WHCI Business Studies
E-Business: Part 1
Business Models &
e-Business
What is a Business Model ?
• A business model is the method of doing business by
which a company can sustain itself -- that is, makes
money!
• The business model spells-out how a company generates
revenue by specifying where it is positioned in the market
place.
• Some models are quite simpleA company produces a good or service and sells it to
customers. If all goes well, the revenues from sales
exceed the cost of operation and the company realizes a
profit.
What is a Business Model ?
Continued…
Other models can be more complicated:
Broadcasting is a good example.
Radio and later TV programming has been broadcasted over
the airwaves “free” to anyone with a receiver for much of the
past century. The broadcaster is part of a complex network of
distributors, content creators, advertisers and listeners or
viewers. Who makes money and how much is not always clear
at the outset.
The bottom line depends on many factors –
- Name 4 different Businesses
connected to Broadcasting?
- How do they make a profit?
New vs tried-and-true models
• Internet commerce will give rise to new kinds of
business models. It is a new frontier with many
possibilities.
• The web also uses tried-and-true models.
Auctions are a perfect example. They have been
widely used throughout the world to set prices for
common commodities and unique items like fine
art and antiquities.
Can you name an auction
based e-business?
Marketing 101
Basic e-business Types
• B2B -- Business-to-business is a marketing strategy which
involves the transaction of goods or services between businesses
• B2C -- Business-to-consumer (also business-to-customer)
describes activities of commercial organizations serving the end
consumer with products and/or services.
• C2C -- Consumer-to-consumer involves electronically facilitated
transactions between consumers through some third party. The sites
are only intermediaries, just there to match consumers, they have do
not check quality of product being offered.
• There are others, can you guess the acronymns: C2B, B2G, G2C
Things to Review
• What is a “business model”?
• Identify 3 different businesses that follow three different
revenue models. Explain HOW they make money.
• Identify two different web businesses with different
revenue models. Explain how they make money.
• What are the three “Basic” types of business? Define their
acronymns in each case.
• Define C2B, B2G, G2C.
WHCI Business Studies
E-Business: Part 2
Web Business Models
Specific e-business models
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Merchant
Advertising-supported
Subscription Fee
Brokerage
Informediary
Manufacturer
Affiliate
Community
Utility
Merchant Model - Overview
Businesses that use this model are known as “etailers”:
Selling physical goods
- order fulfillment + outbound logistics
- examples: dealextreme.com, indigo.ca
Selling digital goods
- transactional commerce
- sell "content" - magazines, music, software,
virtual real estate, etc.
Merchant Model - Types
There are a few specific variations:
Virtual Merchant
a retail merchant that operates solely over the web. [Amazon.com]
Catalog Merchant
mail-order business with a web-based catalog. Combines mail,
telephone and online ordering. [Lands' End , TigerDirect]
Merchant Model – Types
continued
Click and Mortar
traditional brick-and-mortar retail establishment with web
storefront. [Future Shop , Staples]
Bit Vendor
a merchant that deals strictly in digital products and services
and, in its purest form, conducts both sales and distribution
over the web. [Apple iTunes Music Store , Second
Life.com ]
Merchant Model – Types
continued
Questions to Answer:
1. Find additional examples of a Virtual Merchant, Click and
Mortor and Bit Vendor. Explain why each example fits the model
and include the web address.
Read Virtual Goods: the next big business model and then answer
the following questions:
2. What is a “virtual good”? Give some examples.
3. What is a “gold farmer”? (hint: read the “plight link” or this)
4. Why do people spend real money on virtual objects? Be specific.
Bit Vendor Case Study
Using Microsoft Power Point, create a 6 - 8 slide Comparison
of two BIT VENDORS (not previously mentioned) that sell
different types of Digital Goods.
Slide 1: Title page / Credits / Suitable graphic(s)
Slide 2: Identify two companies / give overview of Businesses
Slide 3/4: Details about Business plan* of company one
Slide 4/5: Details about Business plan* of company two
Slide 5-7: Comparisons between two companies, future prospects /
growth profile, your comments and conclusions
Slide 8: References (use hyperlinks where appropriate)
Required: Consistent slide transitions, text animations, colour scheme,
backgrounds and graphic elements.
Evaluation Guide
* A Business plan identifies products sold, target market (age group / demographics),
marketing strategies, competitive advantages, etc
The Advertising Model
Overview
The Advertising Model
Overview
The web advertising model is an extension of the traditional
media broadcast model.
The broadcaster, in this case, a web site, provides content
(usually, but not necessarily, for free) and services (like email,
IM, blogs) mixed with advertising messages in the form of
banner ads.
The banner ads may be the major or sole source of revenue for
the broadcaster. The broadcaster may be a content creator or a
distributor of content created elsewhere
The Advertising Model
Variations
The advertising model works best when the volume of viewer traffic is
large or highly specialized.
