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.
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
E-business Models
 Intermediary Models:
1. Brokerage Models:
– Online Exchange e.g. E-trade
– Online Auction e.g. eBay
2. Agent Models:
Agent Model Representing Sellers
Agent Model representing Buyers
E-tailing Model
Selling Agent
Manufacture’s Agent
Metamediary
Virtual Mall
Shopping Agent
Reverse Auction
Buyer Cooperative
Bit Vendor
Tangible Products
E-Business Models
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
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.
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)
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.
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
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.
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
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.
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.
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.
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
Agent Models Representing
Seller Continued
 Metamediary
An agent that represents a cluster of manufacturers, etailers and content providers organized around a life
event or major asset purchase.
www.peoplefirst.com
www.edmunds.com
www.the knot.com
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
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
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)
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.
Agent Models Representing
Buyer Continued
 Buyer Cooperative (buyer aggregator)
e.g. PowerBuys
Buy-Cycle
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
The End