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 Models BrokerageFacilitate transaction between supplier & customer AdvertisingProvides content mixed with advertising InfomediaryFacilitate the exchange of information MerchantInternet-based Wholesalers and Retailers ManufacturerDirect selling AffiliateSites which direct consumers to other e-business for a fee CommunityHosting of communication between parties with common interests SubscriptionUsers pay for access to content UtilityMetered 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 Models Content 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/Governme nt 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 BusinessConsumer

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 BusinessConsumer Dealers