Revenue Models 4. E-Business

Web business revenue-generating models Web catalog Digital content Advertising-supported Advertising-subscription mixed Fee-based Same revenue model for both B2B/B2C sales

Web Catalog Revenue Models Brand image? Traditional Model Printed information mailed to prospective buyers Orders placed by mail or toll-free telephone number Expands traditional model Replaces or supplements print catalogs Offers flexibility Orders placed through Web site or telephone Payments made though Web site, telephone, or mail Yet another sales outlet! Adapted from mail-order (catalog) model Can combine marketing channels

Web Catalog ... Revenue Models Books, music, and videos Amazon.com- Started … Evolved Web-only- online music, book Luxury goods Difficult to sell online E.g., Vera Wang and Versace - Web sites provide information; Heavy use of graphics and animation Combining marketing channels: Two retailer examples

Web Catalog ... Clothing retailers Revenue Models Web Catalog ... Clothing retailers Display clothing photos categorized by type- Prices, sizes, colors, tailoring ... Lands’ End Online text chat and call-back feature push Web pages to customer’s browser Personal shopper agent Learns preferences and makes suggestions My Virtual Model (customers try clothes) Problem: varying computer monitor color settings Solution: send fabric swatch on request Solution: offer generous return policies x

Digital Content Subscription Revenue Models Digital Content Subscription Firms owning written information or rights highly efficient distribution mechanism subscriptions for access to information ProQuest (digital publications), Wall Street Journal ... x

Advertising Revenue Models Network/Internet television measuring/charging visitor/views # of visitors, # of unique visitors, # of click- throughs Stickiness Keeping visitors at site and attracting repeat visitors Exposed to more advertising in a sticky site obtaining large advertiser interest Requires demographic information collection

FIGURE 4-2 Three strategies for an advertising-supported revenue model Can obtain large advertiser interest by: Using a specialized information Web site Draw a specialized audience certain advertisers want to reach FIGURE 4-2 Three strategies for an advertising-supported revenue model 8 8

Advertising ... Revenue Models Web portals (portal) A launching point- Web directories, Yahoo! search term triggered advertising! General interest strategy- Excite, Google, Bing Specific interest strategy-C-NET Advertisers pay more!

Advertising ... Revenue Models Newspaper and magazine publishers Targeted classified advertising sites higher rates than general advertising? Original version: Newspaper classified advertising Growth of classified advertising Web sites Very bad for newspapers? E.g.: craigslist Web employment advertising Most successful targeted classified advertising category Examples: CareerBuilder.com, bdjobs.com ...

Advertising-Subscription Mixed Revenue Models Advertising-Subscription Mixed Subscribers pay fee and accept advertising Less advertising … Web sites offer different degrees of success The New York Times- Advertising The Wall Street Journal- Subscription revenue weighted more heavily ESPN Leverages brand name, cable interface Sells advertising, offers free information x

Revenue Models FIGURE 4-3 Revenue models used by online editions of newspapers and magazines E- Business, Ninth Edition 12 12

Revenue Models Fee-for-Transaction Service fee charged- Based on transaction ... Travel agency Web-based travel agencies are new entrants Travelocity, Expedia, Hotels.com, Also generate advertising revenue Specialized travel agents (cruises, hotels) Insurance brokers Quotes directly to public (1996)- Independent insurance agents: disintermediated Insurance policy comparisons, sales sites Provides quotes for competitors’ products too

Revenue Models

Revenue Models Fee-for-Transaction ... Online banking and financial services No physical product; Easy to offer on Web Trust and reliability of financial institution? Strategy Use existing bank’s identification and reputation Start online bank not affiliated with existing bank Use different name? Barriers preventing a more rapid rate of growth Lack of bill presentment features Lack of account aggregation tools

Revenue Models Fee-for-Transaction ... Online games - Sales revenue source Advertising (older concept), pay-to-play for premium games, subscription fees Physicians’ online consultations For ongoing, established relationship patients

Free for Many, Fee for a Few Revenue Models Free for Many, Fee for a Few Economics of manufacturing is different for physical and digital products. This leads to a different revenue model Offer basic product to many for free Charge a fee to some for differentiated products Examples: Google Premium Services! Free+mium

Strategy Managing Companies must adapt to revenue model or went out of business Some e-commerce Web sites needed years to grow large enough to become profitable (CNN and ESPN) Due to lengthy unprofitable growth phases Management Issues Web revenue models implementation issues Dealing with the issues x

Strategy- Channel conflict (cannibalization) Managing Strategy- Channel conflict (cannibalization) Web sales/activities interfere with existing Consider Web sites no longer sell products Sites now provide product, retail distributor information Online purchases returnable at retail stores Required compensation and bonus plans adjustments to support Web site Channel Cooperation made it successful

Strategy Managing Strategic alliance Amazon.com joined with Target, ToysRUs ToysRUs and Amazon suing each other Bangladesh?

Effective Web Presence Organization’s presence Public image conveyed to stakeholders- Customers, suppliers, employees, stockholders, neighbors, general public Effective Web presence Critical even for smallest and newest Web operating firms

Web business site objectives Web Presence Web business site objectives Attracting Web site visitors Keeping visitors to stay and explore Convincing visitors to follow site’s links to obtain information Creating an impression consistent with the organization’s desired image Building a trusting relationship with visitors Reinforcing positive images about the organization Encouraging visitors to return to the site

Making Web presence consistent with brand image Coca Cola Web site pages Usually include trusted corporate image (Coke bottle) Image: traditional position as a trusted classic Pepsi Web site pages Usually filled with hyperlinks to activities and product-related promotions Image: upstart product favored by younger generation

Web Site Usability Web Presence Current Web presences Few businesses accomplish all goals Most fail to provide visitors sufficient interactive contact opportunities Improving Web presence Make site accessible to more people Make site easier to use Make site encourage visitors’ trust Make site develop feelings of loyalty toward the organization

Trust and Loyalty Web Presence Creates relationship value Good service leads to seller trust Delivery, order handling, help selecting product, after-sale support Satisfactory service builds customer loyalty Customer service in electronic commerce sites Problem Lack integration between call centers and Web sites Poor e-mail responsiveness

Benchmarking (Control) Web Presence Benchmarking (Control) Review e-commerce Web sites for Usability, customer service, other factors Expert Support Sell the gathered information directly to the companies operating the Web sites Include suggestions for improvements BizRate.com posts ratings Provides comparison shopping service Compiles ratings by conducting surveys of sites’ customers

Usability Testing Web Presence Helps meet Web site goals Avoids Web site frustration Customers leave site without buying anything Simple site usability changes Include telephone contact information Staff a call center Learn about visitor needs by conducting focus groups Usability testing cost Low compared to Web site design costs Usability testing methods

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