Web Business ModelsKurt Komaromi

• Identify the levels of commitment to Web-based business

• Review the primary business models that use the Internet

Learning Objectives

• Value proposition for customers, partners and revenue generation

• Use technology to to achieve strategic objectives

• Goals - Achieve competitive advantage and survive

• Companies select one or more models

E-Business Models

Source: Strauss & Frost

Levels of Commitment

• Order processing

• Online purchasing

• Business intelligence

• Online advertising & PR

• Sales promotions

• Dynamic pricing strategies

Activity Level

• Customer Relationship Management (CRM)

• Supply Chain Management (SCM)

• Database marketing

• Knowledge management

• Mass customization

Business Process Level

• E-commerce

• Portal

• Social networking

• Broker model - exchange, online auction

• Agent model - shopping agent, manufacturer’s rep

Enterprise Level

• Exist on Internet only

• Challenges - establish new brand, convert customers from traditional firms

• Potential to redefine industries - Amazon, eBay, MySpace, iTunes

Pure Play Level

• Founded in 1995 as a pure play retailer

• Did not become profitable until 2001

• 2007 results:

! $14.8 billion in sales

! $476 million in net income

CASE:

• Leveraged strengths

• Developed new business model & partnerships

• Launched first affiliate program

vs.• Brokerage

• Advertising

• Infomediary

• Merchant

• Manufacturer

• Affiliate

• Community

• Subscription

Source: Rappa, M. North Carolina State University

Web Business Models

• Exchange (Orbitz)

• Demand collection (Priceline)

• Auction (eBay)

• Transaction (PayPal)

• Search agent (Shopping bot)

Brokerage Model

• Portal (Yahoo)

• Classifieds (Monster)

• Search Paid Placement (Google)

• User Registration (NY Times)

Advertising Model

• Advertising networks (DoubleClick)

• Audience measurement (Nielsen)

• Metamediary (Edmunds)

Infomediary Model

• Virtual merchant (Amazon)

• Catalog merchant (Land’s End)

• Click and Mortar (Barnes & Noble)

• Bit vendor (iTunes Music Store)

Merchant Model

• Direct (Dell)

• Purchase, lease or license

• Disintermediation - cut out the distribution partners

Manufacturer Model

• Banner exchange

• Pay per click

• Revenue sharing

Affiliate Model

• Open source (Linux)

• Open content (Wikipedia)

• Public broadcasting (NPR)

• Social networking (Facebook)

Community Model

• Content services (Netflix)

• Networking services (Classmates)

• Internet service providers (AOL)

Subscription Model