2. Slide Show By – MUZAHID KHAN Integrated BBA+MBA muzahidkhan123@gmail COMMERCE
3. COMMERCE Revenue/Business Models Revenue/Business Models Web Catalog Revenue Model Advertising-Supported Models Subscription-Based Revenue Models Fee-for-Transaction Revenue Models Fee-for-Service Revenue Models Comparison of Three Models Revenue Strategy Considerations Definition: How does the firm earn revenue? Three issues to consider: What does it sell (product/services). To whom does it sell (customers). How does it sell (distribution channel). Common e-commerce revenue models: Web catalog (e-tailing): Amazon, Dell, Land’s End. Advertising-based: Yahoo, Google, CNN.com. Subscription-based: WSJ. Fee per transaction: eBay, E-Trade. Fee per service: CNN videos.
4. COMMERCE Web Catalog Revenue Model Revenue/Business Models Web Catalog Revenue Model Advertising-Supported Models Subscription-Based Revenue Models Fee-for-Transaction Revenue Models Fee-for-Service Revenue Models Comparison of Three Models Revenue Strategy Considerations Similar to mail-order catalogs predating the web: Works best for: Standardized products with little quality concerns: (New) Books, music, and videos. Impulse purchases: Gifts, electronics. Problems: Thin margins because users shop around for the lowest price. High volume sales are needed to remain profitable (economies of scale).
5. COMMERCE Advertising-Supported Models Revenue/Business Models Web Catalog Revenue Model Advertising-Supported Models Subscription-Based Revenue Models Fee-for-Transaction Revenue Models Fee-for-Service Revenue Models Comparison of Three Models Revenue Strategy Considerations Free programming used to attract viewers, and then sell ads to marketers based on viewership (like broadcast TV). Revenue = CPM * # of eyeballs. CPM: Cost per thousand banner ads. Who has higher CPM: Yahoo or Yahoo Finance? Horizontal versus vertical portal. Stickiness: Website’s ability to retain visitors. Sticky content: e-mail, message boards, chat. Non-sticky content: news, search. Not very effective: Low CPM rates due to low ad effectiveness. Non-sticky content costs money!
7. COMMERCE Subscription-Based Revenue Models Revenue/Business Models Web Catalog Revenue Model Advertising-Supported Models Subscription-Based Revenue Models Fee-for-Transaction Revenue Models Fee-for-Service Revenue Models Comparison of Three Models Revenue Strategy Considerations Subscription fee charged for preferred content (like cable TV): New York Times (crosswords) Wall Street Journal (special articles). CBS Marketwatch (archived articles). AOL (monthly fee for ISP connection). Pornographic web sites. Usually a combination of free and premium (fee) content: Attract customers using free content, then try to make them pay for premium content. Some sites use subscription-advertisement mixed revenue model.
8. COMMERCE Fee-for-Transaction Revenue Models Revenue/Business Models Web Catalog Revenue Model Advertising-Supported Models Subscription-Based Revenue Models Fee-for-Transaction Revenue Models Fee-for-Service Revenue Models Comparison of Three Models Revenue Strategy Considerations Businesses offer services and charge a fee based on number or size of transactions processed. Ebay: Listing fee + % of highest bid (commission). Ameritrade: $8 flat per trade. Expedia: $5 surcharge per ticket. Ticketmaster: Commission per ticket purchased. Plagiarism services: Surcharge per term paper downloaded.
9. COMMERCE Fee-for-Service Revenue Models Revenue/Business Models Web Catalog Revenue Model Advertising-Supported Models Subscription-Based Revenue Models Fee-for-Transaction Revenue Models Fee-for-Service Revenue Models Comparison of Three Models Revenue Strategy Considerations Fee based on value of service provided. Online games: Customers pay to play premium games on the Web. Concerts and films: Subscribers pay for streaming concert videos and films accessed via broadband connection. Professional services: Prepaid legal, dental, insurance, warranty, and other services marketed and sold through the Web.
10. COMMERCE Comparison of Three Models Revenue/Business Models Web Catalog Revenue Model Advertising-Supported Models Subscription-Based Revenue Models Fee-for-Transaction Revenue Models Fee-for-Service Revenue Models Comparison of Three Models Revenue Strategy Considerations The Amazon model (catalog/e-tailing): Low profitability (due to high fulfillment costs). Easy to replicate. Only sustainable through sales volume and repeat sales. Economies of scale and scope are vital for survival. The Dell model (customization): Complex to operate (sophisticated supply chain). Difficult to replicate. Requires end-to-end optimization of supply chains for lowest costs. The eBay model (marketplace): Low operating costs. Strong network effect (non-replicable). First-mover advantage critical.
11. COMMERCE Revenue Strategy Considerations Revenue/Business Models Web Catalog Revenue Model Advertising-Supported Models Subscription-Based Revenue Models Fee-for-Transaction Revenue Models Fee-for-Service Revenue Models Comparison of Three Models Revenue Strategy Considerations Channel conflict (cannibalization): When both online and offline channels are used, growth in online sales may come at the cost of lower offline sales at retail outlets. Strategic alliance: Two companies can jointly sell a common product to help them both. Ford and Firestone, Sears and Kenmore. Minimize customer effort using value-added services: Provide search and comparison tools for customers to compare alternatives. Provide user personalization/recommendation services. Provide account aggregation services: Single site login for all accounts for online bill payment.
