Lecture 2 – eCommerce Revenue Models eBusiness

eBusiness

Lecture 2 - Revenue Models

eCommerce Revenue Models Lecture 2 - 2.2

Introduction to Lecture 2

Topics covered:
• Different types of revenue models
• Changing revenue models to meet the
needs of users
• Revenue strategy issues
• Mobile commerce

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eCommerce Revenue Models Lecture 2 - 2.3

Summary of
Different Revenue Models
• Web catalogue
• Digital content
• Advertising-supported
g pp
• Advertising-subscription mixed
• Fee-for-transaction
• Fee-for-service

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Lecture 2 – eCommerce Revenue Models eBusiness

eCommerce Revenue Models Lecture 2 - 2.4

Web Catalogue Revenue Model

Key characteristics:
• Adaptation of mail order catalogue
• Mail order businesses expanding operations to the
webb
• Firms with physical stores offering online capability
• Access to customers throughout the world
• Enable customers to complete payment via phone
or mail if required

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eCommerce Revenue Models Lecture 2 - 2.5

Businesses Using
Web Catalogue Models
• Computers and
consumer electronics
• Books
• Music and videos
• Luxury goods
• Clothing
• Flowers and gifts
• General discounters

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eCommerce Revenue Models Lecture 2 - 2.6

Digital Content Revenue Model

Key characteristics:
• Used by firms that own rights to information
• Highly efficient distribution mechanism
• Flexibility
Fle ibilit in purchasing
p rchasing information
information,
including subscriptions or one-off payments
• Information can be customised to meet
user’s requirements
• Electronic distribution offers cost benefits
over printed matter

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eCommerce Revenue Models Lecture 2 - 2.7

Businesses Using
Digital Content Models
• Providers of legal information
services
• Access to digital copies of published
documents
• Subscriptions to academic journals
• Access to bibliographic databases
• Subscriptions to digitised news
sources and magazine content

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eCommerce Revenue Models Lecture 2 - 2.8

Advertising-Supported
Revenue Models
Key characteristics:
• Similar to that used by network television
• Advertising revenue pays for content
development and delivery
• Requires specific groups of visitors and
targeted advertising messages
• Problems with how to measure and charge
for number of site visitor views

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eCommerce Revenue Models Lecture 2 - 2.9

Business Using
Advertising-Supported Models
Web portals
• Yahoo!
• Google
• AOL
• MSN
Newspaper publishers
Targeted classified
advertising

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eCommerce Revenue Models Lecture 2 - 2.10

Advertising-Subscription
Mixed Revenue Models
Key characteristics:
• Model originally used by traditional print
newspapers
p p and magazines
g
• Subscribers pay a fee and accept some
level of advertising
• Level of advertising is far less than on
advertising-supported sites

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eCommerce Revenue Models Lecture 2 - 2.11

Businesses Using Advertising-

Subscription Mixed Models
• Online editions of newspapers and magazines
• Advertising used to part fund the website
• Payment for articles retrieved from archive
• Subscription to print version of magazine gives free
access to online version
• Access to member-only sections of sports news
sites

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eCommerce Revenue Models Lecture 2 - 2.12

Fee-for-Transaction
Revenue Models
Key characteristics:
• Business offers service for which they
charge
• Scale of charge dependent upon number or
size of transactions processed
• Provides personal service
• Provides service at competitive rates
compared to traditional providers
• Commonly referred to as reintermediation

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eCommerce Revenue Models Lecture 2 - 2.13

Businesses Using
Fee-for-Transaction Models
• Travel agents
• Car sales
• Stockbrokers
• Insurance
I brokers
b k
• Event tickets
• Estate agents
• Online banking services
• Online music

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eCommerce Revenue Models Lecture 2 - 2.14

Fee-for-Service Revenue
Models
Key characteristics:
• Fee charged for service offered
• Fee based on the value of the service
provided
• Often related to entertainment and leisure
activities
• Increasing interest from professionals

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eCommerce Revenue Models Lecture 2 - 2.15

Businesses Using
Fee-for-Service Models
• Online games sites
• Delivering video content to
subscribers
• Professional services
offering advice:
– Doctors
– Lawyers
– Accountants
– Engineers

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eCommerce Revenue Models Lecture 2 - 2.16

Changing Revenue Models

• Revenue models change to meet changing
behaviour of web customers
• First wave of eCommerce saw reduced
investment, leading to revised revenue
models
• Second wave of eCommerce will require
further adjustments

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eCommerce Revenue Models Lecture 2 - 2.17

Multiple Transitions of
Encyclopaedia Britannica

Mixed
Selling Advertising
Print advertising
information supported
publisher subscription
on the web website
model

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eCommerce Revenue Models Lecture 2 - 2.18

Revenue Strategy Issues

- Channel Conflict
• Website sales can have a negative impact
on established outlets and networks
• Known as cannibalisation
• Requirement to coordinate presence across
all distribution channels

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eCommerce Revenue Models Lecture 2 - 2.19

Revenue Strategy Issues

- Strategic Alliances
• Companies join forces to sell on the web
• Can increase speed of entry into a market
• Websites can join with channel distribution
managementt companies i
• Channel distribution manager develops
specialist knowledge of a product line
• Channel manager takes a percentage of the
sales volume as a fee

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eCommerce Revenue Models Lecture 2 - 2.20

Mobile Commerce
• Laptops, PDAs and mobile phones linked to the
Internet
• M-Commerce applications include
– Stock quotes
– Travel directions
– Weather forecasts
– Airline flight schedules
– Short news reports
• Few companies have yet to generate significant
revenue

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eCommerce Revenue Models Lecture 2 - 2.21

Summary
• Wide variety of eCommerce revenue
models
• Different revenue models are appropriate
for different types of business
• Businesses can adjust revenue models to
meet changing needs of customers
• Important to coordinate activities across all
distribution channels

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eCommerce Revenue Models Lecture 2 - 2.22

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