BUSINESS & REVENUE
MODELS
BUSINESS MODELS
business model involves the following choices:
1.
Value proposition – how to deliver value to the
customer
2.
Market offering – what will sell, where, …
3.
Resource system – what facilities, …
4.
Financial model – how will you charge for
your product or service
Value Proposition
Choice of target segment
 Choice of what benefits you will offer
 Choice of capabilities
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Market Offering
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Identify scope of the offering
Address customer decision process
Match product/services to customer decision process:
What resources to deploy ?
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Resource system shows how a co must align its
internal “systems” and partners to deliver the
benefits of the value proposition
Financial Models
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Revenue Model
Shareholder value models
Growth models
Revenue Models
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P roduct/service information (infomediary)
A dvertising (Google Adwords, Adsense)
S ale/transaction (eCommerce – buy/sell)
S ubscription (to a service – Bloomberg, Dunn &
Bradstreet, Prowess DB, …)
Shareholder Value Models
User Derived:
 Metamarket- hub for many buyers/sellers, multiple
categories; e.g., BabyCenter.com
 Auctions- competitive bid hub: eBay, Freemarket
 Category switchboard- aggreg brands: PlanetRX
Company Derived:
 Best
Information- Zagat, NYTimes
 Wildest assortment- Secondspin.com
 Lowest Price- Buy.com, Lowestfares.com
 Most Personalized- Reflect.com
Revenue Growth Models
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Deeper penetration into current market (existing
product)
New product development (existing market)
New market development (existing product)
New products and new markets
On-line and off-line space
Types of e-business models
generally they are classified on the following basis :1.
2.
Parties connected
e.g B2B, B2C etc
transaction types
business models : transaction types
Brokerage
Value chain
Manufacturer
Info-mediary
Advertising
Subscription
Affiliate
Community
Low
CONTROL
High
Aggregator
Low
VALUE INTEGRATION
High
Agregator Model
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Virtual Merchant – Pure Play e-tailers (Amazon)
Catalog Merchant – Levenger
Bit Vendor – Avast
Surf-and-turf
Brokerage Model
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Buy/Sell Fulfillment
(eTrade,TradeIndia)
Trading Community
(VerticalNet,Goozex)
Distributor
(ConvergeTrade)
Metamediary (Zshops)
Reverse Auctions
(priceline.com)
Bounty Broker
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Market Exchange
(ChemConnect)
Buyer Aggregator
Virtual Mall
(Yahoo!Store)
Auction Broker (eBay)
Classifieds
Search Agent
(DealTime)
Value Chain Model
Value chain moves business away from discrete
streams of data about the product being made to one
unified pool of information
Infomediary Model
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Recommender System – ePinions
Registration Model – NYTimes.com
Advertising Model
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Generalized Portal – AOL
Personalized Portal – MyMSN
Specialized Portal / Vortal
Attention/Incentive Marketing – CyberGold
Free Model – Blue Mountain
Bargain Discounter – Buy.com
Other Models
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Manufacturer Model – Intel, Apple
Affiliate Model
-Banner Exchange, Pay-per-click,
-Revenue Sharing
Community Model:
- Voluntary contributor model (NPR)
- Knowledge Networks (Deja, Guru, ..)
Subscription Model (WSJ)
Utility Model – use based
business models: parties involved

B2B (Business-to-Business)
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B2C (Business-to-Consumer)
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C2B (Consumer-to-Business)
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C2C (Consumer-to-Consumer)
Revenue Model

Revenue Is the amount of money that a company
actually receives during a specific period, including
discounts and deductions for returned merchandise. It
is the "top line" or "gross income" figure from which
costs are subtracted to determine net income.
Revenue = Price of goods and services X no. of units
Five Cases revenue models:
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Advertising model
Subscription model
Transaction fee model
Sales model
Affiliate model
Advertising model
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Simply you have website and provides a contents
and forum for advertisements and get fees from
advertisers.
The advertising model is an addition of the
traditional media model. The web site, provides
content which always free and services like email,
IM, blogs and users accepts advertising messages in
the form of banner ads.
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To attract users to its site, leading Web portal
Yahoo! offers things like free e-mail, extensive
content, and travel services. The firm got its start in
early 1995 when founders Jerry Yang and David
Filo put together a simple list of favorite Web sites.
Subscription model
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A company offers it users content or services
and charges a subscription fee for access to
some or all of it offerings.
where a customer must pay a subscription price to
have access to the product/service. The model was
pioneered by magazines and newspapers, but is
now used by many businesses and website.
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Industries that use this model include mail order
book sales clubs and music sales clubs, cable
television, satellite television providers with pay-TV
channels, satellite radio, telephone companies, cell
phone companies, internet providers, software
providers, business solutions providers, financial
services firms, fitness clubs, and pharmaceuticals, as
well as the traditional newspapers, magazines and
academic journals.
Transaction fee model
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There are businesses offering services for which
they charge a fee based on the number or size of
transactions they process. The business provides
information to the customers which is required to
complete a transaction and revenue is purely
earned on that basis.

For example, online travel agents receive a fee for
facilitating a transaction that includes the making of
travel arrangement for their clients, as well as,
advising them about lodging, transportation etc.
Stock brokerage firms also use this model as they
charge their customers a commission for each
transaction of stocks/shares executed through them.
Sales model
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A company derives revenue by selling
goods, information, or services.
Here the merchants provide goods and services
online but based on list prices or via auction.
Examples: wwww.1800flowers.com
This site sells the flowers online, and deliver your
order almost everywhere in US.
Affiliate model
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A company steers business to an affiliate
and receives a referral fee or percentage of
the revenue from any resulting sales.
Example: www.movies.com
This site uses Amazon Associates Web Services to
deliver a complete marketplace of DVDs.