1. E-Commerce Models Min Ding Pennsylvania State University

2. Today’s Topics  Where is the money? -- Revenue Sources  Get the money -- E-commerce Models  It’s not just about new revenue -- other stuff you could do with a website  Common Network Structure of a Firm

3.  Banner advertising (per exposure)  Prospect fees (per click-through)  Sales commissions (affiliates, Amazon.com)  Sponsorship (fixed payment)  Alliances (exclusive deal, Yahoo and Amazon) What of the above revenue sources did you propose in your class project? Indirect Revenue Sources Getting money from businesses (advertisers)

4. Risk and Return Comparing Various Indirect Revenue Sources Sponsorship Fixed Payment Banner Ads Impressions Prospect Fees Click Through Sales Commissions Purchase Risk Increases for the Web Site Being Paid  Sponsorship  Banner Ads:  Prospect Fees & Sales Commissions: Source: POIM

5. Correlation between bargaining power and the types of indirect revenue sources used? Site/Advertiser Indirect Revenue Source Powerful sites (yahoo.com) Sponsorship Puny sites (Our class project?) Banner Ads Powerful advertisers (Amazon.com) Prospect Fees Puny advertisers (Our class project?) Sales Commissions Q. Should we avoid risk as much as possible?

6.  Product sales  Pay-per-use (?)  Subscriptions (WSJ)  Bundle sales (Science) What of the above revenue sources did you propose in your class project? Direct Revenue Sources Getting money from users (consumers)

7. E-Commerce Models Source: Net Ready  E-Storefront  Infomediary  Trust Intermediary  E-commerce Enabler  Infrastructure Providers/Communities of Commerce

8. E-Commerce Models E-Storefront  What is it:  Online analogue of traditional ways of selling products or services.  Offers:  Products, services, content  Revenue Stream:  Product/service margin, advertising  Examples:  www.bestbuy.com www.bestbuy.com

9. E-Commerce Models Infomediary (content aggregator)  What is it:  An entity that brokers content, information, knowledge, or experiences that add value to a particular E-commerce transaction.  Offers:  Buyer broker (www.comparenet.com)www.comparenet.com  Seller broker (www.autobytel.com)www.autobytel.com  Transaction brokers (www.travelocity.com)www.travelocity.com  Communities of Interest (COIN, www.verticalnet.com)www.verticalnet.com  Revenue Stream:  Subscription fees, advertising, partnership fees, % of transaction fees

10. E-Commerce Models Trust Intermediary  What is it:  An entity that creates trust between the buyer and the seller.  Representative types:  Payment Enabler (secure transaction, www.verifone.com) www.verifone.com  Trust Enabler (create a trusted or authenticated environment, www.tradesafe.com) www.tradesafe.com  Revenue Stream:  Subscription fees, licensing fees

11. E-Commerce Models E-Business Enabler  What is it:  An entity that provides a component or functionality and adjunct services to enable and lubricate other E-storefronts or infomediaries.  Revenue Stream:  Licensing fee, partnership fee, % of transaction  Examples:  Federal Express (www.fedex.com)www.fedex.com  Onsale (www.onsale.com provides the auction engine for Yahoo!)www.onsale.com

12. E-Commerce Models Infrastructure Providers/Communities of Commerce  What is it:  Members aggregated across a set of complementary interests (products, content, and service) and markets; communities of enterprises organized around common interests through a common infrastructure..  Revenue Stream:  Examples:  www.chrome.com (dealers, banks, credit unions, insurance companies) www.chrome.com

13. My Take on E-Commerce Models Where does collaborative commerce fit in?

14.  External  Software Distribution  User Manuals  Net Surveys  Online Customer Support  Online dealers/suppliers Support  Internal  Corporate Intranets It’s not just about new revenues -- getting things done, the cheaper way

15. Common Network Structure Inside a Firm  the public Internet, managed by the marketing department  the extranet, connects the company with it’s major suppliers  the intranet, available only to the company’s employees

16. Summary (and remember!)  Understand potential revenue sources.  Understand the e-commerce models.  Know what are intranet and extranet. Sample Final Question I will give you 5 randomly selected e-commerce sites, and you will be asked to identify the business models and potential revenue sources for each site.