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Five Business Models of eCommerce

Five different ways websites can generate revenue.


by Robert Samuelsen
"There's no such thing as a free lunch!" While this simple economic
aphorism seems to have been forgotten in the world of cyberspace, it
holds true as much today as it ever has. First lets establish the fact Top of Form
that no site is free - every web site costs money. The web site is
stored on a computer, uses web server software, accesses Search
telecommunication resources, and must be maintained. Someone
must pay for the computers, software, telecommunication charges,
and time. The omnipresent cost either comes from your pocket or Bottom of Form
some benevolent benefactor. These online transactions are made
possible with the ecommerce solution the business is using.
Bookmark Us
The cost and potential revenue constitutes a business model.
Therefore, even the "free" sites have a business model. A public site Have Shel Speak
offered by a library, school, or university has a business model. Free to Your Group
email service has a business model. Free home pages fit into a Media Training
business model. Every site in the entire world wide web has a
business model. There are different business models underlying each Marketing &
website. Copywriting
Services
In actuality, five distinct eCommerce business models form the basic
structure for the wide variety of websites today. The five categories Information for
are called vanity, billboard, advertising, subscriptions, and storefront Marketers
sites. [Editor's Note: Mr. Samuelsen considers affiliate programs to be Grassroots
a variant on the storefront model.] While not all drive revenue directly, Marketing
they all incur costs. In addition, many sites combine several of the five
Order Our
identified business models. Each of the five models have unique
Books: Low-
characteristics which make it different from the other types. Therefore,
Cost/Ethical
it is important to understand their differences.
Marketing
Vanity: Many web sites are started as vanity sites. These sites are
Down to
often created by individuals as an outlet of self expression, to share a
Business
hobby, promote a cause, or find others with similar interests. These
sites are created with no intentions of deriving revenue and no Frugal Marketing
illusions of grandeur. It could be as simple as a one page family site Tipsheets
or a complex forum on a specific topic. The costs are borne either by Testimonials
the individual or by some altruistic enterprise such as universities,
libraries, communities, associations, and even businesses. Press Room
Nevertheless, the costs are real of these "free" sites. Frequently Asked
Billboard: Billboard sites (also called brochure or information sites) Questions
are designed to derive economic benefit through indirect means from Contact Us
either referred sales, reduced cost, or both. Revenue comes from
creating awareness of its products or services via the web, with the We Also
actual purchase transaction occurring off-line. Just like a billboard on Recommend
a highway, success is measured on viewership as net citizens "surf" Site Map
by and are influenced to purchase product. Most corporate sites today
put up these electronic brochures to provide information about their
products, employment information, or public information. Economic
benefit is created through the indirect purchase of goods or services
from existing physical outlets and cost savings through the elimination
of infrastructure or inefficiency. Finally, some businesses feel this is Site Search
the best way to avoid channel conflict'a potential pricing disparity Main Page
between different supply chains.
Advertising: Network television, radio, and many periodicals follow
the advertising model. All programming and content is funded by
advertising dollars, with consumer viewership measuring value.
Agencies conduct sophisticated surveys to measure the value and
establish the pricing. For eCommerce, advertising can be in the form
of banners, sponsorships, ezine ads, and other promotion methods.
This is a much-ballyhooed but still largely unproven model on the
web. While there are a few sites that are entirely supported by
advertising dollars, the lack of web-savvy viewership statistics hinder
the mass adoption by advertisers. As the knowledge of consumer
behavior is further understood, experts will prepare purchase pattern
analyses providing advertisers with empirical data to support their
promotion campaigns.
Books by Shel Horowitz
Subscriptions: In other media, the subscription models are well
established'accepted by subscribers and nurtured by publishers. On
the web, subscriptions are not yet widely accepted by consumers. Of
those that are accepted, the subscription model caters to sites
targeted to particular niches of individuals who have specific needs.
These sites are often specialized with expert content and timely
information. The subscriptions fund the development and
maintenance of the site.
Subscriptions can be paid on a weekly, monthly, or annual basis.
Payment through a credit card account is a common payment scheme
for subscription sites because of the ability to periodically process the
purchase transaction electronically.
Storefront: To some people, a products-offered site is narrowly
defined as a "true" eCommerce site. A website that offers products for
sale is the electronic version of a catalog. These virtual storefronts are
built to describe the offering with pictures and words, offer
promotions, provide a "shopping cart," and complete the purchase
transaction. Once the product is purchased, the cyber enterprise
arranges for product fulfillment including shipping and handling. The
fulfillment is sometimes completed by the website enterprise or
directly from the manufacturer in a drop shipping arrangement. Some
manufacturers are now passing up the intermediary wholesalers and
retailers by offering their products directly to consumers. This
collapsing of the supply chain is called disintermediation.
Although the vast majority of these sites offer tangible products, they
can work for service products too. The primary characteristic of these
types of sites is the ability to make a one time purchase with no future
obligations.
While it is impossible to predict the future in this fast moving media, it
is obvious that all five business models will remain viable for the near
term. Each model will continue to mature both in its acceptance and
sophistication. Consumers will increasingly look to the web for
physical commerce alternatives because of the limitlessness of the
media both in terms of geography and shopping hours. For net
entrepreneurs, each model should be examined carefully to
understand which model provides the maximum benefit. With the
understanding of the business models, financial projections can be
easily created and business plans finalized. With the business plan in
hand, you will realize even in cyberspace, there is no such thing as a
free lunch.
Robert Samuelsen operates eVine Online, which he describes as
"The web's first family communication center featuring calendars,
photo albums, discussion groups, address books, and more--all in a
password protected family environment."

