Lecture 4

E-Commerce Applications
Development
Lecture 3
Strategies for selling online
 Revenue models for online business:

A useful way to think about electronic commerce implementations is
to consider the various strategies that can be used to generate
revenue, which are called revenue models.
Revenue generally refers to total amount of money your

business makes during a certain period of time by selling your
products or services.
We will learn that not all electronic commerce initiatives have the goal
of providing revenue; some are undertaken to reduce costs or improve
customer service.
Strategies for selling online
 Revenue models for online business:
There are six types of revenue models that we will discuss here,
many companies use same revenue model for different business
models (B2B,B2C etc):
1. Web catalogue revenue model

2. Digital content revenue model
3. Advertising-supported revenue model
4. Advertising-Subscription mixed revenue model
5. Fee-for-Transaction revenue model
6. Fee-for-service revenue model
Revenue models for online business
1. Web catalogue revenue model:
• Adapted from mail-order (catalogue) model.

• Seller establishes brand image
• Printed information is mailed to
• Orders are placed by email or toll free number
• It expands traditional business model
• Payments are made through mail or in person.
• Creates additional sales outlet for existing companies.
For example: Computers and consumer electronics. Websites sell

same products as in stores.
Web catalogue revenue model (cont..)
• In such revenue models multiple marketing channels can be

used.
• More customers can be reached at relatively less cost.
• Can combine marketing channels
• Mail catalogues with reference to retailer’s website.
• Most ecommerce stores with books, music albums and videos
use this model.
• For example Amazon.com, originally started with books
catalogue retailer and sold books, then evolved into general
retailer.

• Books, music and videos are most selling items using this
model.
Example: Barnes and Nobel, Powell’s books,
Blackwell’s.
• All above mentioned businesses adopted web catalogue
revenue model.
• Luxury items are difficult to sell online as customers
want to see
product first.
– Brands like Versace , and online fashion store adopts
following strategy:
– Website provides information about products
– Buyer purchases at physical stores.

2. Digital content revenue model:

• Firms or companies own written information or information
rights.
• Sell subscriptions for access to information they own.
• Legal context:
For example: LexisNexis is an online company that
provides services like business research and risk management.
They provide legal information in exchange for payment
• Academic research content:

There are many websites that provide access to paid
journals, articles and research papers. These companies deal in
the digital copies of academic publications.
Digital content revenue model (cont..)
• Business content:
DowJones is an online company that provides business
news and financial information from all over the world.
– they sell digitized newspapers, magazines, journals and
content subscriptions.
Factiva, a subsidiary of DowJones provides research and
analytical tools as information management system.
• Technical content:
– Association for Computer Machinery (ACM): digital
library.
3. Advertising-supported revenue model:

• Instead of charging a fee or subscription for content, many online
businesses display advertisements on their Websites.
• The fees they charge advertisers are used to support the
operation of the Web site and pay for the development or
purchase
of its content.
• Some sites rely entirely on advertising for their revenue; others use
it only to provide part of their revenue.
• This model is used by broadcast network television in the United
States. Broadcasters provide free programming to an audience
along with advertising messages.
• Online news sites that focus their coverage on a particular town or
metropolitan area can use the advertising-supported revenue model
successfully.
Advertising-supported revenue model (cont..)
• A very successful advertising-supported website that appeal to

audiences with specific interests is The Huffington Post.
– This website appeals to people who are interested in
politics.
• Advertisers that want to target an audience with a specific political
interest are willing to pay rates that are high enough to make these
sites profitable enterprises.
• Similarly, HowStuffWorks is a Web site that explains, as the name
suggests, how things work. Each set of Web pages in the site
attracts visitors with a highly focused interest.
– For example, a visitor looking for an explanation of how
heating stoves work would be a good prospect for advertisers
that sell heating stoves.
Web Portals:
• Site is used as a launching point to enter the web.
– Almost always includes a web directory or search engine
– Often includes other features
• Web Directories:
– Listing of hyperlinks to web pages.
– Yahoo!: one of the first
– Presents search term triggered advertising on each
page
– Portal websites using general interest strategy
• Google, Bing.
• Portals sites not using general interest strategy:
• Help visitors find information within a specific knowledge
domain
• Advertisers pay more
Example: GSMArena, C-Net
• Travel sites:
• Successful as advertising
supported online businesses
• Example: Kayak
• Newspaper and magazines
publishers:
Sell advertising to cover
website costs
• Internet public library online newspapers page
Provides links to worldwide newspaper sites
• Newspaper’s web presence:
• Targeted classified advertising sites:

