Revenue ModelsRevenue Models

Revenue ModelsRevenue Models

• Revenue model of selling goods and Revenue model of selling goods and services on the Webservices on the Web

– Based on mail order catalog revenue Based on mail order catalog revenue model that predates the Web model that predates the Web Spiegel

• Mail order or catalog modelMail order or catalog model

– Proven to be successful for wide variety of Proven to be successful for wide variety of consumer itemsconsumer items

• Web catalog revenue modelWeb catalog revenue model

– Taking the catalog model to the WebTaking the catalog model to the Web

Computers and Consumer ElectronicsComputers and Consumer Electronics

• Apple, Dell, Gateway, and Sun Microsystems

– Have had great success selling on the WebHave had great success selling on the Web

• Dell Dell

– Created value by designing entire business Created value by designing entire business around offering high degree of around offering high degree of configuration flexibility to its customersconfiguration flexibility to its customers

Books, Music, and VideosBooks, Music, and Videos

• Retailers using the Web catalog model to Retailers using the Web catalog model to sell books, music, and videos sell books, music, and videos – Among the most visible examples of Among the most visible examples of

electronic commerceelectronic commerce• Jeff BezosJeff Bezos

– Formed Formed Amazon.com• Jason and Matthew Olim Jason and Matthew Olim

– Formed online music store they called Formed online music store they called CDnow

– Used the Web catalog revenue modelUsed the Web catalog revenue model

Luxury GoodsLuxury Goods

• People are still reluctant to buy through a People are still reluctant to buy through a Web siteWeb site

• Web sites of Web sites of Vera Wang and Versace

– Constructed to provide information to Constructed to provide information to shoppers, not to generate revenueshoppers, not to generate revenue

• Web site of Web site of Evian

– Designed for a select, affluent group of Designed for a select, affluent group of customerscustomers

Clothing RetailersClothing Retailers• Lands’ End

– Pioneered idea of online Web shopping Pioneered idea of online Web shopping assistance with its Lands’ End Live feature in assistance with its Lands’ End Live feature in 19991999

• Personal shopperPersonal shopper– Intelligent agent program that learns Intelligent agent program that learns

customer’s preferences and makes customer’s preferences and makes suggestionssuggestions

• Virtual model Virtual model – Graphic image built from customer Graphic image built from customer

measurements measurements

Flowers and GiftsFlowers and Gifts

• 1-800-Flowers

– Created online extension to its telephone Created online extension to its telephone order businessorder business

• Chocolatier Chocolatier Godiva

– Offers business gift plans on its siteOffers business gift plans on its site

Digital Content Revenue ModelsDigital Content Revenue Models

• Firms that own intellectual propertyFirms that own intellectual property

– Have embraced the Web as a new and Have embraced the Web as a new and highly efficient distribution mechanismhighly efficient distribution mechanism

• Lexis.com

– Provides full-text search of court cases, Provides full-text search of court cases, laws, patent databases, and tax regulationslaws, patent databases, and tax regulations

• ProQuest

– Sells digital copies of published Sells digital copies of published documentsdocuments

Advertising-Supported Revenue ModelsAdvertising-Supported Revenue Models

• Broadcasters provide free programming to an Broadcasters provide free programming to an audience along with advertising messages audience along with advertising messages KOMO KING

• Success of Web advertising hampered bySuccess of Web advertising hampered by

– No consensus has emerged on how to measure No consensus has emerged on how to measure and charge for site visitor viewsand charge for site visitor views

• Stickiness of a Web site:Stickiness of a Web site: ability to keep visitors and ability to keep visitors and attract repeat visitorsattract repeat visitors

– Very few Web sites have sufficient visitors to Very few Web sites have sufficient visitors to interest large advertisersinterest large advertisers

Web PortalsWeb Portals

• Web directory Web directory

– A listing of hyperlinks to Web PagesA listing of hyperlinks to Web Pages

• Portal or Web portalPortal or Web portal

– Site used as a launching point to enter the Site used as a launching point to enter the WebWeb

– Almost always includes a Web directory Almost always includes a Web directory and search engineand search engine

– Example: Yahoo, AOL, AltavistaExample: Yahoo, AOL, Altavista

Advertising-Subscription Mixed Advertising-Subscription Mixed Revenue ModelsRevenue Models

• Subscribers Subscribers

– Pay a fee and accept some level of Pay a fee and accept some level of advertisingadvertising

– Typically subjected to much less Typically subjected to much less advertisingadvertising

• Used by The New York Times and The Wall Used by The New York Times and The Wall Street JournalStreet Journal

Fee-for-Transaction Revenue ModelsFee-for-Transaction Revenue Models

• Businesses offer services and charge a Businesses offer services and charge a fee based on number or size of fee based on number or size of transactions processed PayPaltransactions processed PayPal

• DisintermediationDisintermediation

– Removal of an intermediary from value Removal of an intermediary from value chainchain

• ReintermediationReintermediation

– Introduction of a new intermediaryIntroduction of a new intermediary

Fee-for-Service Revenue ModelsFee-for-Service Revenue Models

• Fee based on value of service providedFee based on value of service provided

• ServicesServices

– Range from games and entertainment to Range from games and entertainment to financial advicefinancial advice

• Online gamesOnline games

– Growing number of sites include premium Growing number of sites include premium games in their offeringsgames in their offerings

– Site visitors must pay to play these Site visitors must pay to play these premium gamespremium games