lecture 2

Topics covered:• Different types of revenue models• Changing revenue models to meet the

needs of users• Revenue strategy issues• Mobile commerce



Summary of Different Revenue Models

• Web catalogue• Digital content• Advertising-supported• Advertising-subscription mixed• Fee-for-transaction• Fee-for-service



Web Catalogue Revenue Model

Key characteristics:• Adaptation of mail order catalogue• Mail order businesses expanding operations to the

web• Firms with physical stores offering online capability• Access to customers throughout the world• Enable customers to complete payment via phone

or mail if required



Businesses Using Web Catalogue Models

• Computers and consumer electronics

• Books• Music and videos• Luxury goods• Clothing• Flowers and gifts• General discounters



Digital Content Revenue Model

Key characteristics:• Used by firms that own rights to information• Highly efficient distribution mechanism• Flexibility in purchasing information,

including subscriptions or one-off payments• Information can be customised to meet

user’s requirements• Electronic distribution offers cost benefits

over printed matter



Businesses Using Digital Content Models

• Providers of legal information services

• Access to digital copies of published documents

• Subscriptions to academic journals• Access to bibliographic databases• Subscriptions to digitised news

sources and magazine content



Advertising-Supported Revenue ModelsKey characteristics:

• Similar to that used by network television• Advertising revenue pays for content

development and delivery• Requires specific groups of visitors and

targeted advertising messages• Problems with how to measure and charge

for number of site visitor views



Business Using Advertising-Supported ModelsWeb portals

• Yahoo!• Google• AOL• MSN

Newspaper publishersTargeted classified advertising



Advertising-Subscription Mixed Revenue Models

Key characteristics:• Model originally used by traditional print

newspapers and magazines• Subscribers pay a fee and accept some

level of advertising• Level of advertising is far less than on

advertising-supported sites



Businesses Using Advertising-Subscription Mixed Models

• Online editions of newspapers and magazines• Advertising used to part fund the website• Payment for articles retrieved from archive• Subscription to print version of magazine gives free

access to online version• Access to member-only sections of sports news

sites



Fee-for-Transaction Revenue ModelsKey characteristics:

• Business offers service for which they charge

• Scale of charge dependent upon number or size of transactions processed

• Provides personal service• Provides service at competitive rates

compared to traditional providers• Commonly referred to as reintermediation



Businesses Using Fee-for-Transaction Models

• Travel agents• Car sales• Stockbrokers• Insurance brokers• Event tickets• Estate agents• Online banking services• Online music



Fee-for-Service Revenue Models

Key characteristics:• Fee charged for service offered• Fee based on the value of the service

provided• Often related to entertainment and leisure

activities• Increasing interest from professionals



Businesses Using Fee-for-Service Models

• Online games sites• Delivering video content to

subscribers• Professional services

offering advice:– Doctors– Lawyers– Accountants– Engineers



Changing Revenue Models

• Revenue models change to meet changing behaviour of web customers

• First wave of eCommerce saw reduced investment, leading to revised revenue models

• Second wave of eCommerce will require further adjustments



Multiple Transitions of Encyclopaedia Britannica

Print publisher

Sellinginformation on the web

Advertising supported website

Mixed advertising

subscription model



Revenue Strategy Issues - Channel Conflict

• Website sales can have a negative impact on established outlets and networks

• Known as cannibalisation• Requirement to coordinate presence across

all distribution channels



Revenue Strategy Issues - Strategic Alliances

• Companies join forces to sell on the web• Can increase speed of entry into a market• Websites can join with channel distribution

management companies• Channel distribution manager develops

specialist knowledge of a product line• Channel manager takes a percentage of the

sales volume as a fee



Mobile Commerce

• Laptops, PDAs and mobile phones linked to the Internet

• M-Commerce applications include– Stock quotes– Travel directions– Weather forecasts– Airline flight schedules– Short news reports

• Few companies have yet to generate significant revenue



Summary

• Wide variety of eCommerce revenue models

• Different revenue models are appropriate for different types of business

• Businesses can adjust revenue models to meet changing needs of customers

• Important to coordinate activities across all distribution channels



Documents

EBusiness Lecture 2 - Revenue Models. © NCC Education Limited V1.0 eCommerce Revenue Models Lecture 2 - 2.2 Introduction to Lecture 2 Topics covered: