EBusiness Models

1
E-Business Models

• Thinking Outside of the Box

2
What Is a Business Model?

• The basic process flow indicating how a business
  operates, including how business functions are
  linked together.
• A representation of a companys revenue stream,
  benefits to the consumer, and architecture to
  deliver those benefits.
• In short, its how the organization makes money!
• Kleindl, p.5

3
Dells Online Business Model
Suppliers linked through extranet deliver JIT
Product delivered through independent shippers
such as UPS
Customer gathers information and purchases
through Web page
Dell manufactures customized PC and sells at low
price
Web page provides information and ordering
Payments are made online through web page
Kleindl, p3-5 Atler p3
4
Genesis of Online Business Models

• Technology-created vs. Technology-enhanced
• Technology-created business model that did not
  exist or was in a substantially different form
  prior to e-business. (could not survive without
  electronic presence).
• Technology-enhanced traditional business model
  that has been altered, improved, or transformed
  as a result of e-business. (simply improved the
  value chain through technology).

5
E-Business Models

• Direct Sales
• Virtual Storefronts (E-tailing)
• Online Malls
• Online Brokers
• Auctions/Reverse Auctions
• Infomediaries
• Content Sponsorship Models

6
Direct Sales Models

• E-business model is built around concept of
  disintermediation the elimination of middlemen
  in order to cut costs and speed delivery of
  product from manufacturer to consumer or business
  customer
• Has been used most successfully in B2B markets
  because of smaller, more homogeneous customer
  groups, advent of EDI, and JIT inventory control
  systems
• Can be Bit Vendor, tangible good, or business
  service
• Ex. Cisco Systems, Dell Computers, Dells Premier
  Support Demo , CNET Shareware, IBM, Gateway, NY
  Times, Jcrew, LLBean
• Profit Derives from sale of company products
  much like offline sales through company sales
  force

7
Virtual Storefront (E-tailing)

• Model is based on an electronic version of
  traditional brick-and-mortar stores. The
  click-and-order electronic store has product
  displays, shopping carts, checkout stands, etc.
• Much more convenient for consumers to shop,
  cheaper for seller to operate
• Must have assortment management, good site
  content, secure ordering, solid delivery system,
  and method for driving traffic to your site, such
  as affiliate programs
• Ex. Amazons 1 Click demo, CarParts,
  BarnsandNoble, Etoys
• Profits Directly from sale of products of
  product mix from several manufacturers, plus
  banner ads

8
Online Malls

• Hosts multiple online merchants to gain added
  exposure from traffic coming to the mall.
• Customer can register purchase, billing, and
  shipping information in central account which is
  used for purchases at all mall stores.
• Offers numerous customer services such as
  frequent shopper programs, gift registry, buyers
  protection, mall search engine, and product
  recommendations for special occasions
• Ex. Yahoo! Store, Majon International
• Profit Mall owner makes money from listing fees,
  transaction fees, setup fees, ads, and
  occasionally, commissions.

9
Online Brokers

• Creates a market in which buyers and sellers find
  one another, negotiate, and complete transactions
• Provides many value-added services such as
  information resources and financing alternatives,
  but goes beyond just information provider, helps
  arrange transactions for both B2C and B2B
• May take one of several forms such as
• Buyer Aggregators a unique form of broker that
  brings groups of buyers together for power
  buys.
• Ex. (eWinWin)
• Buy/Sell Fulfillment brings individual buyers
  together with seller
• Ex. ETrade, Datek, Carpoint, AutoByTel,
  AutoTrader
• Market Exchanges are trading desks where B2B
  buyers and sellers come together.
• Ex. Metal Site, PaperSpace, Buzzsaw, E-Steel
• Profit Transaction or listing fees paid by
  buyer, seller, or both

10
Auctions/Reverse Auctions

• Extremely popular form of business model for
  selling B2B, B2C, and C2C can be set up to host
  your own auctions or use an auction brokerage
• Auctions may be part of a general auction web
  site or specialized in particular industries
• Great for unloading surplus goods and getting
  close to market prices
• Multiple auction formats reserve, private..
• Challenges including selecting merchandise
  suitable for auctions, handling payment, shipping
• Ex. eBay, uBid, NextPlanetOver
• Profit Listing fees (nominal) plus commission
  based on winning bid price also from affiliates
  and ads

11
Auctions/Reverse Auctions(continued)

• In Reverse Auctions, buyers register an amount
  they are willing to pay, then sellers bid for the
  buyers business.
• Sellers start at high prices, then gradually
  lower it until they meet the buyers price or get
  close enough to cause a sale.
• Common in perishable goods and time constrained
  services (e.g., airline seats and hotel rooms)
• Helps seller get rid of excess merchandise
  without upsetting channel partners
• Ex. NexTag.com, Priceline.com, Travelocity

12
Infomediaries

• Sometimes called aggregators business model is
  built around compiling and distributing
  information
• Profit Referral fees, advertisers, affiliates
• Types include
• Online publications
• Electronic magazines or newspapers where
  consumers seek news or entertainment rather than
  using the offline version
• Usually on an online rental (subscription)
  basis, but may also be on a cost-per-click
  basis
• Gives consumer ability to search archives
• Ex. USA Today, Consumer Reports, MountainZone

13
Infomediaries (continued)

• Types of Infomediaries
• Portal Sites
• Serve as information centers or gateways to other
  sites
• Brings together clusters of manufacturers,
  e-tailers, content providers, consumers into an
  online community
• Can be general (Yahoo!, NetZero, Excite) or
  special-interest vortals (Edmunds, TheKnot,
• Reference Services/Directories
• Compilers of information such as research data,
  articles, reports, etc.
• User can search directories for relevant
  information which is more timely than printed
  material
• May also allow users to contribute reviews,
  opinions, etc
• Ex. ePinions, OutdoorReview, Neilsen, Gallup,
  Media Metrix, The Iconocast, The Standard,

14
Content Sponsorship

• E-business model that builds web sites
  specifically to create traffic and sell
  advertising
• Rooted in traditional media (television,
  magazines, radio) that sell space and air time
• Uses permission marketing, which offers consumers
  incentives to accept advertising and email
  voluntarily.
• Asks people what they are interested in, asks
  permission to send them information, then does it
  in a creative and entertaining manner
• Benefit is a captive audience who has agreed to
  view ads
• Ex. Freesamples.com, MyPoints, Netcentives
  (provider)
• Profit Selling ad space and promo activities to
  advertisers