Presenting the Web’s Business Models - Essay Example

O’ Connor and Galvin (1998) state the term e-commerce can be used to describe any trading activity that is carried out over an electronic network such as the Internet. The Internet can be a catalyst to e-commerce by providing the necessary infrastructure. Consumers are more and more expecting web sites to help them do their retail buying. There are advantages, as well as, disadvantages resulting from the operation of e-commerce, both for consumers and retailers. E-commerce is increasing in adoption by businesses that want to implement a multichannel approach to their sales.

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Moreover, the appropriate know-how is needed by the retailer in order to operate in an effective manner the e-commerce activities and keep his/her customers satisfied and his/her brand name high in reputation. The transactions can be business-to-business, consumer-to-consumer or business to consumer. ASPs Software and service providers that implement e-commerce systems are Application Service Providers (ASPs) that assemble the functions needed by enterprises and packages them with outsource development, operation, maintenance and other services (Turban et all, 2002).

Moreover, ASPs connect the company with any other company’s computers all over the world and with any pc via WANs. The advantage of WANs is that allow easy information sharing of documents, sending and receiving of emails, over long distances making global connectivity of businesses a real case (Nickerson, 2000). A further important element of an EC system is to provide a secure environment for the company and for all the parties involved.

This is done by creating tunnels of secure data flow, by using cryptography and authorization; an extranet, which is known as a virtual private network VPN (Turban et all, 2002). Presenting the Web’s Business Models It is first essential to review the models, as they are outlines in Prof. M. Rappa’s website. He defines a business model, in its most simple form, as being the method that a company chooses to generate its revenues. The business model, which a company applies as a revenue-generating source, will also position it in the value chain.

Because e-commerce is yet at its early stage of maturity, M. Rappa wants to specify that the models he presents are definitely not the only one, and several new models, or amended models, will emerge in the future, all depending on the maturity/growth curve of the e-commerce. In addition, an e-tailer may choose to apply one specific model, or a combination of two or models, depending on the product/service, the philosophy of the company, the consumers’ profile, and the competition.

E-commerce business models are so essential to the e-tailers, and to those who developed them, that some models have even been granted a patent to ensure it is not copied by other e-tailers. Still the patent issue is an open debate, since no model is a static form, changes are constantly taking place, and a slight difference from a patented model may or not give rise to a court dispute between the creators of the patented model and those who altered it just enough to insure it cannot be disclaimed as a copy of the patented one. The Brokerage Model

As in all other kinds of retailing, brokers are the intermediaries who bring together the buyers and the sellers, for a fee, in order to facilitate the transactions between the two. The buyers and sellers can be consumers and/or businesses; the brokerage principle remains the same. There are several types of brokerage models, such as the marketplace exchange, the buy/Sell fulfillment, and the auction brokers. When evaluating the cosmetics e-tailers, more emphasis will be placed on the kind of brokers there are. The Advertising model

On the Internet, this model takes the form of advertisement banners mixed on other web pages. The banners refer to e-companies selling products and services. The visitor can follow the link from the main page to the banner’s page, in order to find out more on the advertised company’s products/services. This kind of model is most efficient when the number of viewers is very large and/or highly specialized. Advertising models include portals, classifieds, query-based paid placement, and contextual advertising The Infomediary Model

Infomediary companies have collected and analyzed large quantities of data about consumers, products and e-companies. These data have been analyzed and processed in such ways to be useful to any person looking for a specific product/service, a specific target group, and/or a specific e-tailer. Infomediary companies can either be advertising networks, incentive marketing companies, or audience measurement services, to name a few. The Merchant Model This model refers to the more traditional wholesalers and retailers of goods and services who use the Internet as a new sales outlet.

The sales take place either based on list prices or on auction basis. Such ‘merchants’ can be virtual, catalog, click and mortar or bit vendor. The Manufacturer (Direct) Model Traditional manufacturers of goods add the Internet as a new sales outlet, thereby also canceling the services of the distributors. Among the advantages of this model, are the fact that company will deal directly with the end, offering better prices, and improving its understanding of the needs of the consumers.

The Affiliate Model

E-tailers, who use this model, will give the web user who is simply surfing the opportunity to make advantageous purchases on a pop-up basis. If a sale is performed, then the affiliate company will receive a commission from the e-tailer, if not, it will be at no cost to either. The Community model This model is based on consumer loyalty. The users of those sites voluntarily share their knowledge and expertise on specific subjects, and therefore, each participant can gain from such free and voluntary exchanges.

Examples are the open source sites, where developers present their findings and may find solutions from other users, and the knowledge network, where open discussion are held by experts from a same field. The Subscription model Against a fee, which is independent of the actual number of visits a user may make, the user can have access to a regular publication s/he subscribes to. The Utility Model In contrast to the above model, in this model, the user is charged for the number of times s/he visits the sites. The best example of this model is the metered telephones, where the subscriber will pay for the actual number of units used.