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El
e
ct
r
o
ni
c
p
a
y
m
e
n
ts
(
e
-
p
a
y
m
e
n
t)
El
e
ct
r
o
ni
c
p
a
y
m
e
n
ts
(
e
-
p
a
y
m
e
n
t)

Cha
ract
erist
ic of
succ
essf
ul e-
pay
men
t
met
hod
s
Cha
ract
erist
ic of
succ
essf
ul e-
pay
men
t
met
hod
s
•Ho
w do
u get
buye
rs to
adop
ta
meth
od
whe
n
ther
e are
few
selle
rs
usin
g it?
How
do u
get
buye
rs to
adop
ta
meth
od
whe
n
ther
e are
few
selle
rs
usin
g it?
•And
how
do
you
get
selle
rs to
adop
ta
meth
od
whe
n
very
few
buye
rs
are
usin
g
And
how
do
you
get
selle
rs to
adop
ta
meth
od
whe
n
very
few
buye
rs
are
usin
g
it?
(chic
ken
and
egg
probl
em)
it?
(chic
ken
and
egg
probl
em)

Som
e
fact
ors
or
char
acte
risti
cs
or
succ
essf
ul e-
pay
men
t
are,
Som
e
fact
ors
or
char
acte
risti
cs
or
succ
essf
ul e-
pay
men
t
are,
•ind
epen
denc
e: e-
pay
ment
that
requi
re
the
paye
r to
insta
ll
speci
alize
d
inde
pend
ence
: e-
pay
ment
that
requi
re
the
paye
r to
insta
ll
speci
alize
d
com
pone
nts
are
less
likely
to
succ
eed
com
pone
nts
are
less
likely
to
succ
eed
•Inte
rope
rabili
ty
and
porta
bility
: an
e-
pay
ment
syste
m
must
mes
h
with
exist
ing
Inter
oper
abilit
y
and
porta
bility
: an
e-
pay
ment
syste
m
must
mes
h
with
exist
ing
interl
inke
d
syste
ms
and
appli
catio
ns
and
must
be
supp
orted
by
stan
dard
interl
inke
d
syste
ms
and
appli
catio
ns
and
must
be
supp
orted
by
stan
dard
com
putin
g
platf
orms
com
putin
g
platf
orms
•Sec
urity:
the
risk
for
the
paye
e
must
be
high
erth
e
paye
r
(mus
t be
very
safe)
Secu
rity:
the
risk
for
the
paye
e
must
be
high
erth
e
paye
r
(mus
t be
very
safe)
•Ano
nymi
ty: e-
pay
ment
syste
ms
must
be
anon
ymo
us to
hide
the
ident
ity of
Anon
ymit
y: e-
pay
ment
syste
ms
must
be
anon
ymo
us to
hide
the
ident
ity of
thos
e
who
want
s to
rema
in so
thos
e
who
want
s to
rema
in so
•Divi
sibilit
y:
must
be
usab
le for
both
high
and
low
purc
hase
s
Divis
ibilit
y:
must
be
usab
le for
both
high
and
low
purc
hase
s
•Eas
e of
use:
must
be
prett
y
easy
to
use
Ease
of
use:
must
be
prett
y
easy
to
use
•Criti
cal
mass
:a
critic
al
mass
of
vend
ors
must
be
willin
g to
acce
pt
the
pay
ment
,
Critic
al
mass
:a
critic
al
mass
of
vend
ors
must
be
willin
g to
acce
pt
the
pay
ment
,
conv
ersel
ya
critic
al
mass
of
plac
es to
acqu
ire
the
pay
ment
meth
ods
must
exist
conv
ersel
ya
critic
al
mass
of
plac
es to
acqu
ire
the
pay
ment
meth
ods
must
exist
El
e
ct
r
o
ni
c
p
a
y
m
e
n
ts
(
e
-
p
a
y
m
e
n
t)
El
e
ct
r
o
ni
c
p
a
y
m
e
n
ts
(
e
-
p
a
y
m
e
n
t)

