1. Lecture 2: E-Business Models

2. Agenda Introduction Types of Business Models Storefront model
Auction model
Portal model
Dynamic pricing model
Many more models….

3. Introduction
There are many benefits to bringing your business to the web.
An e-business offer
Personalized service
High quality customer service
& improved supply chain management
An e-business is defined as a company that has an online presence.
E-business has the ability to sell, trade, barter and transact over the web.
The combination of a company’s policy, operations, technology and ideology define its business model.

4. Types of Business Models
The Internet has given rise to many business models and based on this e-business applications have been developed
Business models have been defined and categorized in many different ways:
Storefront model
Auction model
Dynamic pricing model
Portal model
And others…

5. 1. Storefront Model (1) Online shopping is a very popular activity
The storefront model combines transaction processing, security, online payment, and information storage to enable merchants to sell their products on the web.
This is a basic form of e-commerce where buyer and seller interact directly

6. 1. Storefront Model (2)
Merchants need an online catalog of products, take orders through their website, accept payments in a secure environment, send merchandise to customers and manage customer data (e.g. customer profiles)
They also need to market their sites to potential customers
Some of the most successful e-businesses are using the storefront model. Many of the leading storefront model companies are B2C companies.
E.g. more.com, ticketmaster.com

7. 1.1 Shopping-Cart Technology
Common e-commerce enabler: Shopping-Cart
This order processing technology allows customers to accumulate items they wish to buy as they continue shopping
Supporting the shopping cart is the product catalog, which is hosted on the merchant server in the form of a database.
The merchant server is the data storage and management system employed by the merchant.
The database contains basically product information and also customer information.
E.g Amazon.com

8. 1.2 Online Shopping Malls
Online shopping malls present customers with a wide selection of products and services.
More convenient than searching and shopping at independent online storefronts.
Customers can search and shop for a variety of products and rather than making several separate purchases, they can use the mall’s shopping cart technology to purchase items from many stores into a single transaction
E.g. mall.com

9. 2. Auction Model (1)
Auction sites act as forums through which internet users can log-on and assume the role of either bidder or seller.
As seller, you can post the item you wish to sell, the minimum price you require to sell your item and a deadline to close the auction.
As bidder, you may search the site for availability of the item you are seeking, view current bidding activity and place a bid.
Some sites will allow you to submit a maximum bidding price and will continue to bid for you.
E.g. ebay.com

10. 2. Auction Model (2)
Reverse auction model allows the buyer to set a price as sellers compete to match or even beat it.
E.g. liquidprice.com
A faster option is when the buyer sets a reserve price
A reserve price is the lowest price that the seller will accept in any type of auction
Sellers can set the reserve price higher than the minimum bid
If no bid meets the reserve price, the bid is unsuccessful

11. 2. Auction Model (3)
Auction sites usually require commission on sales but they are usually a forum for buying and selling
No involvement in payment
After auction is complete, buyer and seller are notified and method of payment and delivery is worked out between the two parties.

12. 3. Portal Model (1) Portal sites offer various services in one place.
They offer news, sports, weather as well as the ability to search the web.
Search engines are horizontal portals
Portals that aggregate information on a broad range of topics
Vertical portals
More specific
Offer a great deal of information pertaining to a single area of interest
Online shopping is a popular addition to the major portals
Provides users with a shopping page that links them to thousands of sites carrying a variety of products
E.g. yahoo.com, IMDB

13. 3. Portal Model (2)
Portals link consumers to online merchants, online shopping malls and auction sites.
Portals help users collect information on the item for which they are looking and allow users to browse independently owned storefronts.
Yahoo allows users to browse through a variety of sites while maintaining the convenience of paying through their Yahoo account.