Can command higher rates than general advertising
• Growth of classified advertising web sites
very bad for newspapers
Example: craigslist
Web employment advertising:

Most successful targeted classified advertising category
Examples: CareerBuilder.com, Guru.com
• One of the leading Web portal sites is Yahoo!, which was one of the
first Web directories. A Web directory is a listing of hyperlinks to Web
pages. Because the Yahoo! portal’s search engine presents visitors’
search results on separate pages, it can include advertising on each
results page that is triggered by the terms in the search.
– For example, when the Yahoo! search engine detects that a visitor
has searched on the term new car deals, it can place a Ford ad at
the top of the search results page. Ford is willing to pay more for
this ad because it is directed only at visitors who have expressed
interest in new cars.
•

4. Advertising-Subscription Mixed revenue model:
• In this type of revenue model, subscribers pay a fee, but also

accept some level of advertising.
• Websites that use the advertising-subscription mixed revenue

model, subscribers are typically subjected to much less
advertising than they are on sites supported completely by
advertising.
• Two of the world’s most widely circulated newspapers, The

New York Times and The Wall Street Journal, have each used
an advertising-subscription mixed model since they first took
their publications online.
Advertising-Subscription Mixed revenue model (cont..)
 The Wall Street Journal’s mixed model is weighted

 toward subscription revenue. The site allows non-
subscribing visitors to view the classified ads and certain
stories from the newspaper, but most of the content is
reserved for subscribers who pay an annual fee for access
to the site.
 ESPN is one of the most-visited sports sites on the Web

as it provides all types of sports-related information .
• It sells advertising and offers a vast amount of
free information, but die-hard fans can subscribe to its
Insider service to obtain access to even more sports
information.
• ESPN uses a mixed model that includes
advertising and subscription revenue
Advertising-Subscription Mixed revenue model (cont..)
Revenue models used by different online newspaper and magazine companies.

5. Fee-for-Transaction revenue model:
• Businesses offer services for which they charge a fee that is based
on the number or size of transactions they process.
• This model has shown much success on the internet through travel
agents, vehicle sales, ticket sales, financial services and others.
• Fee-for-transaction revenue models generally generate revenue
through the earning of commissions.
• By providing these services online, companies are able to remove

the human agent as the intermediary (known as
disintermediation)
• The introduction of a new intermediary, such as a fee-for

transaction Web site, into a value chain is called
reintermediation.

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E-Commerce Applications

 Revenue models for online business:

Revenue generally refers to total amount of money your

1. Web catalogue revenue model

1. Web catalogue revenue model:

• Adapted from mail-order (catalogue) model.

For example: Computers and consumer electronics. Websites sell

Web catalogue revenue model (cont..)

• In such revenue models multiple marketing channels can be

Web catalogue revenue model (cont..)

Web catalogue revenue model (cont..)

2. Digital content revenue model:

• Academic research content:

Digital content revenue model (cont..)

3. Advertising-supported revenue model:

Advertising-supported revenue model (cont..)

• A very successful advertising-supported website that appeal to

Advertising-supported revenue model (cont..)

Advertising-supported revenue model (cont..)

• Targeted classified advertising sites:

Web employment advertising:

Advertising-supported revenue model (cont..)

Advertising-supported revenue model (cont..)

4. Advertising-Subscription Mixed revenue model:

• In this type of revenue model, subscribers pay a fee, but also

• Websites that use the advertising-subscription mixed revenue

• Two of the world’s most widely circulated newspapers, The

 The Wall Street Journal’s mixed model is weighted

 ESPN is one of the most-visited sports sites on the Web

Revenue models used by different online newspaper and magazine companies.

• By providing these services online, companies are able to remove

• The introduction of a new intermediary, such as a fee-for

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