Comparisons of Revenue Models for Google, Amazons.com & eBay

Revenue models outline the sources of income of e-commerce companies. The five major revenue models are sales, transaction fees, subscription fees, advertising fees and affiliate fees.

Google
It is known that approximately 90% of Google’s revenues are derived from the advertising fees received. In January 2009, Google decided to add a new revenue model using resellers to market its Web-based Google Applications to enterprises. Yet, this plan is still under the experimental status. Nevertheless, it portrays potential sales revenue model for Google in future.
For details, please refer to : -
New Revenue Model for Google

Currently, Google’s revenue sources are mainly from advertising fees and affiliate fees. Advertising and affiliate fees revenue models include AdWords, Adsense, Froogle and a new advertising program called Cost-Per-Action program which earns Google a commission every time a customer clicks on an advertisement of a site owner.

Google AdWords is a pay per click advertising program which allows the advertisements to be shown as sponsored links based on the relevant words entered by the users. An advertiser has to pay Google every time his ad receives a click. AdWords generate affiliate fees for Google too.














Google Answers is an internet search and research service offered for a fee by Google. It acts as an agent which helps its customers to find answers by getting the assistance from researchers (not Google employees). Google keeps 25% of the payment from customers when his/her question is successfully answered and sends the rest to the researchers. This portrays an affiliate fee received by Google.


Amazon.com
Amazon.com earns revenue through sales, transaction fees and affiliate fees revenue models. It provides a fixed price online marketplace which allows sellers to offer new or used items to customers. Simultaneously, Amazon is offering a variety of products such as DVD, computer software, books and etc. it charges a commission rate based on the sale price, transaction fee and a variable closing fee.

Besides, Amazon has set up an affiliate partnership marketing program which enables Amazon partners to display Amazon products on their websites. The astore is an affiliate product which website owners can use to create an online store on their site. With the affiliate marketing program, Amazon partners earn referral fees or commissions on the sale of the products purchased by customers. This is a win-win strategy as Amazon gains the sales revenue while its partners earn the referral fees.


eBay
eBay is an online auction and shopping website in which a diversified range of items are traded daily. Its main source of revenue is from a number of fees such as insertion fees (to be listed on eBay), promotional fees (additional listing options to help attract attention), picture service fee (uploading second picture onwards) and final value fees (commission charged when there is a closing bid).

Besides, the acquisition of PayPal, an online paying service system which allows users to buy items online more conveniently, brings additional transaction fees to eBay.

In addition, a portion of Ebay’s revenue also comes from fixed-price sale of goods such as books, CDs, games etc through its subsidiary, Half.com. Direct advertising on the site also brings eBay some advertising fees too.

Apparently, the revenue models of Google, Amazon.com and eBay do not include subscription fee. The major revenue models of each online company are illustrated in the table below:-








The links below provide some interesting facts about how Google and Amazon.com seems to be taking the lead while eBay is falling behind the competition. Do check it out!

How Amazon is beating up eBay
eBay will be permanently marginalized by Google

The collapse of Pets.com and its causes

Undeniably, many companies have been extremely successful in doing e-business. However, several e-commerce companies were not able to sustain themselves and hence were forced to close down its e-business.

Pets.com is one of the examples of an e-commerce failure companies. Pets.com is a former dot-com enterprise that sold pet supplies to retail customers over the World Wide Web. It was launched in August 1998 by Greg McLemore. It went from an IPO on a major stock exchange on the Nasdaq to liquidation in merely 268 days.

Causes of its failure :-

1) Competition
The fierce competition in the online pet supply market has resulted Pets.com to be a short-lived online business. Apparently, Pets.com did not take the initiative to distinguish itself from other online pet suppliers retailers by offering unique products to customers. It is clearly understood that in order to outperform the market, Pets.com should have endeavoured to differentiate itself from other competitors.

2) An unwise decision
Another reason that led to the failure of Pets.com was that it had entered into a market that is selling low margin food and supplies but incurs high shipment costs to deliver the items ordered to the customers. Pets.com should have realized that the market of customers to buy such pets stuff is not large enough for them to conduct such online business. Ironically, many consumers still feel that it is more convenient to shop at local discount stores rather than shopping online particularly for buying pets stuff.

