Business models on the web

Teaching Support Materials
For E-business(TAFE)

Evaluate e-business models

Peter Wang
April. 2007


Brokerage Model – Priceline. com 8
Advertising Model – CRAIGSLIST 11
Infomediary Model – DOUBLECLICK 14
Community Model – Flickr Case Study 16
Key Success Factors 16
Launch Strategy 18
Exit Analysis 18
Subscription Model – Classmates. com 18
Interview conducted by Nathan C. Kaiser 19
Utility Model – Slashdot. com 23
About This Site 23
Disclaimer 23
About SourceForge, Inc. 24
Final Assessment Events 24

Author: Michael Rappa

Business models are perhaps the most discussed and least understood aspect of the web. There is so much talk about how the web changes traditional business models. But there is little clear-cut evidence of exactly what this means.
In the most basic sense, a business model is the method of doing business by which a company can sustain itself – that is, generate revenue. The business model spells-out how a company makes money by specifying where it is positioned in the value chain.
Some models are quite simple. A company produces a good or service and sells it to customers. If all goes well, the revenues from sales exceed the cost of operation and the company realizes a profit. Other models can be more intricately woven. Broadcasting is a good example. Radio and later television programming has been broadcasted over the airwaves free to anyone with a receiver for much of the past century. The broadcaster is part of a complex network of distributors, content creators, advertisers (and their agencies), and listeners or viewers. Who makes money and how much is not always clear at the outset. The bottom line depends on many competing factors.
Internet commerce will give rise to

new kinds of business models. That much is certain. But the web is also likely to reinvent tried-and-true models. Auctions are a perfect example. One of the oldest forms of brokering, auctions have been widely used throughout the world to set prices for such items as agricultural commodities, financial instruments, and unique items like fine art and antiquities. The Web has popularized the auction model and broadened its applicability to a wide array of goods and services.
Business models have been defined and categorized in many different ways. This is one attempt to present a comprehensive and cogent taxonomy of business models observable on the web. The proposed taxonomy is not meant to be exhaustive or definitive. Internet business models continue to evolve. New and interesting variations can be expected in the future.
The basic categories of business models discussed in the table below include:
 Brokerage
 Advertising
 Infomediary
 Merchant
 Manufacturer (Direct)
 Affiliate
 Community
 Subscription
 Utility
The models are implemented in a variety of ways, as described below with examples. Moreover, a firm may combine several different models as part of its overall Internet business strategy. For example, it is not uncommon for content driven businesses to blend advertising with a subscription model.
Business models have taken on greater importance recently as a form of intellectual property that can be protected with a patent. Indeed, business models (or more broadly speaking, “business methods”) have fallen increasingly within the realm of patent law.

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Business models on the web