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Dr. Michael D. Featherstone

Introduction to e-CommerceWeb Business Models

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Business Models

The term business model came into usage after Dan Bricklin invented the first ‘Killer App’…VisiCalc (which initially ran on only one computer – under one operating system).

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Business Models

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Business Models

COMPLEX SYSTEMS REVIEWED

• Complex systems typically have a large number of small parts or components thatinteract with similar nearby parts and components (The “long tail” of the power law for example). • These local interactions often lead to the system organizing itself without any master

control or external agent being "in charge".• Such systems are often referred to as being self-organizing. • Such systems frequently form power distributions.• These self-organized systems are also dynamic systems under constant change. • Short of death or destruction, they do not settle info a final stable "equilibrium"

state.• New entities emerge in complex systems. • To the extent these systems react to changes in their environment so as to maintain

their integrity, they are known as complex adaptive systems.

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A Review of the Electronic Commerce Literature to Determine the Meaning of the Term ‘Business Model’.

Susan Lambert School of Commerce Flinders University of South Australia

Abstract

In the electronic commerce literature there is confusion as to the meaning and purpose of the term ‘business model’. There are wide ranging perceptions of the term causing many to wonder just what a business model is. Definitions vary as do the designated attributes of business models thereby creating problems for academics and professionals relying on the literature for guidance in understanding business models. This paper presents and analyses the definitions of ‘business model’ presented in the electronic commerce literature along with the designated business model attributes. The typologies and taxonomies of business models present in the literature are examined and evaluated. It is concluded that until there is some consensus as to the definition of ‘business model’ and the attributes agreed upon, useful taxonomies of business models would not be forthcoming.

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Business Models

Business Models

By Business Category

By Revenue Generation Mechanism

By Simplicity

‘A business model is the method of doing business by which a company can generate revenue to sustain itself’ Turbin “Electronic Commerce:A managerial perspective (2004, p. 11)

Business Model Components

Value Proposition

Revenue Model

Market opportunity

Competitive environment

Competitive Advantage

Market strategy

Organizational development

Management team

Laudon and traver “e-Commerce” 2009 p. 67

Revenue Models

Advertising

Subscription

Transaction Fee

Sales

Affiliate

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Business Models

Mike Rappa’s Models

• Brokerage

• Advertising

• Infomediary

• Merchant

• Manufacturer (Direct)

• Affiliate

• Community

• Subscription

• Utility

http://digitalenterprise.org/models/models.html

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Business Models

Simplicity (Simple Models to more Complex Models)

The concept of Simple Business Models grew from this question:

If the Web is a complex system and if one of the attributes of complex systems is that new entities should emerge, then what types of new business entities are emerging in the Web?

One would expect simpler models to emerge earlier in a new business environment.

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Business Models – Level 1

• Buying domain names

• Selling goods on e-Bay

These require no Web presence.

They leverage the technology that others have developed.

They require very little or no “up front” investment

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Business Models Level 2

• Domain Name Parking

• Opening an e-Bay market presence or store

This requires a slightly higher investment in technological skills.

• You need to know how to transfer your domain name to another DN server

• You still leverage technology others have provided

• Now you begin to have an interest traffic to your page(s).

• Metrics/Analytics become an important part of your business.

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Business Models Level 3

• Affiliate Sites

This requires a still higher investment in technological skills and a wider variety of skills…

Design skills – as you actually need to develop or provide content for a site

However… You may still leverage technology others have provided as third party companies may become more important to your enterprise

• Purchase/Download design templates

• Analytics provided by 3rd party developers

• Marketing assistance from other sites. (For example: Google, Ask, Yahoo)

Now you begin to have a very serious interest in analytics.• Metrics become a much more important part of your business.

• How do we drive people to our site?

• What do they do when they get there?

• How do we keep them coming back?

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Business Model Evolution

E-Commerce Case - Amazon

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Business Models Level 4

This requires a still higher investment in technological skills.

Also requires more time, money and attention …

Web business strategy becomes a factor. Design skills – as you actually need to develop or provide content for a site

You may still leverage technology others have provided as third party companies may become more important to your enterprise

• Purchase/Download design templates which include shopping carts

• Ability to process credit card or Paypal accounts

• Marketing assistance from other sites. (For example: Google, Ask, Yahoo)

• Access to Web Markets (For example Alibabba, Global Source)

Might need still more sophisticated analytics and now strategic tools• High level analytics

• Link analysis tools

E-Commerce Sites and Dynamic Content Centric sites

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MBA in a Paragraph

“As many more BUSINESSES of each INDUSTRY are Started than can possibly survive; and as, consequently, there is a frequently recurring struggle for existence among businesses, it follows that any business, if it vary however slightly in any manner profitable to itself (that is to say if it somehow differentiates itself to its advantage), under the complex and sometimes varying conditions of competition, that business will have a better chance of being naturally selected by customers and thus will have a better chance of surviving”

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Thank you for your attention

This Concludes the Web Business Models Presentation