E-Business Models

1. E-Business Models Business Model-Definition • It defines a revenue stream to the provider. • It provides benefits to the consumer. • It provides architecture to deliver those benefits. Simply put, it is how an organization makes money.

2. E-business Models • A business model defines a revenue stream to the provider, benefits to the consumer, and an architecture to deliver those benefits. • Online intermediaries are classified by the way they make money: 1. Content sponsorship 2. Direct selling 3. Infomediary 4. Intermediary model

3. Agent Model Representing Sellers Selling Agent Manufacture’s Agent Metamediary Virtual Mall Agent Model representing Buyers Shopping Agent Reverse Auction Buyer Cooperative E-tailing Model Bit Vendor Tangible Products E-business Models • Intermediary Models: 1. Brokerage Models: • Online Exchange e.g. E-trade • Online Auction e.g. eBay 2. Agent Models:

4. 1.     sponsorship 2.       Direct selling 3.       Infomediary 4.       Content Intermediaries Broker: Online exchange Online auction Agent: Agent models representing seller Selling agent (affiliate program) Manufacturer’s agent (catalog aggregator) Metamediary Virtual mall Agent models representing buyer (purchasing agent) Shopping agent Reverse auction Buyer cooperative E-Tailer: Bit vendor Tangible products E-Business Models

5. Content Sponsorship E-Business Model Firms create web sites, attract a lot of traffic, and sell advertising. • Involves using a niche strategy to draw special interest audiences (e.g. www.homearts.com, travel, gardening, dance, transport, food and drink.) • The product sold is a space on the Web. • Similar to traditional media, where television, magazines, and other media sell space and air time. • Major portals such as AOL, Yahoo, MSN, Lycos, Excite use this models. Sometimes used with other models to generate a revenue stream e.g., an online e-tailer(www.buy.com), sells ads on its site to generate additional revenue, which helps them to lower prices.

6. Direct Selling E-Business Model • Manufacturers sell directly to customers instead of using intermediaries. (e.g. Cisco systems, Dell Computer) • Wholesalers and retailers are not needed, causing disintermediation. • The Internet makes it easier to bypass intermediaries. • Used in business-to-business markets-saves millions of dollars at times in sales related expenses, such as, personnel, product configuration, and order processing costs. • Also used in consumer markets with sales of digital, software, and music, that require no inventory, pick-up, packing and shipping.(e.g. CNET shareware. Com. Wall Street Journal Online)

7. Direct Selling Considerations • Perishable products, such as fresh foods and flowers are sold using this method. (e.g. pro-flowers delivers flowers fresh from the grower.) • Benefits include cost savings and rapid delivery for the consumer. • Benefits to the manufacturer include an ability to claim a piece of the middleman’s margin.

8. Infomediary E-Business Model • Refers to an online organization that gathers and distributes information (e.g. Market Research Firms, such as, Media Metrix ). • Usually compensates the consumer for sharing information. • Others like DoubleClick use cookies to track users as they surf the web without compensation. • Consumers are paid to buy space on the permission marketers website, thereby generating attention-the scarcest commodity in cyberspace.(e.g. www.alladvantage.com and www.sharkhunt.com

9. Infomediary Considerations • The space is resold to other advertisers. • Consumers have the benefit of receiving ads targeted to their interests, thereby providing them with control concerning the ads they receive • Benefit to the infomediary is that consumer information increases the value of its ad inventory. • Benefit to advertisers is that they can reach a highly targeted audience even while the consumer is on a competitor’s site.

10. Brokerage Models The broker creates a market in which buyers and sellers negotiate and complete transactions. They typically charge a fee. e.g.1.Offline Exchange: NYSE 2.Online Exchange: C2C www.E*Trade.com www.Ameritrade.com www.TradeCast.com B2C Carpoint, AutoByTel B2B NECX, Paper Exchange, E-Steel, Altra 3.Online Auction:C2C e Bay B2C Ubid B2B Spottrader

11. Brokerage Model Considerations • Benefits to the Buyer: 1. Convenience 2. Speed of order execution 3. Transaction processing 4. Cost savings through lower prices 5. Decreased search time 6. Savings of energy and frustration in locating appropriate sellers.

12. Brokerage Model Continued Benefits to the Seller 1. Creation of a pool of interested buyers. 2. Cost savings in the form of lowered customer acquisition costs and transaction costs. 3. Unloading surplus inventory and obtaining market price for their goods.

13. Agent Models Representing Sellers Agents do represent either the buyer or seller depending on who pays their fees. • Selling Agents: Represent a single firm to help it move products and normally work for a commission. For example, affiliate programs pay commissions to web site owners for customer referrals. e.g. Amazon Associates Program and www.tennisserver.com.

14. Agent Models Representing Seller Continued • Manufacturer’s Agent: Represent more than one seller. 1. B2C (Seller aggregators) www.travelcity.com www.expedia.com 2. B2B (Catalog aggregators) www.Chemdex.com www.MRO.com

15. Agent Models Representing Seller Continued • Metamediary An agent that represents a cluster of manufacturers, e-tailers and content providers organized around a life event or major asset purchase. www.peoplefirst.com www.edmunds.com www.the knot.com

16. Agent Models Representing Seller Continued • Benefits of Metamediaries They solve four major consumer problems: 1. Reduce search times 2. Provide quality assurance about vendors 3. Facilitate transactions for a group of related purchases. 4. Provide relevant and unbiased content information about the purchase. They benefit business partners by : 1. Having traffic directed to their sites 2. Co-branding with the metamediary

17. Agent Models Representing Seller Continued • Virtual Malls Host multiple online merchants in a model similar to a shopping mall. Hosted merchants gain exposure from traffic coming to the mall. e.g. www.yahoo.com( Yahoo!Store) www.women.com Six benefits: 1. Branding 2. Digital wallets 3. Frequent shopper programs 4. Gift registry 5. Search facility 6. Recommendation service

18. Agent Models Representing Buyers(Purchasing agent) • Shopping Agents conduct product searches for consumers and display a list of merchants and the price at which they will sell the item. e.g. www. pricescan. com • Second –generation shopping agents measure value not just price. e.g.www.evenbetter.com www.bizrate.com www.frictionless.com (Frictionless Value Shopper)

19. Agent Models Representing Buyers(Purchasing agent) • Reverse Auction serves as purchasing agent for individual buyers. The buyers specifies a price and sellers bid for the buyer’s business. e.g. www.nextag.com www. priceline.com • benefits to the seller 1.unloading excess inventory, especially perishable inventory • benefits to the buyer 1.lower prices 2.the satisfactions of being able to name one’s price.

20. Agent Models Representing Buyer Continued • Buyer Cooperative (buyer aggregator) e.g. PowerBuys Buy-Cycle

21. E-Tailing Models • E-tailing model set up an on-line storefront and sell to businesses and for consumers. 1. Use of bit vendors Any content that can be digitized can be transmitted over the Internet:text, graphics, audio and content. e.g. www.nytimes.com www.hotwired.com 2. Tangible products

22. The End