3) An unsustainable business model
In fact, Pets.com went public in February 2000 after its initial launch without any experience. It assumed that the market and its revenues would grow quickly to make a profit before the funding money was exhausted. This assumption has led to the downfall of Pets.com as it was too focused on gaining market share instead of profits. Besides, another mistake it had made was overestimating the number of online customers that it could gain in the pet market. Pets.com was said to have gone into the public too soon and spent money too quickly that it had made an excessive spending on marketing and advertising. To make things worse, this excessive advertising helped the entire online pet companies to gain sales instead of benefitting Pets.com solely.

4) An inappropriate business strategy
Pets.com also failed to position itself with an effective business strategy. Pets.com’s strategy was to compete with low prices with its competitors without considering switching to a unique positioning strategy in its supplies of goods offered to customers. This mistake had led Pets.com to sell its merchandise at prices below cost and therefore it suffered a negative gross margin for months.

The share price of Pets.com on the first day was $14. However, over its duration of operaton, it has dropped to $0.19 only. Hence, the Pets.com management had no choice but to close down the company as there was a lacking of investors of the company to raise further capital.
For more information about Pets.com, view the links below:

http://www.blogger.com/%20http://news.cnet.com/2100-1017-248230.html
http://www.fool.com/portfolios/rulebreaker/2000/rulebreaker001114.htm

Do it Right, Make it Big!! (E-commerce success and Its Causes)

As suggested by the title, the fundamental element in succeeding is to “Do It Right”. There are many businesses that have adopted e-commerce as their means to transact, but unfortunately, not all can reap its benefits. Before we further discuss, I would like to give an example of a company that has succeeded big-time with e-commerce to help you grasp the key points of e-commerce.

Dell.Inc, is the chosen one. Dell is one of the world’s crown providers of computer products and services such as servers, storage, workstations, notebook and notebooks computers, to businesses and consumers. Furthermore, Dell was considered a primitive and fervent business that had converted to the Internet, creating its first web site in 1994 and then moving much of its business strategies to the Internet ahead of its rivals. The company foreseen that its direct model gave it an advantage in selling online. The company's strategy of selling over the Internet was carried out with absolutely no physical outlets and no intermediaries. Dell’s online sales strategies has proven a grand victory and an Aberdeen Group analyst Kent Allen has even questioned “Does consumer need to go to the store to buy a PC anymore?”.

History of Dell.Inc
Dell was created in 1984 by Michael Dell on a few simple concepts, which are by selling computer systems directly to customers, they also was able to recognize customer’s demands and efficiently offer the most effective computing solutions to meet those demands. Dell’s ever-changing business strategies combined their revolutionary direct customer model with the new distribution channels to reach commercial customers and potential individual consumers all around the planet.

1. Dell’s Delivery System
Due to its efficient supply chain management, Dell is competent of shipping a PC within 24 hours of receiving an order. The establishment of the internet and e-commerce has aided Dell in improving its efficiency and profitability. Moreover, transacting through the internet speeds up a lot of procedures, thus making Dell well-organized in its services.

2. Dell Ventures
Another vital adding point of Dell’s e-commerce strategy is Dell Ventures, which has invested $700 million in approximately 50 Internet companies (as of July 2000). These investments, includes broadband and wireless communications, business-to-business and business-to-consumer e-commerce, ASPs, server and storage infrastructure, Internet content, and e-consulting. With the variety investments, Dell is able to access to new technologies without expanding its own R&D activities. This will help to control its internal funds wisely within the necessary parameters of Dell Inc.


3. The front end
A dominant part of Dell's success is that the site proposes "choice and control" to its users. With just a simple click of a finger, the consumers are able to assemble computer system piece by piece, choosing each particular components, such as hard drive size and processor speed inline with their budgets and requirements. This flexibility allows people to customize the designs and individualization is the core of identity. Consequently, this direct contact with consumers gives Dell competitive advantage. On top of that, Dell also value constructive feedbacks from its fellow customers. Feedback regarding its website as well as service.