U
sin
g
e-
pa
y
m
en
t
re
du
ce
s
tra
ns
ac
tio
n
co
st
by
30
Usi
ng
e-
pa
y
m
en
t
re
du
ce
s
tra
ns
act
ion
co
st
by
30
to
50
pe
rc
en
t
co
m
pa
re
d
to
off
-
lin
e
pa
y
m
en
ts
to
50
pe
rc
en
t
co
m
pa
re
d
to
off
-
lin
e
pa
y
m
en
ts

It
is
fas
ter
It
is
fas
ter

M
ak
es
it
po
ssi
ble
to
co
nd
uc
t
bu
sin
es
s
ac
ros
s
Ma
ke
s it
po
ssi
ble
to
co
nd
uc
t
bu
sin
es
s
ac
ros
s
ge
og
ra
phi
cal
an
d
pol
itic
al
bo
un
da
rie
s
(gr
ea
tly
ge
og
ra
phi
cal
an
d
pol
itic
al
bo
un
da
rie
s
(gr
ea
tly
en
ha
nci
ng
th
e
po
ssi
bili
ty
of
int
er
na
tio
nal
de
als
en
ha
nci
ng
th
e
po
ssi
bili
ty
of
int
er
na
tio
nal
de
als
an
d
tra
ns
act
ion
s
an
d
tra
ns
act
ion
s

E-
pa
y
m
en
t is
ve
ry
im
po
rta
nt
in
EC
be
ca
us
e,
E-
pa
y
m
en
t is
ve
ry
im
po
rta
nt
in
EC
be
ca
us
e,
•Th
ere
is
no
tra
de
wit
ho
ut
a
pay
me
nt
sys
te
m
The
re
is
no
tra
de
wit
ho
ut
a
pay
me
nt
sys
te
m
•A
goo
d
an
d
sec
ure
d
pay
me
nt
sys
te
m
inc
rea
ses
the
tru
st
A
goo
d
an
d
sec
ure
d
pay
me
nt
sys
te
m
inc
rea
ses
the
tru
st
an
d
con
fid
enc
e
of
buy
ers
an
d
con
fid
enc
e
of
buy
ers
Electronic payments (e-
Electronic payments (e-
payment)
payment)
Ele
ctr
oni
c
car
ds:
are
pla
stic
car
ds
tha
t
con
tai
n
digi
tize
d
Ele
ctr
oni
c
car
ds:
are
pla
stic
car
ds
tha
t
con
tai
n
digi
tize
d
inf
or
ma
tio
n,
tha
t
can
be
use
d
for
pay
me
nt
an
d
for
oth
er
inf
or
ma
tio
n,
tha
t
can
be
use
d
for
pay
me
nt
an
d
for
oth
er
pur
pos
es
suc
h
as
ide
ntif
icat
ion
an
d
acc
ess
to
sec
ure
pur
pos
es
suc
h
as
ide
ntif
icat
ion
an
d
acc
ess
to
sec
ure
loc
ati
ons
.
loc
ati
ons
.
•Pa
ym
ent
car
ds:
elec
tron
ic
car
ds
that
con
tain
s
info
rma
tion
that
Pay
me
nt
car
ds:
elec
tron
ic
car
ds
that
con
tain
s
info
rma
tion
that
can
be
use
d
for
pay
me
nt
pur
pos
es.
can
be
use
d
for
pay
me
nt
pur
pos
es.
ther
e
thre
e
typ
es
of
pay
me
nt
car
ds
ther
e
thre
e
typ
es
of
pay
me
nt
car
ds

Cre
dit
card
s:
prov
ider
s
the
hold
er
with
a
cred
it to
mak
e
purc
has
es
Cre
dit
card
s:
prov
ider
s
the
hold
er
with
a
cred
it to
mak
e
purc
has
es
up
to a
limit
fixe
d by
the
issu
ers.
(use
rs
nor
mall
y
don’
t
pay
any
fee
up
to a
limit
fixe
d by
the
issu
ers.
(use
rs
nor
mall
y
don’
t
pay
any
fee
for
usin
g it,
just
a
high
inte
rest
on
thei
r
unp
aid
bala
nce)
for
usin
g it,
just
a
high
inte
rest
on
thei
r
unp
aid
bala
nce)

