Selling on the Web:
Revenue Models and Building a Web Presence
Week of June 17 – June 23

Web-Catalog Revenue Model:
o
The traditional catalog-based revenue model dates back to the 1870s. In this
model, the seller uses the strength of their image to sell to buyers through printed
information (p. 108).
o
The Web catalog revenue model is similar to the traditional catalog model except
that printed information is placed online. Orders to may be placed either online
or through the telephone (p. 108).
o
Most of the successful companies are ones that were operating in the mail order
business. These companies often have physical stores in place as well as
inventory management, shipping procedures, account representatives, and other
infrastructure. As a result, these companies can start selling online without
adding much cost (p. 108).
o
Traditional stores that have typically relied on physical locations are known as
“brick-and-mortar” stores. Those stores that have added online selling have
cleverly been called “click-and-mortar” stores.
o
Here is another definition not in the book. The conversion rate is the percentage
of potential customers who visit your site and actually buy something.
o
Case Studies:

Dell allows customers to build highly customized computer
configurations (pp. 108-109).

Jeff Bezos of Amazon realized that books could easily be sold online
because they could be shipped cheaply and people would buy them
online because there is no need to inspect them (p. 110).

Luxury goods are generally not sold online. Instead, most of these
companies rely on their Web sites to provide product information (p.
110).

Clothing retailers face a number of unique challenges (pp. 111-112).

Color settings on computer monitors very widely making it
difficult for customers to get an accurate idea of how it actually
looks (p. 112).

Lands’ End added a personal shopper feature and a virtual
model. The personal shopper is an intelligent agent program
that learns the customer’s preferences and makes suggestions.
The virtual model is a graphic image built from customer
measurements on which customers can try clothes (p. 112).

Buy.com sells a range of general merchandise online at low prices by
buying their products in high volumes (p. 113).

Digital Content Revenue Model:
o
Information (or the rights to use that information) can be sold or distributed
online (p. 113).
o
Assessing information in this manner is cheaper and more timely than traditional
methods du to the elimination of paper, printing, delivery, etc. costs (p. 116).
o
Case Studies:

Lexis-Nexis makes research information available such as legal,
corporate, or government information (p. 115).

EBSCO makes subscriptions to top academic journals available online.
By the way, MUW has a subscription to EBSCOhost (p. 115).

Advertising-Supported Revenue Models:
o
In an advertising-supported revenue model, Web content is provided for free
along with some advertising (p. 117).
o
Problems:

Hard to measure the number of visitors, number of unique visitors, etc.,
and thus very hard to charge for advertisements (p. 117).

Difficult to obtain demographic information about visitors and is thus
very difficult to target advertising to a specific market (p. 117).
o
Here are a couple of generic e-commerce terms I would like you to know:

Click-through is a count of the number of people who visit a site, click
on an ad, and are taken to the site of the advertiser.

Stickiness is the ability to keep visitors at your site and get them to return
(p. 117).
o
Web portals:

A Web portal is a site that people use as an entry point to the rest of the
Web. It usually includes some sort of directory or search engine and
includes other features that help people find what they are looking for (p.
118).

A horizontal portal is a site that offers a broad range of content
and services such as Yahoo! or Google.

A vertical portal offers content and services aimed at a specific
type of user. Familyeducation.com, for example, offers content
geared for parents or children.
o
Vertical portals are popular because they allow
advertisers to target a certain demographic market and
thus a higher advertising return on their advertising
dollar.
o
According to CanadaIT.com, “ads on specialized vertical
Web Portal have resulted in an average clickthrough rate
7-9 times higher than for banners on common purpose
search engines.”

Advertising-Subscription Mixed Revenue Model:
o
In an advertising-subscription mixed revenue model, subscribers pay a fee and
accept some level of advertising. Subscribers, however, are typically subjected
to far less advertising than on advertising-supported sites (p. 121).
o
Case Studies:

The New York Times charges a fee for access to its Opinion, News
columns, and crossword puzzles (p. 121).

The Wall Street Journal relies on subscribers more and non-subscribers
are allowed to view very little of the newspaper (p. 121).

The Washington Post and Los Angeles Times make available current
stories free of charge, but requires visitors to pay per article for stories
retrieved from the archive (p. 121).

Fee-for-Transaction Revenue Models:
o
In a fee-for-transaction revenue model, businesses offer services for which they
charge a fee that is based on the number or size or transactions they process (p.
122).
o
Examples include Travel agents (such as Orbitz) who find the best prices for
tickets or hotel rooms, automobile sales (such as Autobytel) who remove car
salesman from the transaction (YEAAHHH!!!), stockbrokers (such as
Ameritrade) who make lower-priced stock purchases possible, and real estate
agents (such as realtor.com). Other examples given by the textbook include
event tickets, online banks, and online movie stores (pp. 122-129).
o
The removal of an intermediary from a value chain is called disintermediation.
A real estate agent is a prime example (p. 122).

Fee-for-Service Revenue Model:
o
In a fee-for-service revenue model, companies offer a service on the Web and
charge for it (p. 130).
o
Case Studies:

Several companies have attempted to offer streaming video or even
movies online (p. 131).

Other examples include online games and professional services (such as
legal advice).

Channel Conflict:
o
Channel conflict (a.k.a. cannibalization) occurs when sales on the Web site
interferes with traditional sales. In other words, Web site sales consume sales
that would otherwise be made in the company’s other sales channels (p. 137).

The textbook gives the example of Maytag whose authorized distributors
were upset because they were losing sales when customers began to buy
product directly from the Web site (p. 137).

Web Presence:
o
The stakeholders of a firm include its customers, suppliers, employees,
stockholders, neighbors, and the general public. Web presence is how these
stakeholders know the company over the World Wide Web (p. 140).
o
Web site design helps to create or enhance a company’s image. According to the
textbook, Pepsi, for instance, uses their Web site to appear like a younger
company with games and activities. Coca Cola uses their Web site to portray a
trusted old company (p. 140).
o
Even with cheap, commoditylike items, price is not a determining factor.
Instead, in these situations, having a trust-based Web presence would be more
useful (p. 149).

Web Site Usability:
o
Web site designers should perform market research to see what customers want
(p. 146).
o
o
Most Web sites have the following (p. 146):

History

Mission statement

Product or service information

Financial or product information

Means to communicate with the organization
Web sites should be flexible and take into account the following (p. 147):

Not all users have broadband Internet connections

Not all users have the latest software technologies installed on their
computers such as plug-ins and add-ins


Some users have disabilities and need some special features
Communication Models:
o
In the personal contact model, a firm individually finds and contacts potential
customers (p. 152).
o
In the mass media model, a firm broadcasts information to many customers at
once (p. 152).