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1 Back to Table of Contents

2 E-Commerce Revenue Models
Chapter 8 Revenue Models and the Business Plan in E-Commerce Section 8-1 E-Commerce Revenue Models Section 8-2 E-Commerce Business Plan 2

3 Section 8-1 Why It’s Important
A revenue model determines how a company makes money and how the company functions. A well thought out model can mean the difference between success and failure. Understanding what revenue models entail can help you understand more about how companies operate. Section 8-1 3

4 Section 8-1 Key Terms revenue model e-zine blog affiliate program
licensing Section 8-1 4

5 What Is a Revenue Model? The type of revenue model you choose will depend on the type of product or service you intend to sell. revenue model how a company generates income Section 8-1 5

6 E-Commerce Revenue Models
Types of Revenue Models E-Commerce Revenue Models E-Commerce Models Online Applications Product Sales consumer goods, retail, wholesale Advertising search engines, Web portals, directory pages, commercial Web sites Service online fee-for-service, fee-for-transaction, subscriptions Inter-Organizational procurement, supply chain, distribution Third-Party e-malls, online auctions, online exchanges Licensing intellectual rights, patents, copyrighted material Section 8-1 6

7 Types of Revenue Models
The most basic revenue model involves selling one product or related product line to customers who use your Web site as they would a print catalog. Section 8-1 7

8 Types of Revenue Models
There are two types of products you can sell: products you make, which you should sell at a higher price than they cost to make products you buy, which you should sell at a higher price than you paid for them Section 8-1 8

9 Types of Revenue Models
A wholesale price is the price a supplier charges a business for a product. A retail price is the price a business charges customers. Section 8-1 9

10 Types of Revenue Models
Like magazines, TV stations, and other media outlets, Web sites can sell advertising space as a source of revenue. An online business must ensure that its ads will reach its target audience. Section 8-1 10

11 Types of Revenue Models
Most magazines, newspapers, and information services earn income by selling advertising and subscriptions. An e-zine can also generate revenue by selling subscriptions. e-zine electronic magazine Section 8-1 11

12 Types of Revenue Models
A specialized type of e-zine is the weblog, or blog. blog a public online journal kept by a writer, or blogger; short for Weblog Section 8-1 12

13 Types of Revenue Models
Another way to generate revenue is through an affiliate program. affiliate program a partnership through which an online business delivers customers to other online businesses In exchange for bringing business to your affiliates, you receive a commission, or a percentage of the sales they make on that business. Section 8-1 13

14 Types of Revenue Models
The idea behind licensing is simple. licensing the granting of permission to use intellectual property, such as music, photos, software programs, and inventions Assume you have created a product. Companies would pay you a licensing fee for the right to market, copy, or use the product. Section 8-1 14

15 Types of Revenue Models
In the case of musical compositions, licensing is a critical form of protection. Whenever a musical work is performed for the public—beyond family and friends—the performers must obtain a license. Section 8-1 15

16 Section 8-1 Review 1. What is a revenue model? What is a major factor in determining the type of revenue model to use? Why is it important for advertisers to know about a company’s customers before advertising on a particular site? What is the difference between wholesale and retail prices? What is a blog? How can it generate income? 2. 3. 4. Section 8-1 16

17 Section 8-2 Why It’s Important
Creating a company is hard work, and entrepreneurs must have a clear path, or business plan, laid out when they begin and as they continue to operate their businesses. Knowing what a business plan contains will help you to understand more about what creating and running a business entails. Section 8-2 17

18 Section 8-2 Key Terms business plan forward-looking statements
income statement balance sheet assets liabilities Section 8-2 18

19 What Is a Business Plan? Your business will be defined by your choices. When you have to make tough decisions, such as whether to offer a new product, you’ll be able to refer to your business plan for guidance. Section 8-2 19

20 What Is a Business Plan? Your business plan will be used to show potential investors what you hope to accomplish and how you plan to get there. business plan a detailed description of a business’s objectives, products and services, operations, potential customers, and financial resources Section 8-2 20

21 Elements of a Business Plan
Cover Page Market Analysis Title Page Competitive Analysis Table of Contents Marketing Plan Executive Summary Operations Plan Management Plan Organizational Plan Company Description Financial Plan Product and Service Plan Growth Plan Mission and Vision Statements Contingency Plan Industry Overview Supporting Documents Section 8-2 21

22 Elements of a Business Plan
The executive summary of your business plan is a brief but detailed description of the company’s mission, objectives, products, and competition. It is used to convince the reader that an operation is well-planned and has a good chance of success. Section 8-2 22

23 Elements of a Business Plan
Your business plan should include forward-looking statements. forward-looking statements the parts of a business plan that describe the future of a company in both the short and the long term Section 8-2 23

24 Elements of a Business Plan
Investors will want to know about the demographics of your Web site. Demographics include information about a customer’s age, income level, and location. This information is used to identify a target market for a business. Section 8-2 24

25 Elements of a Business Plan
An income statement is an important financial statement. income statement summarizes a company’s revenue and expenses for a period of time and shows profits or losses A balance sheet is another important financial statement. balance sheet shows how much a business is worth at a specific time Section 8-2 25

26 Elements of a Business Plan
A balance sheet lists all of a business’s assets and liabilities and shows the net worth, or actual value of the business. assets all of the things owned by a business liabilities debts or lawsuits Section 8-2 26

27 Elements of a Business Plan
No matter how you choose to raise money, your business plan will serve as your primary set of credentials. If you don’t need to raise money, your plan will serve as a road map for success. Section 8-2 27

28 Section 8-2 Review 1. What is a business plan? Why is it important? What is an executive summary? Why is it an important component of a business plan? What does an income statement reveal about a business? Why is it important? What are customer demographics? Why is this information important? 2. 3. 4. Section 8-2 28

29 Customizable Slide 29

30 End of Back to Table of Contents

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