Cha
rge
card
s:
are
like
mon
thly
loan
s
give
n to
the
user
,
that
he/s
he
Cha
rge
card
s:
are
like
mon
thly
loan
s
give
n to
the
user
,
that
he/s
he
is
requ
ired
to
pay
bac
k in
full
at
the
end
of
the
mon
th
or
upo
n
is
requ
ired
to
pay
bac
k in
full
at
the
end
of
the
mon
th
or
upo
n
rece
ipt
of
mon
thly
stat
eme
nt.
(usu
ally
no
inte
rest
is
paid
on
suc
h
rece
ipt
of
mon
thly
stat
eme
nt.
(usu
ally
no
inte
rest
is
paid
on
suc
h
card
s,
just
an
ann
ual
fee
and
or
sev
ere
pen
alty
for
failu
re
to
pay
card
s,
just
an
ann
ual
fee
and
or
sev
ere
pen
alty
for
failu
re
to
pay
bala
nce
in
full)
bala
nce
in
full)

Deb
it
card
s:
with
a
card
the
mon
ey
for a
tran
sact
com
es
dire
ctly
Debi
t
card
s:
with
a
card
the
mon
ey
for a
tran
sact
com
es
dire
ctly
fro
m
the
user
s
acco
unt
fro
m
the
user
s
acco
unt
El
e
ct
r
o
ni
c
p
a
y
m
e
n
ts
(
e
-
p
a
y
m
e
n
t)
El
e
ct
r
o
ni
c
p
a
y
m
e
n
ts
(
e
-
p
a
y
m
e
n
t)

Vi
rt
ua
l
cr
ed
it
ca
rd
s:
a
pa
y
m
en
t
sy
st
e
m
in
Vi
rt
ua
l
cr
ed
it
ca
rd
s:
a
pa
y
m
en
t
sy
st
e
m
in
w
hi
ch
th
e
iss
ue
r
gi
ve
s
a
sp
ec
ial
w
hi
ch
th
e
iss
ue
r
gi
ve
s
a
sp
ec
ial
tr
an
sa
cti
on
nu
m
be
r
th
at
ca
n
be
us
ed
tr
an
sa
cti
on
nu
m
be
r
th
at
ca
n
be
us
ed
on
lin
e
in
pl
ac
e
of
a
re
gu
lar
ly
cr
ed
it
ca
rd
on
lin
e
in
pl
ac
e
of
a
re
gu
lar
ly
cr
ed
it
ca
rd
nu
m
be
r.
nu
m
be
r.

E-
w
all
et
s:
is
a
so
ft
w
ar
e
co
m
po
ne
nt
in
E-
w
all
et
s:
is
a
so
ft
w
ar
e
co
m
po
ne
nt
in
w
hi
ch
a
us
er
st
or
es
cr
ed
it
ca
rd
nu
m
be
rs
w
hi
ch
a
us
er
st
or
es
cr
ed
it
ca
rd
nu
m
be
rs
an
d
ot
he
r
inf
or
m
ati
on
;
w
he
n
sh
op
pi
ng
an
d
ot
he
r
inf
or
m
ati
on
;
w
he
n
sh
op
pi
ng
on
lin
e,
th
e
us
er
si
m
pl
y
cli
ck
s
th
e
e-
w
all
et
on
lin
e,
th
e
us
er
si
m
pl
y
cli
ck
s
th
e
e-
w
all
et
to
au
to
m
ati
ca
lly
fill
in
inf
or
m
ati
on
ne
ed
ed
to
au
to
m
ati
ca
lly
fill
in
inf
or
m
ati
on
ne
ed
ed
to
m
ak
e
a
pu
rc
ha
se
.
to
m
ak
e
a
pu
rc
ha
se
.
El
e
ct
r
o
ni
c
p
a
y
m
e
n
ts
(
e
-
p
a
y
m
e
n
t)
El
e
ct
r
o
ni
c
p
a
y
m
e
n
ts
(
e
-
p
a
y
m
e
n
t)

S
m
art
Ca
rd
s:
an
ele
ctr
oni
c
ca
rd
co
nt
ain
s
an
S
m
art
Ca
rd
s:
an
ele
ctr
oni
c
ca
rd
co
nt
ain
s
an
e
m
be
dd
ed
mi
cr
oc
hip
th
at
en
abl
es
pr
ed
efi
ne
d
e
m
be
dd
ed
mi
cr
oc
hip
th
at
en
abl
es
pr
ed
efi
ne
d
op
er
ati
on
s
or
th
e
ad
dit
ion
,
del
eti
on
,
or
op
er
ati
on
s
or
th
e
ad
dit
ion
,
del
eti
on
,
or
m
ani
pul
ati
on
of
inf
or
m
ati
on
on
th
e
ca
rd.
m
ani
pul
ati
on
of
inf
or
m
ati
on
on
th
e
ca
rd.
•So
me
ap
plic
ati
ons
of
sm
art
car
ds:
So
me
ap
plic
ati
ons
of
sm
art
car
ds:

