e-BUSINESS MODELS

see also Cannibalization  witiger.com/ecommerce/cannibalization.htm
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For the students of Prof. W. Tim G. Richardson, Toronto, Canada
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This web page has audio clips - just click on the icon (like the one to the left) and you can hear Prof. Richardson's voice adding additional information to topics on the page.

turn on your speakers to hear audio clips

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re: e-business models and exploring ways of making money in the digital age
"The reasonable man adapts himself to the world:
the unreasonable one persists in trying to adapt the world to himself.
Therefore all progress depends on the unreasonable man"
George Bernard Shaw, Irishman, Nobel Prize winner, 1856-1950

WTGR is choosing to quote Shaw in the context of discussing digital age entrepreneurs who had crazy ideas - which proved to be profitable
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"Intro to e-commerce business models" by Prof. Tim Richardson Feb 2nd 2010 A Summary of the content on the first half of this page www.witiger.com/ecommerce /businessmodels.htm camera by Vanja

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..	This unit is used in   MGT D06 MRK 610 / MRK 410 IEC 719 IEC 818 BCS 421 BCS 555 MGD 415 / MGT 471
.	Not all of the material in this unit will be used in each of these courses; the amount of material covered will be indicated by the actual lecture given in class by the professor. Some courses cover this topic extensively, some courses deal with it briefly.

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click on the "witiger.com" globe to hear an audio clip on the topic below The e-commerce business model is a result of the drastic changes effecting the previously well known versions of traditional business models  - these versions are being stretched by many "exceptions" caused by globalization, competition and technology - this stretching has caused the traditional business model to be almost unrecognizable due to the additional considerations we have to make for the "e" age "Jean-Paul Satre once said history could be viewed as if one were looking out the back of a moving car: all the nearby scenery is a blur that starts to come into focus somewhere down the road. And so too it is with e-commerce business models - they are still blurring past us at an unprecedented speed, whilst there is not yet much further down the road on which we may focus."  www.chrisfoxinc.com/eCommerceBusinessModels.htm

 

LEARNING OBJECTIVES

The purpose of this unit on Business Models is to have the student understand that   .    o You need to question what type of business model your company         will follow because if you do not do this properly you will fail    o The old understanding of business models does not apply         now given the rapidly changing environments    o Some new business models have to be created to allow for        unusual stresses and demands    o There is no perfect to answer to questions about e-business models         because this part of the economy is too young to be able to         substantiate clearly what worked in the long-term     o Several e-commerce textbooks discuss e-business models in different ways         - which is right?          - you need to understand the basics of all of them and form your own opinion

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"There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things"   Nicollo Machiavelli sixteenth century Florentine philosopher

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KEY  POINTS

Opening this unit with a quote from Machiavelli reminds us that the consideration of new business in a "challenging" environment is not just something we had to deal with in the 1990's and the new millenium, it goes way way back. The quote from this philosopher also suggests that when it comes to business models, it is always difficult to be the one to go first - which is often what is happening in the first years of Y2K - many companies are the "first" to do something new. Going first can be very "uncertain" - but, it you succeed, it can also mean you have a head start on everyone else and it can be hard for the competition to catch up.

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pic supplied by Karen

Karen, in MGT 471 at UTM in January  2006 was interested in the material we discussed about Machiavelli and sent an email in which she said... I was quite fascinated with what Nicollo Machiavelli had to say that it's usually harder to be the one to invent something new first. So I wanted to find examples, other than the ones you mentioned in class. Here's what I found:

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Karen writes, Fuji was the first to invent disposable cameras in 1986, however Kodak has now invented the digital disposable camera - the KODAK Plus Digital 35 mm One-Time-Use Camera System. Kodak has taken the ideas invented by Fuji and taken it one step further in allowing the camera to take both traditional photos and digital photos. There are some reservations about this disposable digital camera where it might make more sense to just buy the more expensive digital camera.  http://www.g4tv.com/callforhelparchive/features/44779/Disposable_Digital_Cameras.html Also Kodak got the digital camera idea from the original technology used to invent the first video tape recorder in 1951. In the 60's NASA started using digital signals with their space probes to map the surface of the moon (sending digital images back to earth). It was only in the mid-70's that Kodak then got the idea to make digital cameras available for the consumer-level market.  from http://inventors.about.com/library/inventors/bldigitalcamera.htm?terms=kodak+digital+cameras