4. The back end
Other than the front end which is seen by the customers, the back end is equally important as well. According to Aberdeen Allen, “Nowadays that many e-tailers have built a customer-friendly front end, their back end supply chain is a greater focus”. The progress on ensuring that they are not just capturing the order but was fulfilling the order. That is when Dell continues to thrive. One of the main reasons Dell can use the Just-In-Time (JIT) system is because the receive orders beforehand online, making it possible to order their inventories after an order has been secured. This helps to cut down on the managing inventories section, where they don’t need to store up so much to display like the traditional storefront would do.

After analyzing the above tips, it is obvious that Dell handles e-commerce well, and benefited on this method. You may check out the website to experience dell's services. http://www.dell.com.my/

Yesterday is History, Today is Revolutionary, and Tomorrow is a Mystery. (History And Evolution of E-commerce)

The ever prospering technique of dealing with routine transactions on the internet, e-commerce, is working its way up in the world as one of the most widely embraced technological gateway to operate economic exchange activities. The word “e-commerce” itself is abbreviated. Initially, it was known as electronic commerce. The utterance “commerce” is defined as: trade, especially between countries; the buying and selling of goods and services. Thus, e-commerce simply means trading activities online. E-commerce was founded over a few decades ago, by Michael Aldrich. It was used extensively by Ford, Peugeot-Talbot, General Motors and Nissan.



1. Originally, electronic commerce was preordained for the facilitation of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT). These were both introduced in the late 1970s, allowing businesses to send commercial documents like purchase orders or invoices electronically.


2. Next, it is the development of Mosaic web-browser in 1992. This web browser was soon given the form of a browser which could be downloaded and was named as Netscape. This further broadened the scope and possibility of electronic commercial transaction.

3. Subsequently, the birth of DSL was another key moment in the growth to of e-commerce. DSL allowed quicker access and a persistent connection to the Internet.

4. Christmas of 1998 was another major step in the expansion of e-commerce. AOL had sales of 1.2 billion over the 10 week holiday season from online sales.

5. Soon, the creation of Red Hat Linux was also another major step in electronic commerce escalation. Linux gave users another choice in a platform other then Windows that was reliable and open-source.

4. Consequently, a major merger, in early 2000, between AOL and Time Warner was another great push for electronic commerce. The merger, worth $350 million, brought together a major online company with a traditional company.


5. Today, the largest electronic commerce is Business-to-Business (B2B). Businesses involved in B2B sell their goods to other businesses. In 2001, this form of e-commerce had around $700 billion in transactions. Other varieties growing today include Consumer-to-Consumer (C2C) where consumers sell to each other, for example through auction sites. Peer-to-Peer (P2P) is another form of e-commerce that allows users to share resources and files directly. Thus, continually, more and more businesses on the globe are adopting e-commerce to trade because of its convenient element as well as other advantages.


By the way, it wasn’t all smooth-sailing for e-commerce since its stone age. During the twentieth century, hackers attacked some major players of e-commerce, including Yahoo, Ebay and Amazon. In the light of these attacks the need for improved security came to the forefront in the development of electronic commerce.

In my opinion, e-commerce had evolved so much since Aldrich because it has provided a very competitive and value adding trading system. Nowadays, e-commerce does not deal with tangible products only, but intangible as well. For example, people can be trading information, knowledge, electronic work of art, digital products and etc.

In the coming days, users will definitely demand more from e-commerce, and perhaps, it will progress until the extend where it actually possesses all the benefits of a physical storefront trading and eliminating all current drawbacks of e-commerce.

Last but not least, Web 2.0 has enhanced e-commerce tremendously. The term "Web 2.0" was coined by Darcy DiNucci in 1999, this was depicted in her article "Fragmented Future". "Web 2.0" refers to what is perceived as a second generation of web development and web design. It is characterized as facilitating communication, information sharing, interoperability, user-centered design and collaboration on the World Wide Web. It has led to the development and evolution of web-based communities, hosted services, and web applications. Examples include social-networking sites, video-sharing sites, wikis, blogs, mashups and folksonomies. For further information, we have provided a website that shows journals on Web 2.0: http://web2.sys-con.com/