Loy
alty
car
ds;
reta
iler
s
are
usin
g
loy
alty
car
ds
to
ide
ntif
y
Loy
alty
car
ds;
reta
iler
s
are
usin
g
loy
alty
car
ds
to
ide
ntif
y
thei
r
loy
al
cus
tom
ers
and
rew
ard
the
m
thei
r
loy
al
cus
tom
ers
and
rew
ard
the
m

Fin
anci
al
app
lica
tion
;
fina
ncia
l
inst
ituti
ons
,
pay
me
nt
Fin
anc
ial
app
lica
tion
;
fina
nci
al
inst
ituti
ons
,
pay
me
nt
ass
ocia
tion
s,
cre
dit
car
ds,
deb
it
car
ds,
cha
rge
car
d
issu
ers
ass
ocia
tion
s,
cre
dit
car
ds,
deb
it
car
ds,
cha
rge
car
d
issu
ers
are
all
usin
g
sm
art
car
ds
to
ext
end
the
trad
itio
nal
car
d
are
all
usin
g
sm
art
car
ds
to
ext
end
the
trad
itio
nal
car
d
pay
me
nt
ser
vice
s
pay
me
nt
ser
vice
s

Tra
nsp
orta
tion
Tra
nsp
orta
tion

Ide
ntifi
cati
on;
sm
art
car
ds
fits
perf
ectl
y in
the
ide
ntifi
cati
on
Ide
ntifi
cati
on;
sm
art
car
ds
fits
perf
ectl
y in
the
ide
ntifi
cati
on
mar
ket
mar
ket
El
e
ct
r
o
ni
c
p
a
y
m
e
n
ts
(
e
-
p
a
y
m
e
n
t)
El
e
ct
r
o
ni
c
p
a
y
m
e
n
ts
(
e
-
p
a
y
m
e
n
t)

El
ec
tro
nic
ca
sh:
th
e
dig
ita
l
eq
uiv
ale
nt
of
pa
pe
r
Ele
ctr
oni
c
ca
sh:
th
e
dig
ita
l
eq
uiv
ale
nt
of
pa
pe
r
cu
rre
nc
y
an
d
coi
ns,
wh
ich
en
abl
es
se
cu
re
an
d
cu
rre
nc
y
an
d
coi
ns,
wh
ich
en
abl
es
se
cu
re
an
d
an
on
y
m
ou
s
pu
rc
ha
se
of
lo
w-
pri
ce
d
ite
ms
.
an
on
y
m
ou
s
pu
rc
ha
se
of
lo
w-
pri
ce
d
ite
ms
.
•E-
cas
h
has
var
iou
s
var
iati
ons
;
E-
cas
h
has
var
iou
s
var
iati
ons
;

Wir
eles
s
pay
me
nts
Wir
eles
s
pay
me
nts

Sto
red-
val
ue
car
ds
Stor
ed-
val
ue
car
ds

E-
loy
alty
E-
loy
alty

P2
P
pay
me
nt:
e-
pay
me
nt
sch
em
es
that
allo
ws
the
tran
sfer
P2P
pay
me
nt:
e-
pay
me
nt
sch
em
es
that
allo
ws
the
tran
sfer
of
fun
ds
bet
wee
n
two
indi
vid
uals
of
fun
ds
bet
wee
n
two
indi
vid
uals

Pa
y
m
en
t
m
ad
e
ele
ctr
oni
cal
ly
at
kio
sk;
cu
sto
m
ers
Pa
y
m
en
t
m
ad
e
ele
ctr
oni
cal
ly
at
kio
sk;
cu
sto
m
ers
act
ing
as
ca
shi
ers
an
d
ch
ec
kin
g
th
e
ms
elv
es
ou
t.
act
ing
as
ca
shi
ers
an
d
ch
ec
kin
g
th
e
ms
elv
es
ou
E-commerce And Its Business Model
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Kiran Rathodleft a comment

is reading E-commerce And Its Business Model.

03 / 01 / 2011

aleya_genius8812left a comment

tq for the info..

02 / 22 / 2010

deviless87left a comment

thanx alot.. :)

02 / 04 / 2010

cooldeepchauhanleft a comment

its good

11 / 28 / 2009
sibanjl1left a comment

Good and very informative.

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