1. Electronic Commerce Lecture 2 [ok] Syed Roohullah Jan
Department of Computer Science
Abdul Wali Khan University, Mardan

2. Business Models

3. Business Models
In simple words a Business Model is description of how a company plan to make money?
Definition:
A plan for the successful operation of a business, identifying sources of revenue, the intended customer base, products, and details of financing.

4. The plan implemented by a company to generate revenue and make a profit from operations.
The model includes the components and functions of the business, as well as the revenues it generates and the expenses it incurs.
Making innovative business models is an art
Innovation in business models key for success

5. E-Business Model
An e-business model is simply the approach a company takes to become a profitable business on the Internet.
A business model is the method of doing business by which a company can sustain itself - that is, generate revenue.
A business model describes how a company makes money by specifying where it is positioned in the value chain.
Online business models are continuously evolving as a result of innovation.
What does value chain means??????

6. A business model is an idea and like any idea it cannot be patented
that is, others can copy a business model
A complete product based on innovative idea can be patented [novel product]
That is, others are not allowed to create the same product
However, companies try to modify new products intelligently to avoid patent law. Such as [reverse engineering]

7. Revenue Models Revenue Model is different from a “Business Model”
It is part of the big Business Model
A revenue model of a business describes how the business will generate revenue streams from its products or services.
Different companies can use different Revenue Models for the same online product of service
For example, one company could charge directly for the product while another could earn from the advertisement
Freemium vs Premium
Business model VS Revenue model

8. Some companies have simple revenue model in business models
A company produces a good or service and sells it to customers. If all goes well, the revenues from sales exceed the cost of operation and the company realizes a profit.
Other revenue models are complex
Commission based income
Advertisement based income
Premium Services bases income
Subscription fees based income

9. Revenue Models Commerce and retail B. Subscriptions and usage fees
Revenue from Products or service directly
B. Subscriptions and usage fees
C. Licensing
D. Auctions and bids
E. Advertising
F. Data
G. Transactions/Intermediation
H. Freemium
Revenue model types common in financial services industry
Asset Management

10. E-Business Model Examples and types
We now discuss some different business models being implemented on the web
The list presented here is not exhaustive or complete
Continuously newer models are being tried by innovative entrepreneurs/tycoons/business man
New business models identify new needs of the customers base

11. Store Front Model [do a practical of this]
The most basic business model
Storefront model enables merchants to sell products on the Web
E-commerce allows companies to conduct business 24/7, everyday, worldwide
An e-commerce storefront should include
online catalogue of products
Shopping cart
order processing
secure payment
timely order fulfilment

12. Online catalogue of products
it is listing of the products that a company sells
The catalogue should include
Price
Product description
Customer rating and Product Reviews are very important now
Reviews have become standard resource for consumers making purchase decisions. Ratings and reviews are no longer an option, but an expectation (Matt Moog, CEO of PowerReviews)
Consumers prefer to shop through channels that make product information, including ratings and reviews, easily accessible.
More than half (57%) of online shoppers reported specifically seeking out websites with product reviews. (PowerReviews)
Shopping cart
An order-processing technology allows customers to accumulate[collect/gather] lists of items they wish to buy as they continue to shop.
The shopping cart is supported by the product catalogue, merchant server, database technology

13. Order processing and secure payment
Address of the customer is taken
Payment information is taken
Involves communication to business about the order
Communication to a customer with detail about the products purchased
Online payment is done with the help of third party financial institution
Banks
Other online financial organization (paypal)

14. Examples: E-tailing Online market (Online Mall)
Online presence of a single seller
Online market (Online Mall)
A collection of online retailers that offer their products and services on a single site.
Here multiple sellers present their products together
There is single catalogue and single shopping cart
Order Processing and packaging is done by individual sellers for their part of the order.
Amazon
Ebay
By It Now category which is not Auction based systems

15. Auction Model Auction Customer bids on different products
Bidding starts for products with minimum acceptable price
There is a time deadline after which the maximum bidder wins the bidding
The customer then has to arrange the payment
failing to which is case is being opened against the bad customer

16. Auction sites collect a commission on every successful auction.
Online auction sites act as forums through which Internet users can log-on and assume the role of either bidder or seller.
Sellers post items they wish to sell and wait for buyers to bid.
Reserve price
The minimum price a seller will accept in a given auction.
Auction sites collect a commission on every successful auction.