Machiavelli First Mover Advantages Bell vs. Rogers

Manraj S., in MGT 471 at UTM in January  2011  Emailed Jan 15th to say "After your lecture covering E-business models I was very intrigued by  Nicolllo Machiavelli?s statements about being the first do something.  After the lecture I was interested in locating some real world cases  that were similar to the examples discussed in class and I immediately  thought of the companies Bell and Rogers Communications. From its inception and much throughout the 1990s Bell obtained a  monopoly in communications dominating Canadian markets in services  such as home phone, television, cell phone and internet. Bell's  infrastructure spanned the entire width of the country and was the  primary provider of telecommunication services for a majority of  Canadian consumers. Although Rogers was a key player in the television industry, it lacked  the ability to expand into the wireless and phone markets until it  purchased Cantel Inc in 1985, a wireless company to further its  abilities to breach the market dominated by bell. They were slowly  able to penetrate the market and provide greater services than that  offered by Bell." Manraj concludes "Bell had obtained the first mover advantage but Rogers ultimately  entered the market and were able to provide a wider range of services  for a far cheaper price. They took things a step further by purchasing  the Toronto Blue Jays and the Toronto sporting stadium previously  named the `sky dome` allowing them to penetrate the sports market and  create additional revenue. It is clear that being first does not mean  you are going to remain at the top, and the Roger`s Vs. Bell example  is a clear Canadian case that is relevant to myself as I was  previously using Bell services growing up, and now am a Roger`s  Customer today."

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Definition

"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." says Prof. Rappa of North Carolina State University "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" from digitalenterprise.org/models/models.html Prof. Michael Rappa is the Alan T. Dickson Distinguished University Professor of Technology Management at North Carolina State University in Raleigh, North Carolina. (2003 email on file in permissions binder asking permission to quote Rappa)

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Why Business Models are Important to Study

"According to www.dotcomfailures.com, the number one reason (47%) dot com owners stated for failing is a faulty business model. (A business model is the strategy by which a company plans to make and sustain its income.)...it is getting harder for companies to deliver profitable growth on a sustained basis. It is also more difficult for many companies to hold their  ground and not fall behind. The key reasons include the dramatic increase in complexity in managing business and the increasing premium put on innovation. The complexity is due to significant and irreversible changes in  the business environment. The pace of business is accelerating beyond the ability of most corporations to  adjust. " Witiger translates the above statement from Booz-Allen    o it is getting harder to make money, and make enough to have profit    o it is getting harder to do this year after year after year    o the Competitive Environment is getting tougher    o business is getting more complicated    o you always have to keep improving    o the speed with which things are going is almost too much for most companies  http://www.strategy-business.com/research/96201/page1.html this article from the well-known consulting firm Booz-Allen & Hamilton about changing business models, is divided into 7 pages online, which print out to about 12 pages if you want a hard copy

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TEXT  RESOURCES

Several of the texts we use in this unit discuss Web Business Models.  Some discuss the model in terms of  what type of business they do,  some discuss it in terms of how they are structured,  some in terms of how they make money.     (eg. provider based, user based)  Some even go so far as to say the goal is not to make money, but capture market share and the model is based on that assumption. The table below lists the names of each model discussed in each text -  students can see that even the experts cannot agree on some simple commonalties for this topic; perhaps this is because the variations in e-business models are as varied as brick & mortar businesses !!!

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In this unit on Business Models, we will refer to material from the following texts

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Hanson: Principles of Internet Marketing   Chpt 5	Schneider/Perry Electronic Commerce 3rd Edition Chapter 8 (in 2nd edition) Chapter 3 (in 3rd edition) Chapter 3 (in 4th edition)	Turban: Electronic Commerce: A Managerial Perspective 2002 Edition	Internet Business Models : Text and Cases by Dr. Thomas R. Eisenmann, Harvard Business School If we had the time for several lectures on business models, this would be a good book to use.	Internet Business Models and Strategies: Text and Cases Dr. Allan Afuah, Dr. Chris Tucci - we used Chpts 4 and 5 - has a good taxonomy of business models
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This text book discusses	This text book discusses	This text book discusses	This text book discusses	This text book discusses
Provider based revenue models User pay based revenue models	The Web Catalog Advertising-Supported Advertising-Subscription Mixed Fee-for-Transaction Fee-for-Services Revenue	Direct Marketing vs Indirect Marketing Full Cybermarketing vs Partial Cybermarketing Electronic Distributor vs Electronic Broker Electronic Store vs Electronic Shopping Mall Generalized E-malls/stores vs Specialized E-malls/stores Proactive vs Reactive Strategic Posture toward Cybermarketing Global vs Regional Marketing Sales vs Customer Service	Internet Access Providers Online Portals Online Content Providers Online Retailers Online Brokers Online Market Makers Networked Utility Providers Application Service Providers	Brokerage model Advertising model Infomediary model Merchant model Manufacturing model Affiliate model Community Model Subscription Model Utility Model

