8.14 Internet Revenue Models

The Internet has profoundly changed the nature of business in many market sectors, and there is debate over whether the change is one of type or degree. Nonetheless, most observers believe that the same basic rules apply to Internet businesses as to any other business, and Internet revenue models are commonly grouped as follows:

B2B: Business to Business

Businesses sell to other businesses. Much the most important grouping, ten times the size of the B2C market.

E-Distributor

E-Distributors sell goods and services direct to companies. Examples are Cisco Systems, Fiat Group Automobiles S.p.A. and Eneco Energie.

E-Procurement

E-Procurement companies create and sell access to digital markets. Example: Google Services.

Digital Exchanges

Digital exchanges are electronic marketplaces where hundreds of suppliers meet large commercial purchasers. Example: Liquidation.Com.

Industrial Consortia

Industrial Consortia are industry-owned vertical marketplaces that serve specific industries. Example: GlaxoSmithKline's Patent Pools.

Private Industrial Networks

Private Industrial Networks or Private Trading Exchanges are digital networks that coordinate the flow of information between companies that do business together. They constitute some 75% of all B2B expenditures by large companies. Examples are Wal-Mart, Inc. and Procter & Gamble Co.

B2B: Business to Customer

Retail: businesses that sell to customers. The grouping can be further distinguished in many, sometimes overlapping, ways, but below is a common one.

Online Retail Stores: E-Tailers

A varied grouping ranging from giant stores like Amazon to Mom and Pop sites selling handicrafts. Estimated at $3.9 trillion in 2009 for the United States. The low barriers to entry make this an extremely competitive sector. Examples: Amazon, Inc. and Wal-Mart, Inc.

Content Provider

Not only text but CDs, photos, audio and video files are marketed in electronic form in a market that generated revenues of $3.9 billion in 2009. Example: Netflix.

Portals

Portals offer packages of content and services. Example: Google Services and Andhra Pradesh e-Governance.

Transaction Brokers

Transaction Brokers help get things done more quickly and cheaply. Examples: PayPal, Open Table and Commerce Bancorp.

Market Creators

Market Creators use Internet technology to create markets that bring buyers and sellers together. Examples are eBay, Inc. and Liquidation.Com.

Service Providers

Service Providers make money by providing a service. Example: SIS Datenverarbeitung GmbH and Zipcar.

Community Providers

Community Providers create sites where individuals can meet, exchange experiences or work on common projects. Example: Twitter, Inc. and Aurora Health Care.

Customer to Customer

Customers connect directly with each other to trade or purchase. Examples: Craigslist and eBay, Inc.

Peer to Peer

A technology that allows consumers to share files and service, not always legally. Example: 4Shared.Com.

M-Commerce

A growing sector that uses wireless technology for many of the groupings above. Example: PayPal mobile.

eCommerce Enablers

The Gold Rush model: less than one percent of the half million miners who descended on California in the Great Gold Rush became wealthy, but companies supplying their needs often built long-lasting empires in banking, real estate and clothing. The representatives in the Internet age are as follows.

Hardware

Companies assembling computers and servers. Example: Dell, Inc.

Software: Operating Systems and Servers

Companies include Microsoft and Apple.

Hard/Software: Routers

Example: Cisco Systems.

Software: Ecommerce Systems

Companies include Amazon Merchant Services and Yahoo Merchant Solutions

Software: Customer Relationship Management

Examples. Microsoft Dynamics CRM and Sage CRM.

Software: Encryption

Examples: NCH Software and Sophos.

Software: Streaming and Rich Media

Example: VideoLan and Adobe Flash Media Live Encoder.

Software: Payment Systems

Examples: Amazon Flexible Payments Service and Verotel.

Software: Performance Enhancement

Examples: Limelight Networks and Cachefly.

Software: Databases

Examples: Oracle, and DB2 database software.

Software: Site Hosting

Examples: Corporate Hosting and BlueWho.

Consulting: Search Engine Optimization

Software and advice relating to seo: examples include Market Position and SearchEngine Journal.

Consulting: Marketing

Companies include Clickz and Marketing Experiments.

Consulting: Ecommerce Gurus

Individuals include Jay Abraham, Dan Kennedy and Ralph Wilson.

Questions

1. Describe, with examples, a common three-fold grouping of Internet businesses.
2. Describe the essentials of five types of business to business Internet transactions.
3. Briefly describe B2C Internet businesses.
4. Name as many eBusiness enabler types as possible.

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