17. Reverse-auction Model
Here customers specify minimum price for a product
Sellers try to match the product price
Off the topic:
Somewhat similar to the China products in Pakistan 
China sellers can provide single product in multiple prices depending on quality

18. Brokerage Model
Brokers are market-makers: they bring buyers and sellers together and facilitate transactions.
Usually a broker charges a fee or commission for each transaction it enables. The formula for fees can vary. 
Applications in
Real estate agency
Automobile selling
Cheap service finder (insurance quotes)
Job agencies

19. E-Learning Distance Learning or E-Learning
E-learning is changing the way people learn.
Web-based training and education give the world access to continuing education form their home
Many colleges and universities offer distance learning and degree programs online
Both Formal Learning or Informal Learning can take place online
Diffrence between Formal Learning or Informal Learning

20. Earning comes from fees
MOOCs
Massive Open Online Courses is an example
Coursera.com
Earning comes from fees
Certificates / Degrees are offered
Lynda.com
For informal education
Online University Programs

21. Online Entertainment
Online entertainment means providing access to entertainment contents, that is, video, audio or games.
Video on demand service
Video on demand service provides access to large number videos
Users can access any video anytime by their own choice unlike a broadcast TV.
The videos are recorded movies or shows
For example: Netflix, iTunes.

22. Online Live TV channels
Online Music services
spotify
Online Live TV channels
These services provide access to live TV channels.
Some can be free and some can charge fees
Online Gaming
These services allow you to play online games
Online multiplayer games are very popular
Payment Options
Subscription model
Pay fees for some duration, all you can watch!
Pay as you go or pay-per-view pricing
Pay for whatever you watch, pricing is based on use.

23. Portal Model [yahoo, msn]-do a practical
Portal Sites contain information
Portal sites give visitors the chance to find almost everything they are looking for in one place.
News, sports, weather, shopping, etc
Two types; horizontal and vertical
Horizontal portals
Those portals that aggregate information on a broad range of topics.
These attracts users with wide range of interests
Yahoo!, AltaVista

24. vertical portals
These portals offer much detailed and more specific information within a single area of interest.
These portal attracts users with narrow range of interests.
These are good candidates for targeted advertisements.
E-g:
portal about medicine: WebMD,
Movies and Drama: IMDB,
Cricket: cricinfo.com
FirstGov

25. Income comes from monetizing traffic and advertisement
The idea behind portals is the same as that behind television advertising:
Directing viewer to advertisements.
In portals, the advertisements could be more effective as customers could be directed immediately to order a product online at the same time.
monetizing

26. Buy Now Pay Later model
This model is based on buying using credit (loan)
The payment can start up to 6 months after purchase of goods
Like any other credit (e.g. credit cards) customer has to pay interest on the amount
Customer credit (loan) history could be checked for eligibility
The credit is actually arranged by the company from a credit provider (banks)- [credit history-fees-in case if loan disapprove]
Paying later encourages many customer to buy products.

27. Online Service Providers
Many companies provides online services
Cloud storages
Dropbox, sugarsync
Cloud based softwares
Evernote
Marketing
These services help business in marketing
Specially targeted market, where specific group of potential customers are targeted with marketing
Proof Reading and Editing
Helping non-native speakers of language to proof read and edit their writings in a foreign language
These could be automated tools or services where experts review writings.

28. Online News and Publishing
Online Newspapers
Online Magazines
Online newspapers and magazines are getting very popular.
Many paper based newspapers have converted completely to online versions.
Income is generated from advertisement

29. Comparison Website Model
Web sites that provides opportunities to users to compare different products are also getting very important.
Such websites can help users making savings as well as help them to make informed choices about products.
Products comparison
Insurance comparison
Energy comparison
Price comparision
Example of a website

30. Social Networking
Social networking web applications are now very common, that generates income from advertisement
A social network can be general purpose or for a specific purpose
Customers (users) activity or preferences on social network provide a good opportunity for targeted advertisement.
The data generated from users activity is of greater interest to bigger companies and this data are shared (sold) by social network to generate income
Facebook, Instagram, linkedin, etc

31. Dynamic Pricing Model
The Web has changed the way products are priced and purchased
Dynamic pricing model provides opportunities to buy products at lower prices.
Comparison pricing model
Comparison pricing Web sites using shopping bot technology to find the lowest price for a given item
shopping bot: a program that searches internet for some information

32. Demand-sensitive pricing model[refer to group purchase ]
The concept behind this model is that the more people who buy a product in a single purchase, the lower the cost-per-person becomes.
Group buying reduces price as volume sales increase
For example:
Family packs
Party Size products
Group tickets for events, travel, attractions

33. These websites could also reduce price based on advertisement income.
Rebate Model
These websites offer rebates (some refund) on products of leading online retailers
Customers get products cheaper on these websites
These companies have formed partnerships with wholesalers and retailers who will offer discounts.
These company passes these discounts to customers in the form of rebates.
These rebates can be in the form of cash-backs or immediate discount at the time of purchase
is a very popular service
These websites could also reduce price based on advertisement income.

