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

History and Evolution of E- commerce

History and evolution of e-commerce

At the early 1960’s, e-commerce was known as the process of execution of commercial transactions electronically with the help of the leading technologies. In other words, users can execute electronic transactions by using Electronic Funds Transfer (EFT). EFT is a system of transferring money from one bank account directly to another without any paper money changing hands.




Later in 1970s, e-commerce enabled business companies and organizations send commercial documentation such as invoices and purchase orders electronically through Electronic Date Interchange (EDI). EDI is the transfer of data between different companies using networks, such as VANs or the Internet. Thereafter, other forms of electronic commerce emerged, such as automatic teller machines, credit cards, and telephone banking.

Since the early 1990s, e-commerce has developed into the huge global internet market that exists today. Before 1991, commercial enterprise on the internet was strictly prohibited. However, in 1992, when the Mosaic web-browser was made available, it was quickly adapted into a downloadable browser, Netscape, and allowed an easier access to electronic commerce. The development of DSL was another key element in the development to of e-commerce. DSL allowed quicker access and a persistent connection to the Internet. The development of Red Hat Linux was also another major factor in the growth of electronic commerce. Linux was an open source and reliable. More importantly, it gave users another alternative for Windows. Thus, Microsoft invested more in many things including electronic commerce in order to stay competitive.


In 1994, the internet started to become popular around the world, and by the beginning of the twenty-first century, more and more companies worldwide were offering their services over the internet. In today’s context, e- commerce is known as the ability to purchase a variety of goods and services over the internet using secure protocols and electronic payment systems.

The early adoptors of e-commerce in Malaysia include Pizza Hut and Malaysia Airline Cargo (MASKargo).

Web 2.0

Web 2.o is a term that is used to describe a second- generation of Internet-based services that let people collaborate and share information online in perceived ways. For example, social networking sites, wikis, and communication tools.

It is evolved from the previous generation of Web 1.0.

Web 1.0 ----------------------------> Web 2.0

• Double Click -------------------------> Google Adsense

• Mp3.com -------------------------> Napster

• Personal Web Sites ------------------> Blogging

• Britannica Online --------------------> Wikipedia

• Content management systems ---------> Wikis

Web 2.0 makes the finding of information easier, and uses RSS technology to notify users about the changes of content in a timely manner. A major characteristic of Web 2.0 is the global spread of innovative Web sites, whereby when a good website exists in a country, similar sites will appear around the world.




The six principles in Web 2.0 are:

1. Sell everywhere- Web 2.0 includes various online channels with additional branded websites, various online marketplaces (such as eBay, Amazon.com, Overstock.com, and others), and online shopping comparison engines (such as Shopping.com, PriceGrabber.com, and others).
2. Target Niche Markets- Web 2.0 is able to reach beyond the traditional prospect base and tap the potential of niche markets.
3. Customers Rule- The content buyers create through forums such as product reviews, blogs, and social networks influences other buyers as much or more than any promotion eTailers create. For example, Youtube and MySpace.
4. Personalised Shopping
5. Integrate and Collaborate- Web 2.0 was built upon many interrelated systems and processes that require information to be exchanged dynamically.
6. Data is the King- Web 2.0 allows collection and management of data from all online channels to enable better business decisions.

References:
http://www.ecommerce-land.com/history_ecommerce.html

http://www.flysyk02.netfirms.com/Ecommerce/History.htm

http://www.articlesnatch.com/Article/A-Brief-History-of-E-Commerce/634686

An example of E-commerce failure and its causes

In the 21st century, many companies try to develop their business in the internet and sell their products and services through e-commerce. Some companies carried out the plan successfully;yet, some experienced failure in doing so. Some of the B2C websites that failed include toysrus.com, eToys.com, Xpeditor.com, Chemdex.com and Webvan.com.

Now, let's talk about eToys.com. eToys Incorporation is an on-line retailer of children's products. One of the top products that the company sell is Barbie dolls. eToys will fulfill any specialized requirements requested by customers on the Barbie dolls' appearance. In others words, it retails different products with 750 brands. Since eToys started to involve its business in the e-commerce world, there were many challenges faced by them such as competition with ToysRUS.com ,which is also a retail sales of toys. However, since February 12, 2009, Toys“R”Us has acquired eToys company. In the early stage of its business conduct via internet network, eToys failed in surviving in the e-commerce world.

