Identify and Compare Revenue Models of Google, Ebay and Amazon

There are a few revenue models for e- commerce, such as:

Sales Model

It is the most well known revenue stream where the website sells products
or services online. Revenues are generated from the sales of products or fees from service performed.

Transaction Fees Model

It generates revenue by receiving commission based on the volume of transaction made. The higher the value of the sale, the higher the total transaction fee. However, transaction fees can also be charged on ‘ per transaction’ basis, regardless of the volume of transaction.

Subscription Fees Model

It generates revenue by charging users a fixed amount periodically, usually monthly, for a type of service consumed. For example, subscription of e-magazine monthly.

Advertising Fees Model

The websites using this model sell advertising space to potential advertisers. The rates are based on number of impressions, clicks or actions. Previously, most of the advertising rates were based on number of impressions delivered. However, due to low click through rates and downturn in the dot.com era, advertisers now choose to apply performance based models.

Affiliate Fees Model

This model generates revenues by referring users to other business or relevant websites. The website itself may not sell any product or service, but helps in promoting the product.

Google

Google’s revenue model is under the Advertising Fees Model. Google generates most of their revenues from Google AdWords.

Google AdWords is a ‘pay per click advertising program’ of Google. This program allows the advertisers to advertise their products or services to people. When a user uses Google’s search engine, advertisements for related search will appear as sponsored links at either right side or above the main search results.

'Pay per Click Advertising' is is an online advertising payment model in which payment is based on qualifying click-throughs. Every time an advertiser’s advertisment is being clicked, a fee will be charged. The advertisers decide the keywords relevant to their offer which induce the display of their advertisements and the maximum amount they are willing to pay per click for that keyword.

Besides that, Google AdSense is also an advertisement serving program. Website owners can enroll in this program to enable text, image and, video advertisements on their sites. These advertisements can generate revenue on either a per-click or per-thousand-impressions basis.

The latest revenue model of Google will be Cost-Per-Action Model, where the site owner gets paid whenever a visitor clicks on an advertisement and performs a specific action, such as purchasing a product from the advertiser.

ebay

Ebay is the largest, most recognized online auction facility in the world. Its major advantages compared to other competitors include enormous brand equity, essentially unregulated market, and significant economies of scale.

The revenue model for eBay is transaction fees model. Majority of the eBay’s revenue is from the listing and commission on completed sales. An additional commission fee is charged for the Paypal purchases. Advertising and other non-transaction net revenues represent a relatively small proportion of total net revenues of ebay.

In addition, eBay's transaction fees model is evenly spread out among a number of categories. For example, in 2004, the revenues are as below:

• Clothing and accessories -- $3.3 billion
• Consumer electronics -- $3.2 billion
• Computers -- $2.9 billion
• Home and garden -- $2.5 billion
• Books/Movies/Music -- $2.4 billion
• Sports -- $2.1 billion
• Collectibles -- $2.0 million
• Toys -- $1.6 billion
• Jewelry and watches -- $1.5 billion
• Business and industrial -- $1.5 billion
• Cameras and photos -- $1.3 billion

Amazon

The revenue model of Amazon.com are the sales model and also affiliate fees model. Amazon's revenue are mostly from media categories such as books, music, and videos. Besides that, Amazon also sells a variety of new and used products for which Amazon receives a commission on those products sold, in the form of affiliate fees.

References:

http://www.organicspam.com/google_revenue_model.asp

http://www.ecommerce-guide.com/essentials/ebay/article.php/3522981

http://content.websitegear.com/article/revenue_introduction.htm