E-Business Management Session Two : Revenue Models

Session Objectives Define the type of revenue collection methods for B2C and BCB marketplaces What is a revenue model? Define the type of revenue models available Understand the changes in the revenue composition of e-businesses

Revenue Collection Collection and disbursement of revenue items B2C Use of credit cards Digital wallets Digital Cash

Revenue Collection Collection and disbursement of revenue items B2B Electronic Letters of Credit – where a bank or other authority guarantees the payment, and therefore takes the risk associated with repudiation or order dispute Internet based EDI – although less standardised than more traditional EDI, this approach has the benefit of integrating payment details with other organisational systems Electronic billing presentation and payment (EBPP): the process by which companies bill customers and receive payments electronically over the Internet. There are two types of presentment models: direct model: a biller delivers the bill to customers via its own website, or via a third-party's site consolidator model: bills from multiple billers are delivered to a single Web site, to be presented in aggregate to the consumer for viewing and payment

Revenue Model - Definition A revenue model is a part of the overall business model, and is essentially the underlying concept of how the e-business will attract and collect revenue The three forms are: Sales Taxes/Individual Service User Payments Financial Contributions from the public

Types of the Revenue Model Advertising – income from, for example, banner ads and linked to volume and quality of hits Sponsorship – sponsorship from a company wanting to convey brand values through association with programs that fit the company's product or corporate image. Subscription – in effect a membership charge for the ability to receive services for a specified time

Types of the Revenue Model Transaction Fee – in effect, a broking fee for facilitating a sale between two parties Affiliate – referral fees when one website leads a party on to another where they conduct a transaction – and the original site therefore gains a cut of the fee : a referral type model

Types of the Revenue Model Sales – may be of goods or services, which can include information (for example, market information) or provision of web services themselves (such as server spaces for websites, or hot counters) sales packages may themselves come in diverse forms, such as forward payments for a series of services or deliveries of goods, or agreements to purchase a number of as yet unspecified items (for examples, on a book club model) or basic sales plus discounts on add-ons and so on

Sales Revenue Online sales revenues are further affected by sales channel decisions, such as customer service, purchase processes, website performance

Internet B2C Revenue Before the dot.com crash

Internet B2C Revenue After the dot.com crash

Discussion Discuss the feasibility of the types of revenue models the following companies use: www.ebay.com www.orbitz.com Harvard Business Review Online www.amazon.com

References Afuah & Tucci, Internet Business Models and Strategies: Text and Cases, 2001 Groucutt & Griseri, Mastering E-Business, 2004 Soh & Markus, B2B E-Marketplaces— A Strategic Archetypes Approach, 2002