Electronic Commerce: Business Models

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

Learning Objectives
Importance of Business Models in
Electronic Commerce What is a Business Model? Taxonomy of Electronic Commerce Business Models Transplanted Content based Models Transplanted Transaction based Models Native Content Based Models Native Transaction based Models
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ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

Growth in Electronic Commerce

Unprecedented Growth in Internet Connectivity Unprecedented Growth in Number of Web Sites Unprecedented High Profile failures
Boo.com (US $135 million) Toysmart.com Kozmo.com (US $50 million) Etoys.com Jaldi.com Autoindia.com

Is Electronic Commerce Businesses are for real?

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

Electronic Commerce: Business Model

A business model describes a set of

business entities and interrelationships among them. The model describes the sources of revenues and potential benefits accruing to the involved business actors.

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

Electronic Commerce: Business Model

The business model provides the broad

perspective necessary for identifying appropriate solution at some level of abstraction. The identified solution should be sustainable in terms of revenues and capable of realizing the stated objective.

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

Taxonomy of Business Models

Information Content Model Freeware Model Information Exchange Model

Digital Products Internet Access Provision Web Hosting & Internet Services Metered Service Model Metamediary Model Electronic Store Model Brokerage Model Manufacturing Model

Native Transplanted

Subscription Model Advertisement Model Infomediary Model Affiliate Model

Content

Transactions Transactions
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ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

Information Content Model

Web is a largest source of Information repositories In the early stages of Web developments Major source of Information Contents were scientists, Academicians and Researchers The Information is typically available at no charge basis It is typically utilized by agencies and groups interested in wide dissemination of information For example, Virtual Library -- http://www.vlib.org International Council of Museums http://www.icom.org/vlmp National Informatics Center, India http://www.nic.in

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

Freeware Model
Distribution of cooperatively developed free

software prototypes, products, patches and demonstration versions. The contents (software packages) can be downloaded at no incremental cost. For Example Linux http://www.linux.org GNU -- http://www.gnu.org Apache Web server http://www.apache.org

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

Information Exchange Model

The interaction- click-stream and transaction
in addition to voluntarily provided information at time of registrations at a web site can be used for creating profile of user. targeted marketing and promotions companies.

This information can be exchanged with other Privacy Issues

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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Subscription Model

Economic Databases (CMIE, Prowess) Stock Exchange Trading information (NSE ) Digital Contents Scientific discoveries, Images http://cfa-www.harvard.edu Stock Market - EDGAR Journals -- http://acm.org, http://ieee.org The model provides a subscription based access to Digital contents Flat rates vs. Contents based subscription rates

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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Advertising Model

Web sites that establish providing free interactive and repetitive services such as Email, Chat sessions, Discussion forums, News etc. aggregate web traffic or eye-balls These sites can serve Advertisements to these eyeballs by charging the companies to make up for the content provision and other associated cost and profit margins. The model is derived from the free television model. Charging on the basis of number of times a advertisement has been served. Additional charges for the click-through. ISPs - Caltiger.com, Juno.com Emails- HotMail.com, Rediffmail.com Portals/search engines Yahoo.com
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Infomediary Model
Aggregated personal profiles/needs from its
users (consumers and /or suppliers) Subsequently, markets that data to interested set of users Maintains the data privacy The users may get a portion of the brokered deals It operates by lowering the search/location cost It leverages on interaction cost for identifying the right product and price in a fast evolving technologically innovative product groups
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ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

Affiliate Model

User Enters Affiliates Website

Affiliated Web Site

Sponsoring Merchants Site

1: Affiliated Site redirects the customer to sponsoring merchants site 2: The Sponsoring merchant pays a percentage of transaction to the affiliated site Figure 2.2: The Affiliate Model

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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Digital Product Merchant Model

Information Flow

Seller Digital Data MM Content s/w Programs

Transaction Buyer Digital Data MM Content S/W Programs Payment Flow

Delivery

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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Internet Access Provision Model

Network Infrastructure is at the foundation of growth of electronic commerce Various modes of Internet Service Providers Dial-up Services Cable based services DSL and ADSL Leased Line services Payment options Flat rates Bandwidth based flat rates Usage based Free Access (in lieu of advertisement viewing)
ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill 18

Web Hosting & Internet Services Model

Electronic Shops and Businesses require 24x7 presence, upkeep, maintenance Also, common services like transaction security and payment services SMEs may not have expertise and the cost to get on electronic marketplace by addressing all infrastructure issues may get too high In this business model, the infrastructure company provides complete set of services required for hosting your business online. Yahoo Shops, iCats Lemonade Stand, Pugmarks.com Other services related to Speeding up the access across the globe etc.

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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Metered Service Model

Owning licenses for multiple software
packages, information databases, computing resources that are used occasionally is usually an expensive and time-consuming proposition. It puts strain on resources Distracts from core business activities. Model - Pay as you go approach for services on demand Example- HPs Infrastructure on Tap

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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Metamediary Model

intermediary that provides a single point of contact between a community of customers and the community of suppliers it deconstructs space and time it offers products in new ways Metamediaries present the information from users viewpoint rather than the Industry segments.

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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Metamediary Model
Travel Magzines Newspaper classifieds Travel Agents Hotel reservation Agents Skiing Equipment dealer
ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill 22

Financing Insurance Peer and Expert reviews Trekking Clubs

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ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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Electronic Store Model

Requires robust delivery (third party) infrastructure

Information Flow

Seller Products like Computers, Electronic Systems, and Camera

Transaction

Payment Flow

Buyer Products like Computers, Electronic Systems, and Camera

Delivery

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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Brokerage Model

Market makers, also known as brokers, play an important role of facilitating the transactions by bringing the buyers and seller together Commission based Services Model Transplant the per transaction/value based commission model by bringing the sellers and buyers on electronic marketplace For Example

Stock brokers- Charles Schwab, ICICIDirect Flowers- Teleflowers Auctions- BaZee.com, AuctionIndia.com

ELECTRONIC COMMERCECOMMERCE- Framework, Technologies and Applications Tata McGrawMcGraw-Hill

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Manufacturer Model
From Manufacturer to Consumer Product passes through several intermediaries The cost of product increases in the distribution process Each intermediate layer assists in the distribution and logistics If a manufacturer is capable of direct distribution- it can reduce the distribution cost.

Example- Dell Computers

In the process, it may need to handle several distribution and logistics issues The customer feedback can be direct, and thus create an opportunity for mass-customization

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