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E-Business Models - Outline

E-Business Models - Outline . What is a business model Classifying e-business models Applegate, HBS Rappa , NCSU ( http://digitalenterprise.org/models/models.html ) Information Discovery models Social Network models The world of online advertising Evolution of e-business models.

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E-Business Models - Outline

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  1. E-Business Models - Outline • What is a business model • Classifying e-business models • Applegate, HBS • Rappa, NCSU (http://digitalenterprise.org/models/models.html) • Information Discovery models • Social Network models • The world of online advertising • Evolution of e-business models

  2. Business Model • It is a descriptionof the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams. (OSTERWALDER, 2004)

  3. Business Model – Why and What? • A business model is the organization’s essential logic for consistently achieving its principle objectives – generate revenue on a sustained basis • E.g., Online retailer model, subscription model • It also describes the market, business, and system support structures • It specifies where the organization is situated in the supply chain • In very general terms the three basic modeling products are: • Activity models - what a business does • Process models - how a business accomplishes what it does • Data models - describes the information structure of a business

  4. And, leverages technology opportunities Developing the eCommerce business model • eCommerce strategies are best when driven by business, not technology, concerns. • One way is to dissect the buying/selling process into its various elements, from the buying side and the selling side, and with your customers and suppliers. Then, think about how you can apply the Web to each • What are your customer needs now and how are they changing? How can the Web help you address them?

  5. E-Business Models – Applegate, HBS Network Business Models Product/Service Distributors Producers(E.g., Online Content Producers) Infrastructure Infrastructure distributors (E.g., VOIP Services, Data Centers) Infrastructure Portals (E.g., LTE Portal) Portals Focused Distributors

  6. E-Business Models – Focused Distributors • Online Retailers • Assume inventory, price set by seller, physical products/services • Online Marketplaces • Electronic channel to link buyers and sellers, online sales • Aggregators • Collect product information for consumers, no online sales • Infomediaries • Focus on information products, transaction online • Exchanges • Price discovery by auction or bid/ask, transaction online

  7. Another Way to Classify Business Models (Dr. Michael Rappa, NCSU) • Brokerage model (Orbitz, Priceline, Paypal) • Advertising model (Yahoo, Monster) • Infomediary (DoubleClick, Edmunds) • Merchant model (Amazon, LandsEnd) • Manufacturer/Producer (Dell) • Affiliate (Amazon) • Virtual community (RedHat, MSNMoney) • Subscription (Netflix, Truste) • Utility (ISPs and ASPs) (http://digitalenterprise.org/models/models.html)

  8. Brokerage Model • Market makers who bring buyers and seller together • Market makers do not take ownership of the goods/service • Value added is in bringing together • adequate number of buyers for sellers to be able to sell profitably and/or • adequate number of sellers for buyers to purchase competitively • Usually charge transaction-based fee from the seller and occasionally from buyers • Orbitz, Escrow.com, ebay

  9. Advertising Model • Extension of the traditional media ad model • Works best when the website can attract high traffic of users • Banner are the most common form of ads • Portals are good examples of ad-driven models • Yahoo.com • Other example are classifieds (Craigslist) and online media (NCAA.com) • Keyword Search based sponsored links are also ads

  10. Infomediary Model • Focus on value added information to buyers / sellers • Data about products and producers provided in the form of reports • Lendingtree.com, Edmunds.com • Data about consumers collected, carefully analyzed and used for targeted marketing • Nielson, DoubleClick

  11. Online Merchant Model • Online version of well-known physical stores • Sometimes online-only presence • Retail pricing • Shipping is free or based on quantity • Popular examples • Bestbuy.com (click-and-mortar) • Lands’ End (catalog) • Apple’s iTunes Stores (digital content) • Amazon.com (virtual merchant)

  12. Other models • Manufacturer direct model • Affiliate model • Connects from small websites (partner sites) to well known merchants through a link • Percentage of sales to the affiliated partner sites • Pay-for-performance model that imposes very little cost to big merchants • Amazon.com, Google • Online Communities • Based on a focus topic/activity and user loyalty • Contextual advertising and premium services

  13. Information Discovery Model • Need for discovery tools • Search engines • Google, Yahoo, FilesTube, SearchCrystal • Meta-search engines • Metacrawler, Kartoo • Discovery of material in foreign languages • Google, Yahoo BabelFish

  14. Social Network Models • Focus on building a network of users who find value in connecting to other users • Provide easy-to-use tools to share information and content with other users on a selective basis or a global basis • Variety of communication tools in multiple platforms to make it easy to connect from anywhere • Facebook and LinkedIn

  15. Online Advertising Value Chain • Publishers creates ad spaces (ad inventory) on their web pages • Maximize ad revenue and minimize risk • Search engines are special type of publishers • Ad Network is an aggregator of the ad inventory • How do ad networks add value? • www.cpxinteractive.com Source: http://www.liesdamnedlies.com/2008/06/online-advertis.html

  16. Your Ad is being Served Source: http://www.liesdamnedlies.com/2008/06/online-advert-1.html

  17. Online Advertising Methods • Banners • Sponsored links on search pages • Pop-up and pop-under ads • Permission marketing • ExpressPaidSurveys, Pay Me For Surfing • Viral marketing • Pricing Models • CPM or Impression based • Cost Per Click (CPC) or Performance based

  18. Drivers of today’s online advertising • The emergence of “communitainment.” • The increasing popularity of “Usites.” • Mainstreaming of the Internet. • Declining usage of traditional media. • Fragmentation of content consumption. • Consumers are multitasking and they do not like ads. Source: PiperJaffrey

  19. Business Model & Web-site Design • Common Web-site Design elements • Company information and web-site purpose • Product/service information • Catalog search • Transaction processing / Shopping cart • Customer registration / Log-in • Database integration • Integration with related services • Digital certificate, payment, delivery • Contact / Feedback • How does each web-site design element fit with the needs of the business model?

  20. Evolution of Business Models • Why do business models evolve? • Enhance • Add features • Improve performance of current offerings • Expand • Add new product/service • Enter new markets • Extend • Add new line of business • Add new business models • Exit

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