Information Technology, Engineering Faculty

UNIM

E-Commerce Business Models &

Concepts

Academic Year: 2014-2015

UNIM

(3rd Week)

2

Bussiness Model

Definition

Source: "Business Models for Electronic Markets" by Paul Timmers

in Electronic Markets, Vol. 8, No. 2, July 1998, p. 4.

• An architecture for the product, service, and information flo

ws, including a description of the various business actors and

their roles; and

• A description of the potential benefits for the various business

actors; and

• A description of the sources of revenue.

3

Type of Bussiness Model

Michael Rappa

1. Brokerage

2. Advertising

3. Infomediary

4. Merchant

5. Manufacturer

6. Affiliate

7. Community

8. Subscription

9. Utility

4

Brokerage

Definition

Brokers are market makers, they bring buyers and sellers together

and facilitate transactions in B2C or B2B or C2C markets.

Scope

Marketplace Exchange: Orbitz, ChemConnect

Buy/Sell Fulfillment: CarsDirect, Respond.com

Demand Collection System: Priceline.com

Auction Broker: eBay

Transaction Broker: PayPal, Escrow.com

Distributor :

Search Agent: MySimon

Virtual Marketplace: Amazon.com

5

Advertising

Definition

This model is an extension of the traditional media broadcasting model.

This model only works when the volume of viewer traffic is large or highly s

pecialized.

Scope

Portal : Yahoo!

Classifieds: Monster.com, Match.com

User Registration: NYTimes Digital

Query-based Paid Placement : Google, Overture

Contextual Advertising : Gator, WhenU, eZula

ContentTargeted Advertising : Google

Intromercials : CBS MarketWatch

Ultramercials

6

Infomediary

Definition

Data about consumers and their buying habits are extremely val

uable, especially when that information is carefully analyzed and

used to target marketing campaigns.

Independently collected data about products are useful to cons

umers. Infomediaries provide information to both buyers and selle

rs.

Scope

Advertising Networks : DoubleClick

Audience Measurement Services : Nielsen//Netratings

Incentive Marketing : Coolsavings, MyPoints, Greenpoints

Metamediary : Edmunds

7

Merchant

Definition

These are classic wholesalers and retailers of goods and services.

In other words, "e-tailers.“

Scope

Virtual Merchant :Amazon.com

Catalog Merchant : Lands’ End

Click and Mortar : Barnes & Noble

Bit Vendor : Apple iTunes Music Store

8

Manufacturer

Definition

This model is predicated on the power of the Web to allow manu

facturers to reach buyers directly and thereby compress the distri

bution channel.

Scope

Purchase, Lease, License, Brand Integrated Content.

E.g.

DellComputer

9

Affiliate

Definition

Provides purchase opportunities from a number of different sites.

The affiliate sites provide purchase-point click-through to the mer

chant.

Scope

Banner Exchange, Pay-Per-Click, Revenue Sharing.

E.g.

Barnes & Noble and Amazon.com.

10

Community

Definition

Users who have a common interest in an area congregate at co

mmunity Web sites.

The viability of the community model is based on user loyalty.

Scope

Open Source: RedHat

Public Broadcasting: The Classical Station (WCPE.org)

Knowledge Networks: AllExpert.

11

Subscription

Definition

Users are charged a periodic fee to subscribe to a service.

Scope

Content Services: Listen.com, Netflix

Person-to-Person Networking Services: Classmates

Trust Services: Truste

Internet Service Providers: America Online

12

Utility

Definition

A metered usage or pay as you go approach.

Scope

Metered Usage, Metered Subscriptions.

E.g.

IBM (International Business Machine)

13

Business Concept

8 Key Elements of a Business Model

1. Value proposition

2. Revenue model

3. Market opportunity

4. Competitive environment

5. Competitive advantage

6. Market strategy

7. Organizational development

8. Management team

14

Value Proposition

“Why should the customer buy from you?”

Successful e-commerce value propositions:

Personalization/customization

Reduction of product search, price discovery costs

Facilitation of transactions by managing product delivery

15

Revenue Model

“How will the firm earn revenue, generate profits, and produce a su

perior return on invested capital?”

Major types:

Advertising revenue model

Subscription revenue model

Transaction fee revenue model

Sales revenue model

Affiliate revenue model

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Market Opportunity

“Whatmarketspace do you intend to serve and what is its size?”

Marketspace: Area of actual or potential commercial value in w

hich company intends to operate

Realistic market opportunity: Defined by revenue potential in eac

h market niche in which company hopes to compete

Market opportunity typically divided into smaller niches

17

Competitive Environment

“Who else occupies your intendedmarketspace?”

• Other companies selling similar products in the same marketspac

e

• Includes both direct and indirect competitors

Influenced by

Number and size of active competitors

Each competitor’s market share

Competitors’ profitability

Competitors’ pricing

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Competitive Advantage

“What special advantages does your firm bring to the marketspace

?”

Is your product superior to or cheaper to produce than your com

petitors’?

Important concepts

Asymmetries

First-mover advantage, complementary resources

Unfair competitive advantage

Leverage

Perfect markets

19

Market Strategy

“How do you plan to promote your products or services to attract yo

ur target audience?”

Details how a company intends to enter market and attract cust

omers

Best business concepts will fail if not properly marketed to potenti

al customers

20

Organizational development

What types of organizational structures within the firm are necessary

to carry out the business plan?”

Describes how firm will organize work

Typically, divided into functional departments

As company grows, hiring moves from generalists to specialists

21

Management Team

“What kind of backgrounds should the company’s leaders have?”

A strong management team

Can make the business model work

Can give credibility to outside investors

Has market-specific knowledge

Has experience in implementing business plans

Finish