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Witiger's summary of all the e-Business Models First, divide the list according to whether it is a physical product or a service - many services can be sold online and are unique to the Internet world, many of the products sold online simply use the Internet as another form of advertising and the "model" is not so special. The second thing to do is divide the list according to whether the product/service is for business2business purposes, or for consumers direct - the differences are huge. An online website listing plastic autoparts will require a completely different arrangement than a website selling DVD movies to individual customers.   Product Consumer Product The Web Catalog Model Through a Broker, or Portal Industrial Product Through a Broker, or Portal Through an Industry Association Portal Through a Third-Party Intermediary Service Consumer Service Advertiser pays, viewer sees content free model  Subscription based revenue models Advertising-Subscription Mixed Model Fee-for-Transaction/Services Models Industrial Service Subscription based revenue models Fee-for-Transaction/Services Models Through an Industry Association Portal Through a Third-Party Intermediary

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Hanson: Principles of Internet Marketing   Chpt 5   Web Business Models  Revenue based business models p. 131- 132 Hanson text Hanson says of revenue based models, "the major split is between cases where providers pay for service and those where users pay"

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Provider based revenue models

• you have a lot of exciting and interesting content and you allow access for free
• you make money by giving vendors access to your customers so they can advertize to them
• fees are paid to the web site by the companies wanting to read the people using the site
• advertisers who want to target a demographic that goes to a particular site
• for example: you collect special detailed information about vacation spots in the Caribbean and you let potential tourists see this information for free - while they are on the site they have to click through pop-ups, or log in with a free userID - which allows them to be identified to the advertisers

User pay based revenue models

• the user pays a subscription fee or access fee to see content or information that they cannot get elsewhere on the web
• for example: you collect special detailed information about vacation spots in the Caribbean and you sell access to those pages to travel agents, who then use this info to book tourists
• Hanson says revenues from transactions are the fastest growing benefits of being online (p. 137)
• Hanson connects user based models to B2B sales.

Example of a Provider based revenue models

Example of a Provider Based Revenue Model    o you have a lot of exciting and interesting content and you allow access for free    o you make money by giving vendors access to your customers so they can advertize to them   . Annie F., student in BCS 555 in October 2004, found a good example of an application of the  Provider Based Revenue Models. . Annie sent an email, and explained "Today in class you explained how advertisers can get a targeted audience by simply offering some free viewing of their products. Then in order to target the audience they want, they offer free membership in which they must give their names, email, address, etc.  Here's a good example: www.snapfish.com lets you upload your pictures for free so that you create an online photoalbum to share with all your friends.  Once you upload these pictures, you type in all of your friends email addreses. Then snapfish.com sends out all these invitations to your friends and they must sign up in order to view the pictures.  Of course, the smart thing about snapfish.com is that once you are a member, you are entitled to 2 free pictures per order.  Since your friends would not have access to the original copies of the picture off snapfish.com, they would have to order the pictures if they wanted it." Witiger "Thanks Annie, that was a great example and a helpful explanation, your contribution is appreciated"

Example of a Provider based revenue models

Example of a Provider Based Revenue Model   . Victor L., student in MGD415 at UTM in 1st week of Feb 2009 emailed to say "I read the example of "provider based revenue models" by Annie F on the witiger website. I think she provided a great example and I would like to provide an example of my own. " Vic explains "As Annie suggested, advertisers want to target a specific demographic or audenices by providing free content or prizes to attract the customers. In return, the customer has to provide personal contact information such as their name, address, phone number, e-mail, and etc. So here is my example: I work at a Wal-Mart Photo Center.  We receive online orders from customer everyday. In order to promote our online digital photo service, we tell the customer that if they create an account on the Wal-Mart Photo Center website, it very convenient for them and they can choose the Wal-Mart that is located closest to their location.  Of course, having customers creating an account with us will allow Wal-Mart to obtain more business allowing customers to send in their orders 24/7. Furthermore, Wal-Mart can then obtain customer personal contact that will allow them to send customers information about products and new services." WTGR responds Yes Vic, is all about capturing the customer and turning them into a relationship which you can milk for every possible advantage - CLV