14. 4. Dynamic Pricing Models
Name-Your-Price Model
Comparison Pricing Model
Demand-Sensitive Pricing Model
Bartering Model
Rebates
Offering Free Products and Services

15. 4.1 Name-Your-Price Model
Empowers customers by allowing them to choose their price for products and services
Many of businesses that offer this service have formed partnerships with leaders of industry such as travel, lending, retail, etc
These industry leaders receive the customer’s desired price from the intermediary and decide whether to sell or not the product and service.
If customer’s price is not reasonable, they will be asked to chose another price.
E.g. priceline.com

16. 4.2 Comparison Pricing Model
Allows the customer to poll a variety of merchants and find a desired product or service at the lowest price
These sites often get their revenue from partnerships with particular merchants
Be cautious because price obtained may not be the best price available on the entire web.
E.g. bottomdollar.com

17. 4.3 Demand-Sensitive Pricing Model
The concept is that the more people who buy a product in a single purchase, the lower the cost-per-person becomes.
Selling products individually can be expensive because vendor must price a product so that it covers selling and overheard cost while still generating a profit.
When customers buy in bulk, this cost is shared and profit margin increased.
E.g. mercata.com

18. 4.4 Bartering Model
Bartering – offer an item in exchange with another.
Ubarter.com is a site that allows individuals and companies wishing to sell a product to post their listings. The seller makes an initial offer with the intention of bartering to reach a final agreement with buyer.
A broad range of products and services are available for barter.
Examples of items bartered are overstocked inventory items, factory surplus and unneeded assets.

19. 4.5 Rebates Help attract customers to a site
Offers “everyday low prices” and specials to keep customers coming back.
Normally such companies have partnerships with wholesalers and retailers who will offer discount and they passes these discount to customers in the form of rebates.
E.g. ebates.com

20. 4.6 Offering free products and services
Many entrepreneurs are forming their business models around advertising-driven revenue streams.
TV networks, radio stations, magazines ad print media use advertising to fund their operations and make a profit.
Companies offer their products for free in the web. They form partnerships with companies to exchange products and services for advertising space.
E.g. iwon.com, freelotto.com, freemerchant.com.

21. B2B Exchanges
B2B exchanges allows businesses to buy, sell, auction, barter and distribute products and services
Examples:
(Exchange employee)
(Industry to Industry)
(Business to Business)
(Deals with the supply chain)

22. B2B Service Providers
B2B service providers make B2B transactions on the Internet easier
These E-Businesses help other businesses improve policies, procedures, customer service and general operations
Solutions include supply chain management, logistics, procurement.
Example

23. Online Trading and Lending Models
Online trading empowers the average investor to handle their own investments
Trading sites offer
Research
Investments analysis
Stock history
Simple buying and selling
Online Trading sites include:
E*TRADE
Ameritrade
Fidelity.com

24. Getting a Loan Online A growing segment of E-Business.
Loan online at a lower rate than other traditional channels.
E-loan –
E-credit –
Clients – HP, Intel, other businesses
Loan direct –

25. Recruiting on the Web
Resume tutorials, cover letter help, and free job searching available on the Web
Employers can find new employees from a global pool of applicants
Earn rewards for referring new hires to recruiters
Examples:
Guru.com
Dice.com
Refer.com
Sixfigurejobs.com
Monster.com

26. Recruiting on the Web

27. Online Travel Services
Customers now have the power to bypass a travel agent
Discounts and low fares available online
Name-your-price for tickets, hotels and car rentals
“Last minute” fares often lower online
Examples:
Expedia.com
Travelocity.com
Cheaptickets.com

28. Online Entertainment The Web is a form of entertainment
Interactive television will use the Internet to offer interactivity to the world
MP3 and file-transfer technology threaten copyright law
Examples:
MP3.com
iCast.com
Napster.com

29. Online Automotive Sales
Consumers access automobile information empowering them to make an informed buying decision
Dealers use the Web to showcase vehicles
Online auto auctions give buyers more options
Examples:
Auto.com
Autobytel.com
Autoparts.com
Ramadbk.com

30. Energy Online
A number of companies have set up energy exchanges where buyers and sellers come to communicate, buy, sell and distribute energy.
Companies sell crude oil, electricity and products and systems for distributing them
Examples:
Houstonstreet.com
Retailenergy.com

31. Selling Brainpower
Companies can buy patents and other intellectual property online
It is often difficult for small businesses to invest time and money in research and development
Hiring outside contractors or companies to complete projects and offer consulting.
Contractors can find projects to match their needs on the Web
Examples:
Hellobrain
Yet2.com

32. E-Learning
E-Learning is growing rapidly as the number of Internet users increases.
Universities and other training companies offer high quality distance education over the Web.
Allows teachers and educational institutions to post their courses on the web.
E.g.:
E-books –

33. Case Study
Zopa.com
SmithKline Beecham