The causes that lead to the failure was due to eToys' founders were lack of experience in the retail toys industries. Management experience is one of the important factors in determining the success or failure of business in e-commerce. However, the founders of the eToys, Inc did not have any management experience. The business was being run by a bunch of “twenty-something’s” with no management experience. Without experience, the business was unlikely to be successful.

Another cause that lead to the failure of eToys' e-commerce is its poor demand forecasting. This can be seen clearly in the case happened in 1999 during the Christmas season, where eToys with no experience in managing the business was unable to forecast the demand for the production of the toys. The number of orders was large and eToys was unable to meet the required orders. During that season, all the children celebrated Christmas with sadness and it is known as a disaster for eToys.

Besides that, eToy's poor customer services also caused its failure. For example, no toll free call was provided at the site and this caused inconvenience to customers. If consumers have any questions or problems about their orders, they were unable to contact eToy and make any correction. This lead to the lack of confidence and trust from consumers on the website.

Next, competitive environment also caused the failure of eToys e-commerce network. In the e-commerce world, eToys was not the only one in the retail toy industry. There were other companies such as Toys R’ Us involved in the same industry too. Therefore, eToys has a strong competitor to compete with. Compared to eToys, Toys R’ Us not only has online presence, but it also has the perceived stable infrastructure of bricks and mortar. Furthermore, eToys' strategy to offer more diverse product was in conflict with the strong “toy store” branding they had developed. The pricing competition with other retailers and high customer acquisition cost also lead to the failure of e-commerce.

Reference:

http://www3.toysrus.com/about/

An Example of E-commerce Sucess and its causes

ebay is one of the global company that succed in e-commerce. It is a global online marketplace where people can trade almost anything. There are more than 125 million internet users regiestered worldwide on ebay website.

ebay website has simple design and navigation which makes it easier for user to get information and do their transactions. This helps ebay to acheive customer satisfaction. For instance, ebay's fresh members can learn about buying and sellling through the information that ebay provides. The benefits provided by online trading are extensive: all member can trade with retailers without high overheads or start up costs; persons in rural areas are able to access a wider choice of items to buy at competitive price.

ebay built online person-to-person trading community where people can exchange information goods, services, and also merchandises. Besides that, ebay also trade collectibles and hard-to-find items since 1995. This allows people to pursue their interests and passions in their hobbies and collectibles such as toy soldiers, Barbie dolls, doll houses, and so on.

People really enjoy the experience of shopping bazaar. They enjoy hunting and the competition in bidding process. The ebay auction allows users to bid. They like to bargain and negotiate a little bit over the price. Besides that, individual or company who are interested in auction can create their own auctions to highlight their products. This can direct people to their websites. It is a really cost saving type of advertisement that let people search for what you have to offer. There have been some successful stories in ebay auction. For instance, a teddy bear maker in Virginia used to sell her hand-made crafts for $30 a piece. With the exposure she gets on ebay, her bear now sells from $100 to $300 each. In addition, ebay also offers different methods of payment for different countries for auction purpose. For example, for Malaysian buyers, auction payment can be made through Maybank2u, RHB Bank, CIMB Bank and PBB Bank.

For more information about auction payment, you can refer the website below:

http://cgi.ebay.com.my/1-8-Inflator-Flexible-Hose-with-hand-free-Clip-Chuck_W0QQitemZ230350027659QQcmdZViewItemQQptZLH_DefaultDomain_207?hash=item35a1ee7b8b&_trksid=p3286.c0.m14&_trkparms=65%3A12%7C66%3A2%7C39%3A1%7C72%3A835%7C240%3A1318%7C301%3A0%7C293%3A1%7C294%3A50

Moreover, most of the people who are selling on ebay are warm, trustworthy and honest. Therefore, a lot of people would like to do transactions at ebay. It also provides online security such as implementation of privacy protection system to reduce the risk of exposure of users' personal confidential information. Furthermore, ebay provides some types of wizard to guide customers through the process of creating the security setting on their account, such as Google Checkout and PayPal. These facilities offer great flexibility for buyer when they are making payment.

They have also improved their services by providing new services other than buying and selling. Those new services include services that allows users to list their items by a photograph in the ebay gallery, establishing categories that deal with higher priced items, collectibles and automobiles, and also the feedback forum.

You may refer to the website below to know more about other reasons that cause ebay to be successful in e commerce:

http://www.homebiz-direct.com/articles/An-Introduction-to-Ebay-Selling.html