New  Business Models 2010

Student Masoud Al - R. of MGD415 (at UTM) in early March 2010 emailed to say "I came across a very interesting article about a shift in the internet pricing paradigm." Masoud explained I had a long conversation with a friend of mine about how Google is bleeding cash (~ $470 million per year) in order to pay for the bandwidth required to serve 75 billion videos a year on Youtube. (Multichannel, 2009) The author came to this conclusion as he assumed that the internet still followed the traditional cost structure, where" money flowed upwards - little ISPs paid regional ISPs who paid major ISPs who paid backbone operators." (wired, 2009) However, a few days ago he sent me an article showing that this is not the case at all, in fact it is hypothesized that Google pays close to $0 to serve its byte hungry users.  This is because Google "owns" 10% of the traffic on the internet and it also owns an extensive among of optical fibre known as "Dark Fibre"; unclaimed fibre optic cables. Thus Google "peers" with ISPs, essentially trading its Youtube traffic and other services with local ISPs. Moreover, because it owns a fair portion of internet cables, Google need not rent telecom lines from local carriers. This is just one of the many examples of dynamic shift in the "power" structure of the internet. "Who pays whom is changing, "All sorts of negotiations are happening behind closed doors." Says Labovitz, the Chief scientist for Arbor Networks, a firm that monitors 70% of global ISPs. WTGR responds, thanks, your email is informative and also raises some issues for business models going into the next decade of the millenium.   WTGR adds Dark Fibre refers to unused optical fibres - it is refered to as "dark" because no light is shining through carrying data  CNET.com  reported that Google is shopping for people with experience in dark fibre and is rumoured to be planning to build a global fiber-optic network news.cnet.com/Google-wants-dark-fiber/2100-1034_3-5537392.html WTGR reminds readers/students that Google has stated in a 300 yr business plan its goal is to "index all the world's information and make it searchable". In order to do this effectively, it would make sense to have a vertical monopoly on the information process from the hardware in the ground, all the way through to the data on the servers.

New  Business Models 2009

In my Feb 2009 response to student Vic about Wal-Mart's Photo Centre i made the point about "capturing the customer and turning them into a relationship" This "relationship building" aspect is part of a new business model which has been termed "co-creation" or "co-production"   Co-creation was discussed in an interview given by Prof. Dellev Zwick  www.yorku.ca/dzwick  of York University (Schulich School)  with John Turley-Ewart of the Financial Post (4th week of Oct 2009) Back in 2006, students of Prof. Hal Varian at UCLA Berkeley (quoting Dr. Ajit Kambil 1999)  said "Co-creation “creates a new dynamic to the producer/customer relationship by engaging customers directly in the production or distribution of value" The Co-creation Business Model recognizes thats sometimes businesses are in a situation (like FaceBook) where the activities of the customer, or how the customer uses the product/service results in value. This value can attract more customers and also allow the company to increase its competitiveness. If the vendor can also find a way to "monetize" the value coming from the customers contributions then you have a situation where the company realizes income, not from employees work (the traditional way) but from customers. Then the company's focus will change to "serving the customer" to facilitate customer's creation of more value.

Co-creation Business Models 2014 oneclass.com

An example of a web based enterprise created with crowdsourced university course content using the co-creation business model Katherine Chong, student in the previous MGTD06 (re-named MGMC20) class was also involved in the company www.notesolution.com ... which is now http://oneclass.com/ Notesolution is/was a classic example of a co-creation business model since the basics of the enterprise were students making course notes, and then sharing them with other students within a web-based structure provided by the Notesolution team.. which was a group of smart UofT students. In the process of teaching/explaining about the Co-creation model Richardson has been using the example of Notesolution for a couple of years and in January 2014 invited Katherine Chong to be a guest speaker to discuss Notesolution and the re-branded entity now known as oneclass.com. Katherine couldn't make to the class at short notice but was very kind to write the following discussion/description about co-creation business models and put it into the context of the "Environments" that effect business. oneclass.com has now expanded to include exam prep, exam bank solutions and analysis and many other helpful things for students. see them on Facebook  www.facebook.com/Notesolution

