Internet Business Models The Internet can help companies create and capture profit in new ways by adding extra value to existing products and services or by providing the foundation for new products and services. Internet business models provide: the customer with a new product or service; additional information or service along with a traditional product or service; or a product or service at much lower cost than traditional means.

Examples of Internet Business Models Virtual storefront – sells physical products directly to consumers or to individual businesses (such as Amazon.com and EPM.com) Information broker – provides product, pricing, and availability information to individuals and businesses, and generates revenue from advertising or from directing buyers to sellers (such as Edmunds.com, Kbb.com, Insweb.com, ehealthinsurance.com and IndustrialMall.com) Transaction broker – saves users money and time by processing online sales transactions, generating a fee each time a transaction occurs, and also provides information on rates and terms (such as E*TRADE.com and Expedia.com)

Examples of Internet Business Models (Cont.) Online marketplace – provides a digital environment where buyers and sellers can meet, search for products, display products, and establish prices for those products, can provide online auctions or reverse auctions where buyers submit bids to multiple sellers to purchase at a buyer-specified price as well as negotiated or fixed pricing, and can serve consumers or B2B e-commerce, generating revenue from transaction fees (such as eBay.com, Priceline.com, ChemConnect.com and Pantellos.com Content provider – creates revenue by providing digital content, such as digital news, music, photos, or video, over the Web (such as WSJ.com, CNN.com, TheStreet.com, Gettyimages.com and MP3.com)

Examples of Internet Business Models (Cont.) Online service provider – provides online service for individuals and businesses, generates revenue from subscription or transaction fees, from advertising, or from collecting marketing information from users (such as @Backup.com, Xdrive.com, Employease.com and Salesforce.com) Virtual community – provides online meeting place where people with similar interests can communicate and find useful information (such as FortuneCity.com and iVillage.com) Portal – provides initial point of entry to the Web along with specialized content and other services (such as Yahoo.com, MSN.com and StarMedia.com)

Relevant Definitions Dynamic pricing – pricing of items based on real-time interactions between buyers and sellers that determine what an item is worth at any particular moment Banner ad – a graphic display on a Web page used for advertising. The banner is linked to the advertiser’s Web site so that a person clicking on it will be transported to the advertiser’s Web site Pop-up ad – an advertisement that opens automatically and does not disappear until the user clicks on it Portal – Web site or other service that provides an initial point of entry to the Web or to internal company data Clicks-and-mortar – business model where the Web site is an extension of a traditional bricks-and-mortar business Web personalization - the tailoring of Web content directly to a specific user

Categories of Electronic Commerce By looking at the nature of the participants in the e-commerce transaction, the three major electronic commerce categories are: Business-to-consumer (B2C) electronic commerce involves retailing products and services to individual shoppers. Business-to-business (B2B) electronic commerce involves sales of goods and services among businesses. Consumer-to-consumer (C2C) electronic commerce involves consumers selling directly to consumers.

E-commerce Payment Systems Special e-payment systems have been developed to handle ways of paying for goods electronically on the Internet. E-payment systems for the Internet include: Digital credit card payment systems Digital wallets Accumulated balance digital payment systems Stored value payment systems Digital cash Peer-to-peer payment systems Digital checking payment systems Electronic billing presentment and payment systems

Digital Credit Card Payment Systems Extending the functionality of credit cards so they can be used for online shopping payments Making credit cards safer and more convenient for merchants and consumers by providing mechanisms for authenticating the purchaser’s credit card to make sure it is valid and arranging for the bank that issued the credit card to deposit money for the amount of the purchase in the seller’s bank account Some examples are: CyberSource and IC Verify

Digital Wallets Making paying for purchases over the Web more efficient by eliminating the need for shoppers to repeatedly enter their address and credit card information each time they buy something Securely storing credit card and owner identification information and providing that information automatically to complete the purchase Amazon.com’s 1-Click shopping, which enables a consumer to automatically fill in shipping and credit card information by clicking one button, uses e-wallet technology. Other examples are: Gator, Yahoo Wallet, and America Online’s Quick Checkout

Accumulated Balance Digital Payment Systems Sometimes called “stored value payment systems” Allowing users to make micropayments (payments of less than $10) and purchases on the Web Accumulating a debit balance that they must pay periodically on their credit card or telephone bills Qpass collects all of a consumer’s tiny purchases for monthly billing on a credit card. The New York Times uses Qpass to bill consumers wishing to access articles from its Web site. Trivnet lets consumers charge small purchases to their monthly telephone bill.

Stored Value Payment Systems Enabling consumers to make immediate online payments to merchants and other individuals based on value stored in a digital account (bank, checking, or credit card account) A smart card: is another type of stored value system used for micropayments is a plastic card with the size of a credit card that stores digital information can store health records, identification data, telephone numbers, and e-cash.

Digital Cash Also known as electronic cash (e-cash) Used in e-form for micropayments or larger purchases Used with client software and exchanged with another e-cash user over the Internet or with a retailer accepting e-cash Useful for people who don’t have credit cards and wish to make Web purchases eCoin.net is an example of a digital cash service.

Peer-to-peer Payment Systems Serving people who want to send money to vendors or individuals who are not set up to accept credit card payments The money sender uses his or her credit card to create an account with the chosen payment at a Web site used for peer-to-peer payments. The money receiver gets the payment by visiting the Web site and supplying information about where to send the payment (a bank account or a physical address.) PayPal, a popular peer-to-peer payment system, enables users to pay anyone with an e-mail address or send a personal or group bill online.

Digital Checking Payment Systems Extending the functionality of existing checking accounts so they can be used for online shopping payments Less expensive than credit cards and much faster than traditional paper-based checking Prevented from unauthorized access to or understanding of the data being transmitted with a digital signature that can be verified and used for payments in e-commerce Useful in B2B e-commerce Examples are: CHEXpedite and Western Union MoneyZap

Electronic Billing Presentment & Payment Systems Used for paying routine monthly bills Allowing users to view their bills electronically and pay them through e-fund transfers from bank or credit card accounts Supporting payment for online and physical store purchases of goods or services after the purchase has taken place Notifying purchasers about bills that are due, presenting the bills, and processing the payments CheckFree combines subscribers’ bills from various sources so that they can all be paid at one time.