Portal -- usually a search engine that may include varied content or
services. A high volume of user traffic makes advertising profitable and
permits further diversification of site services. A personalized portal
allows customization of the interface and content to the user. A niche
portal cultivates a defined user demographic. [Yahoo! , Sympatico]
Classifieds -- list items for sale or wanted for purchase. Listing fees are
common, but there also may be a membership fee. [Monster.ca,
Lavalife.ca]
The Advertising Model Variations
(Cont’d 1)
User Registration -- content-based sites that are free, or partly free, to access
but require users to register and provide demographic data. Registration allows
tracking of user surfing habits and generates data of potential value in targeted
advertising campaigns. Registration may also be required for “premium” levels
of access – see “Subscription Fee Model”. [Globe and Mail]
Query-based Paid Placement -- sells favorable link positioning (i.e.,
sponsored links) or advertising keyed to particular search terms in a user query,
such as Overture's trademark "pay-for-performance" model. [Google]
Contextual Advertising / Behavioral Marketing -- freeware developers who
bundle adware with their product. For example, a browser extension that
automates emoticon selection, also delivers advertising links or pop-ups as the
user surfs the web. Contextual advertisers can sell targeted advertising based on
an individual user's surfing activity. [Claria]
The Advertising Model Variations
(Cont’d 2)
Content-Targeted Advertising -- pioneered by Google, it
extends the precision of search advertising to the rest of the
web. Google identifies the meaning of a web page and then
automatically delivers relevant ads when a user visits that page.
[Google] (check side panel on a search like “car”)
Intromercials -- animated full-screen ads placed at the entry of
a site before a user reaches the intended content. [Apple]
Things to Review
1. What is the Advertising Model an extension of?
2. What is the major source of revenue for sites that use the advertising?
3. When does the Advertising Model work best?
4. Explain what a “Portal” is – give some examples.
5. Why do some site require users to register?
6. What is Contextual Advertising? Explain how Facebook uses this type of
advertising.
7. What is content targeted advertising? Experiment with Google and explain
what you discover (make at least 3 clear points / conclusions)
8. What is an “Intromercial”? Explain and find links to at least two examples.
Read the following article: How Web Advertising Works and identify at least
two main points about each of the following: Banner Ad Prices, Sidebar
Ads, Pop-Up and Pop-Under, Floating Ads, Unicast Ads.
The Subscription Fee Model
Users are charged a periodic -- daily, monthly or annual -- fee to subscribe to
a service. It is not uncommon for sites to combine free content with
"premium" (i.e., subscriber- or member-only) content. Subscription and
advertising models are frequently combined.
Content Services -- provide text, audio, or video content to users who
subscribe for a fee to gain access to the service. [Listen.com, Zip.ca]
Person-to-Person Networking Services -- are conduits for the distribution
of user-submitted information, such as individuals searching for former
schoolmates. [Classmates]
Trust Services -- come in the form of membership associations that abide
by an explicit code of conduct, and in which members pay a subscription
fee. [Truste]
Internet Services Providers -- offer network connectivity and related
services on a monthly subscription. [Sympatico.ca]
Brokerage Model
Brokers are market-makers: they bring buyers and sellers together and
facilitate transactions. Brokers play a frequent role in business-tobusiness (B2B), business-to-consumer (B2C), or consumer-toconsumer (C2C) markets. Usually a broker charges a fee or
commission for each transaction it enables. The formula for fees can
vary. Brokerage models include:
Marketplace Exchange -- offers a full range of services covering the
transaction process, from market assessment to negotiation and
fulfillment. Exchanges operate independently or are backed by an
industry consortium. [SellOffVacations, ChemConnect]
Buy/Sell Fulfillment -- takes customer orders to buy or sell a product
or service, including terms like price and delivery. [CarsDirect]
Brokerage Model Variations
(cont’d 1)
Auction Broker -- conducts auctions for sellers (individuals or
merchants). Broker charges the seller a listing fee and commission
scaled with the value of the transaction. Auctions vary widely in terms
of the offering and bidding rules. [eBay]
Transaction Broker -- provides a third-party payment mechanism for
buyers and sellers to settle a transaction. [PayPal, CCNow.com]
Distributor -- is a catalog operation that connects a large number of
product manufacturers with volume and retail buyers. Broker
facilitates business transactions between franchised distributors and
their trading partners. (a traditional model)
Brokerage Model Variations
(cont’d 2)
Search Agent -- a software agent or "robot" used to search-out the
price and availability for a good or service specified by the buyer, or
to locate hard to find information.[Pricegrabber , BestBuyFinder ]
Virtual Marketplace -- or virtual mall, a hosting service for online
merchants that charges setup, monthly listing, and/or transaction
fees. May also provide automated transaction and relationship
marketing services. [eBayStores]
TO BE CONTINUED…
Evaluation Guides
Bit Vendor Case Study: In Power Point
___ / 3 Title page / Credits / Suitable graphic(s)
___ / 4 Identify two companies / give overview of Businesses
___ / 4 Details about Business plan of company 1 and 2
___ / 5 Company comparisons, future prospects, comments & conclusions
___ / 2 References (use hyperlinks where appropriate)
___ / 4 Design: Consistent transitions, text animations, colour scheme,
backgrounds, graphic elements, etc
___ / 2 2 < TOTAL
GO BACK
TO BE CONTINUED…