Co-creation Business Models 2014 oneclass.com

Economic Environment Now that you have content coming into the site and traffic coming in to see the content that your site hosts, how will you monetize and start making money (see user pay subscriptions vs. provider pay) The purchasing power of your target market. How willing are the people in your target market willing to separate with their money for the service that you’re offering? (assuming user pay model)

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Sociocultural Are people willing to share content online? What are the trends that people are following?  Can they be incorporated in the platform to encourage people to provide quality content

New  Business Models 2009

Dr. Ajit Kambil is the global director of Deloitte Research.  Kambil is also a distinguished scholar in residence at Babson College " Co-creation adds a new dynamic to the producer/customer relationship by engaging customers directly in the production or distribution of value. Customers, in other words, can get involved at just about any stage of the value chain. Some managers liken the transformation to turning customers into "employees." Consequently, managers must learn new techniques to motivate customers to co-create value as well as ways to successfully monitor and manage the process along the way." Ajit Kambil, G. Bruce Friesen and Arul Sundaram, Outlook Journal, June 1999

New  Business Models 2009

Co-creation and Privacy Issues Prof. Tim Richardson If company's recognize that monitoring customer exchanges of communication and sharing information on product use can be helpful - one of the considerations must be the negative side. While Co-creation has potential for helping the company, company executives must also be aware of the opportunities for customers to share negative opinions and comment negatively about product features and service within the chatrooms and bulletin boards that might be hosted or faciliated by the company. If a company becomes too worried about controlling the positive spin and hiding the negative comments, it might lead some executives to using certain technological tactics to interfer in the free exchange of customer opinions - leading to some customers worrying about the degree to which their communications are private. The impediment for such corporate control should be the dire consequences if such inteference becomes public - the negative press could be disastorous. Companies should have the confidence that both good and bad information is welcome through customer communications since the bad information can serve to guide improvements in product quality and service. WTGR

New  Business Models 2009

Co-creation - The Upside of Losing Brand Control Aaron Strout  blog.stroutmeister.com  writing in www.ecommercetimes.com in July 2009 said  "Companies that once tightly controlled their branding messages may be experiencing high anxiety in the age of social media." Strout explains "While brand ownership may be shifting away from the corporation and toward the customer, there is no rule forcing your company to sit on the sidelines and watch idly. In fact, companies that take the right approach can benefit from this new world order that puts customers much more in control. What companies need is a plan: how to engage with their customers and begin to "shepherd" their brand, even if they no longer "own" it."

New  Business Models 2009

Co-creation means 2 way communication Prof. Tim Richardson I used to say, in a critical way, that most people considered corporate communication to simply be tactics to shout the loudest. Meaning, in an intensely competitive world, getting your message across meant using the latest technology with the largest amount of financing to broadcast at the highest volume and, figuratively, across all bandwidths. The principle of Co-creation recognizes that communication is just as much about listen as it is speaking. Good communicators are not necesarily people with rich vocabulary and pleasent accents, they are people who listen well and can really understand what the other side is saying. Companies who use Co-creation well in 2010 and beyond will be companies that are adept at listening and doing a good job of communicating to their customers that they really hear the messages coming back, and that these messages are valued, helpful, and will be attended to. WTGR

Example of a User pay based revenue model

Example of a User Pay (Subscription) Based Revenue Model    o you have a lot of exciting and interesting content, you some allow access for free, and the viewer then pays to see/read the rest of the material    o you make money from the users of the material   Hsiu-Hui (Amy) K., student in MRK 410 in February 2005, found a good example of an application of the User Pay (Subscription) Revenue Models. WTGR . Amy sent an email, and explained "Hi Sir, Today I read the text online about business model-User pay based revenue models.    From the content it says that the user pays a subscription fee or access fee to see content or information that they cannot get elsewhere on the web.       I found a website www.autonews.com. This website is designed to give users access to all the content of Automotive News.  In the website, you can read some content for free but if you want further information then you need to be a subscriber which means you need to pay the subscription fee in order to get the entire information.  For example, if you are the subscriber then you get the entire contents of Automotive News and Automotive News Europe, Data Center and the archives to Automotive News and Automotive News Europe.  If you are an Automotive News Group German Market Newsletter subscriber then you get access to German Market section.  You will get the information about Europe's largest automotive market... ." Witiger "Thanks Amy, that was an interesting example and your email explained it well, thanks for your contribution"

