1. Internet Marketing
Web Business Models

2. Do You Yahoo? For 50% of US Web users: YES!!!
A phenomenal Silicon Valley success story
Yahoo! brand extensions provide value add for users
Yahoo! games
Yahoo! clubs
Yahoo! chat
Yahoo! auctions
Yahoo! Stores
Yahoo! leverages its brand and ability to draw traffic to generate multiple revenue streams

3. Most Popular Web Sites Yahoo! Leads
Figure 5.1

4. Yahoo! Brand Extensions The Success of the Yahoo! Brand
Figure 5.2

5. Topics
Web benefits to firms
Closed loop marketing

6. Web Benefits to Firms The range of Web benefits
Business models can be based on improvements in product or service
Business models can be based directly on generating revenue
Let’s take a closer look at these broad classes of business models

7. Improvement-Based Biz Models
Use the Net to Improve Products & Services
Enhancement
Efficiency
Build brand
Build category
Enhance quality
Reduce costs
Free trial
Effectiveness
Support dealers
Support suppliers
Collect information

8. Before We Look at Revenue-Based Biz Models Let’s Take A Look At Some Recent Headlines

9. Name of Publication - Date
Headline
Name of Publication - Date
Insert excerpts from a current article out of the business press (e.g. Wall Street Journal, Wired News, Business 2.0, or Fast Company) that profiles a company and its business model. I usually take excerpts out of the lead paragraph, and highlight keywords. I’ve found articles on the accumulating losses of a number of e-tailers that provide an interesting introduction to the subject of making money on the Web.

10. Revenue-Based Biz Models
Use the Net to Make Money
Provider Pays
Sponsorship
Alliances
Banner advertising
Prospect fees
Sales commissions

11. Which Company Bears the Risk?
Payment Mechanisms
Which Company Bears the Risk?
Sponsorship
Fixed Payment
Banner Ads
Impressions
Prospect Fees
Click Through
Sales Commissions
Purchase
Risk Increases for the Web Site Being Paid
Sponsorship least risky: fixed payment
Banner Ads: payment depends on impressions
Prospect Fees & Sales Commissions: depend on success of site and advertiser

12. The Many Ways to Pay Online
Figure 5.8

13. Bargaining Power Determines Who Bears Risk
Powerful sites shift risk to advertisers and demand sponsorships
Powerful advertisers demand accountability and negotiate for prospect fees of a share of transaction revenue

14. Revenue-Based Biz Models
Use the Net to Make Money
Provider Pays
Customer Pays
Sponsorship
Alliances
Banner advertising
Prospect fees
Sales commissions
Product sales
Pay-per-use
Subscriptions
Bundle sales

15. Building Value Bundles via Alliances
The Internet makes it easy to bring a wide range of resources together on a single site
Fast, cheap way to build a product or service offering (whole product)
A visit to any search engine illustrates
Note: At this point in the lecture, it’s helpful to go to one of the major portals and identify sponsorships, alliances, affiliates, advertisers

16. Alliances A Marketing Challenge
Screen real-estate:
how big will my logo be?
where will it appear?
exclusive deal?
Revenue sharing
The deal you can make depends on the bargaining position of each partner

17. No Q: Are these Biz Models mutually exclusive?
Companies try to generate revenues any way they can
Multiple revenue models are combined on the same site

18. Closed Loop Marketing
Marketing is closed loop when specific customer responses to specific marketing actions can be tracked
For example: if an online ad encourages Web site registration, the campaign is closed loop if users can be tracked from ad exposure to the decision to register
Closed loop marketing leads to rapid learning
Marketers can experiment with prices, ad copy, and product features on selected samples of consumers

19. The Impact of Closed Loop Marketing
Figure 5.10
On the Internet
Nobody Knows
You’re A Dog
Marketers want two results from user responses
They want consumers to make a choice that leads to
information
improved customer satisfaction
a transaction
Marketers want to learn about visitors to their site

20. Web Chains A Web chain is a click sequence
Can be as short as a single click
Can be as long as all possible choices on a Web site
Decision points = event nodes
Ending point = result node
Common Web chain starting points
Company homepage
Search engine or portal
Banner ads

21. Web Chain of Events Figure 5.12 BEGIN END No Notice Rate (NNR)
E1: Views Page with Paid Link
(1-CTR-NNR)
Click-through Rate (CTR)
R2: Notices Ad but doesn’t click = Ad brand impact
E2: Clicks Through to Company Web Site = Prospects
BEGIN
(1-PCR)
Prospect Conversion Rate (PCR)
E3: Views Web Site but Doesn’t Buy
E4: Visits Web Site and Buys
New Customer (1-RR)
(1-OIB)
R4: No Immediate Purchase = (Ad brand + Web Site brand impact)
Repeat Buyer (RR)
R5: New Customer = (Ad brand + Web Site brand + Online profit + Future lifetime value)
E5: Loyal Customer
END
Offline Buy Rate (OBR)
Online Only (1-OBR)
R7: Only buy online = (Ad brand + Web Site brand + Online profit)
R6: Would have bought offline anyway = (Ad brand + Web Site brand + Online profit – Offline profit)
R1: Doesn’t Notice Ad = $0 benefit
Offline Induced Buyer (OIB)
R3: Offline Purchase = (Ad brand + Web Site brand + Offline profit)

22. Evaluating Web Chains
Enables marketers to evaluate a wide range of Web strategies and tactics
Calculate
expected value of an impression
expected value of a prospect
expected value of a new customer
expected value of a repeat buyer

23. Web Chain Benefits and Probabilities Five Main Benefits Occur in the Chain
Online contribution: the incremental profit from an online sale
Offline contribution: incremental profit from the sale of products through the standard channel
Ad-brand impact: value to a visitor, who sees the ad but doesn’t click through
Web site brand impact: value of a visit to the Web site that results in benefits, but not a sale
Lifetime customer value: future value of profits from a new customer

24. Evaluating Web Chains

25. Cost and Performance Table 5.5
One of the best uses of Web chain analysis is to compare alternative methods of acquiring customers

26. From Web Chains to Closed Loops
There’s a strong connection between Web chains and closed-loop marketing
A Web chain is closed loop if
the chain extends from the marketing offer to the desired marketing response
Each step is trackable
The Internet can be used to close the loop on traditional media advertising if unique identifiers are included with the ad
Dell newspaper ads contain a unique code