34. Bartering Model-[refer to exchange of goods for goods instead of money]
Individuals and business trade unneeded items for items they desire.
Goods for goods model
Ubarter.com, isolve.com
Free offering model
Free products and services generate high traffic
Traffic generates incomes from advertisement
Freemerchant, Start Sampling, FreeSamples.com

35. Name-your-price model
Name-your-price for products and services.
This model empowers customers by allowing them to choose their price for products and services. Many of the businesses that offer this service have formed partnerships with leaders of industries such as travel, lending, retail etc. These industry leaders receive the customer’s desired price from the intermediary and decide whether or not to sell the product or service. If the customer’s price is not reasonable then that customer will be asked to choose another price.

36. Online Lending and Trading
Online trading empowers the average investor to handle their own investments
These trading sites offer
Research resutls
Investments analysis
Stock history
Simple buying and selling
These information and guidance help individual do trading online without hiring individual.
Online Trading sites include:
E*TRADE, Ameritrade, CharlesSchwab, Fidelity.com

37. Online News Services Internet and Web offer a 24-by-7 news source
It is important to check the information source as rumors are often passed online
Independent and freelance content creators compete with large scale industry players
CNN.com
ESPN.com
Drudge Report
Boston.com
Salon.com

38. Travel and Tourism Services
These services allow customers to bypass travel agent who would take more commission
These services offers
Discounts
Low fares available
Deals
These services specially offers “Last minute” deals / fares, which are often very lower online
Last minutes cruise ship travel deals are very popular which are otherwise very expensive luxury tours.
Name-your-price for tickets, hotels and car rentals is also applied
expedia.com

39. Automotive Sites These services offer sales of vehicles or parts
These services could also offer service to check vehicles history to confirm they are safe to buy or identify any issues the cars may have
Consumers access automobile information empowering them to make an informed buying decision
In these services dealers display available cars and customers arrange appointments to view the vehicles
Online auto auctions are also options
Examples:
Auto.com
Autobytel.com
Autoparts.com

40. Online Job Agencies Examples:
These agencies offers recruitment services to both organizations and individuals looking for jobs
Both organizations and individuals register their interests and these agencies would try to meet them.
They would arrange interviews for individuals with organizations
These services would also offer services to individual regarding job applications like make better Resume / CVs or cover letters
These services are specially helpful in finding new employees from around the world (International market)
Examples:
Monster.com
Sixfigurejobs.com

41. Deals Websites
Many websites lists current deals or offers different products or services by different companies
These websites are updated regularly.
Deals can be posted by users of the website or by companies
These website generates huge traffic and income could comes from advertisements or commissions from companies when their referred customer make purchases.
Groupon
UKHOTDEALs

42. The Low-Cost model
In this model companies sells some basic- quality (not premium quality) products with minimum price.
Similar products could be available with slightly better quality or packaging on a higher price
This is also known as Ryan Air model
Ryan Air started to offer very cheap air tickets based on compromised services or fewer facilities in terms of luggage weight, food, seating spaces, etc

43. Online Real Estate Agency
Providing customers opportunity to rent or buy properties online
Income is generated based on commission
These websites try to offer reliable services
These websites are popular among people because of lower rates of commissions as compared to real world real state agents.
Customer can make deals based on the available agents trust reviews.

44. Click-and-Mortar Businesses
Brick-and-mortar
They are companies that operate solely offline with traditional business practices
Click-and-mortar
This term is given to companies which operate both online and offline
They offer online transactions facility for the same products that are available in the real world shop or establishment.
Click and mortar companies have brand recognition, and an established customer base

45. Online Banking Online banking services are also getting very popular
Online banking helps customers do banking activity from home using computers or even mobile phones
Many companies run their own banks that are available online only

46. Art Dealers This business model is based on Art work.
Artists have now access to global audience.
The Web itself is a new medium for art
Virtual galleries give artists a chance to showcase their work
Short films are finding new fans online
Examples:
Art.com
Guild.com
AtomFilms
art.net

47. B2B Exchanges
B2B exchanges allow businesses to buy, sell, auction, barter and distribute products and services.
B2B exchanges is helping businesses do B2B E-commerce.
B2B is the biggest E-commerce area by amount of transactions.
Business-to-Business (B2B) exchanges are electronic marketplaces (online systems/websites) in the Internet where suppliers and buyers interact to conduct transactions.
B2B exchanges acts as a virtual marketplace that are free of geographic limits. Business from any geographic area can come together to do business.

48. This cuts costs of businesses while improving efficiency.
B2B exchanges can also Enabling companies with surplus inventory to use Free markets to sell extra assets
B2B exchanges make money through charging a transaction fee (approximately 4%) to buyers and suppliers.
The B2B marketplace is one of the fastest growing segment of e-commerce.
This cuts costs of businesses while improving efficiency.
Surp;us inventory

49. B2B Exchange models Icgcommerce.com Tradeaccess.com itoi.com Ework.com
Biz2biz.com
Ariba.com
Freemarkets.com
Liveperson.com
Pcroomlink.com
Ceverything.com
Magnifi.com

50. assignment
Comparision website example and the services they offer