Example of an Advertising Business Model

Example of a Advertising supported Business Model    o you have a lot of exciting and interesting content, you make money from advertisers who want their ads to be seen by users viewing the ads among the content   Raymond Y, student in MGT 415 at UTM in March 2008 emailed to say "I was reading the Globe and Mail today and I found an interesting example of an no-charge advertising supported business model.  cbs.com is making millions from March Madness by allowing people to watch the games from the CBS website. To make money, CBS sells advertising space during the broadcasts. In 2006, online advertising from March Madness brought in $250,000. This year CBS expects to rake in over $4,000,000 with over 95% of ads sold. Almost Super Bowl like numbers for the Internet. " Ray explains "What’s even more interesting is that CBS doesn’t expect online advertising to cannibalize their TV ad sales."

Example of a Advertising supported Business Model Ray adds "I think this is extremely relevant as it shows an advertising model still works, even though various other advertising supported models have failed. What started out as an experiment to “see how many slackers at the office would tune in” has turned into big business for CBS." The story can be found here: http://www.theglobeandmail.com/servlet/story/RTGAM.20080319.wrmadness20/BNSt Witiger ads Ray, thanks for finding this story, I think it serves as a good example of how "rich media content" [NCAA March Madness] put onto the web, is an opportunity for some new and innovative ways to make money in 2008 and beyond - meaning there continues to be new and exciting ways to make money on the web - not just "back-in-the-days" of 2005 and 2006.. Footnote: the pic to the left is Canada's own Denham Brown, formerly of Scarborough's West Hill Collegiate and a NCAA Champion when he played with the University of Connecticut Huskies  http://uconnhuskies.com/ See also  http://en.wikipedia.org/wiki/Denham_Brown

Internet Business Models and Strategies: Text and Cases Dr. Allan Afuah, Dr. Chris Tucci

• Brokerage Model
• "firms act as market makers who bring buyrs and sellers together for a fee for the transactions they enable"
• Advertising model
• a company provides some attractive content to bring in browsers. "The website owner usually makes money by charging advertisers fees for banners, permanent buttons and other ways.."
• Infomediary model
• "a firm collects valuable information on consumers and their buying habits and sells it to firms which in turn mine it for important patterns and other useful information to help them better serve their customers"
• Merchant model
• "the e-tailer model in which wholesalers and retailers sell goods and services over the Internet"
• Manufacturing model
• "manufacturers try to reach end users directly through the Internet instead of going through a wholesaler or retailer" (in a B2B context)
• Affiliate model
• "each time a visitor to an affiliate's site clicks through to the merchant's site and buys something, the affiliate is paid a fee". Sometimes the affiliate earns a fee just for the "click through" even if the customers does not end up buying
• Community Model
• "rests on community loyalty rather than traffic. Users have invested in developing relationships with other members of the community and are likely to visit the website frequently"
• Subscription Model
• "Members pay a subscription price and in return receive high-quality content". In reality, this model has not been too successful in 2001 and 2002 due to many alternative sites providing similar content free using the Advertising model. The only way this model works is if the content is VERY VERY good and cannot be seen for free on other sites.
• Utility Model
"activities are metered and users pay for the services that they consume"

Business Models text resources

Schneider/Perry Electronic Commerce Chapter 8 (in 2nd edition), Chapter 3 (in 3rd edition) Chapter 3 (in 6th edition) The Web Catalog Model Digital Content Revenue Model Advertising-Supported Revenue Model Advertising-Subscription Mixed Revenue Model Fee-for-transaction Revenue Model Fee-for-service Revenue Model the models described herein are The Web Catalog Model ( in the some editions they title this "Sell Goods and Services") following the hope that a small company could sell product to people anywhere in the world, just as long as Fedex or UPS ship there, and if the credit card they gave for the purchase is good

Student Raquel J., MRK 410 Feb 2005, found this good webpage on the accenture.com site which describes some aspects of business models in terms of looking at the "big picture"

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"Few people can state clearly what a business model is, much less how their company makes money" Linder and Cantrell

"By "business model," people mean everything from how a company earns its money to how it structures the organization. Most often, they are referring to components of a model. Take the so-called clicks-and-mortar business model. This just says that the company reaches customers over the Internet and through retail stores—hardly a complete business model." Linder and Cantrell explain  "A real business model is the organization's core logic for creating value. More specifically, it is:     * The set of value propositions an organization offers to its stakeholders,     * along with the operating processes to deliver on these,     * arranged as a coherent system,     * that both relies on and builds assets, capabilities and relationships,     * to create value. " Thanks for the good link Raquel, WTGR

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Turban: Electronic Commerce: A Managerial Perspective Internet Business Models  - series on online Powerpoint slides at  http://www.prenhall.com/divisions/bp/app/turban/cw/ppt/  go to Chapter 2, slide 9 The following are the "perspectives" that compose the e-business models, according to the book's authors Direct Maketing vs Indirect Marketing Full Cybermarketing vs Partial Cybermarketing Electronic Distributor vs Electronic Broker Electronic Store vs Electronic Shopping Mall Generalized E-malls/stores vs Specialized E-malls/stores Proactive vs Reactive Strategic Posture toward Cybermarketing Global vs Regional Marketing Sales vs Customer Service

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Virtual companies as a business model Virtual companies as a concept are not new, in fact they are very old - the only thing that is the use of the adjective "virtual" and the technology which facilitates communication among the corporate components. Virtual companies are essentially a special way that people provide capability to clients. Instead of having to possess all the capability that all your clients need all the time, virtual organizations consist of networks of affiliated people (specialists) and organizations which, depending on the project, will get together to provide a solution to a client which one of the people in the virtual network has. The reason this type of structure has become spoken off in the category of business models in the year 2000 is because it allows individuals and small sized organizations to bid on tasks that may be beyond the capability of the originating consultant - yet, can still be "handled" because the consultant has, through affiliations, friendships and alliances, a virtually larger capability which can be brought in to handle a larger situation.

 

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Virtual companies as a business model . Virtual companies are not just contained to the IT business world but exist in many types of formats in business throughout the globe. One example of the diversity in applying virtual companies as a concept is the famous rap group Wu-Tang Clan.   KEY POINTS The reason for mentioning Wu-Tang Clan is to prove, by example, that business is not just the circumstances of widgets and auto parts - business is very diverse and the entertainment industry is definitely big business - with all the commensurate business considerations, such as business models. . As TIME magazine noted, (Dec 11th issue, 2000) "The Wu-Tang "brand" blossomed in 1993. Each member of the group periodically goes off and does some solo project from which they develop additional capability and experience, at the same time keeping public their alliance and affiliation with Wu-Tang. The "brand", in the form of the bands members, continue to also put out products under the bands name as well in order to maintain the value of the "base" of their individual reps. The strength of the company, as explained in TIME, is "... maintaining just a small core and outsourcing everything else." Wu-Tang is a conglomeration of rappers that includes Robert Diggs AKA RZA (cousin of ODB) his interview with TIME www.time.com/time/sampler/article/0,8599,88614,00.html  for those of you that don't know much about the "business" of rap and hip hop, this is a fascinating interview which exposes just how "business" oriented these people are to market share, branding building, product diversification etc. Diggs "my original strategy — to have artists placed in different locations, then get those different labels to work together for my brand" Michael Diggs AKA Divine his interview with TIME www.time.com/time/sampler/article/0,8599,88545,00.html

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.	Virtual companies as a business model link to http://www.time.com/time/sampler/article/0,8599,88545,00.html (Still active in October 2006) Wu-Tang is Method Man, Masta Killa, U-God, Raekwon, Inspectah Deck, GZA, Ghostface Killah, ODB AKA Ol' Dirty Bastard (dead 2004, Cappadonna

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Virtual companies as a business model The band members have so many sites devoted to their activities that Yahoo has devoted an entire Yahoo category to them  http://dir.yahoo.com/Entertainment/Music/Artists/By_Genre/ Rap_and_Hip_Hop/Wu_Tang_Clan/Band_Members/ "Everything else" is their forays into video games, clothing, comics, movies and many other constantly new and evolving merchandise crossing over and back into music, video, movies and the internet.   Wu-Tang website  - example of "product diversification" - they had a kung fu game at  www.activision.com/games/wutang/ but the link is no longer active . fb

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Disclaimer: The author of this web page, [witiger]  does not necessarily advocate or subscribe to the lyrics, imagery or lifestyle associated with Wu-Tang Clan, [which some may find objectionable] or any other musical group noted herein. The purpose of noting this organization is strictly in the context of exploring the great diversity of business activity which is online, and reflects the diversity of business globally. The entertainment industry is often the particular area of business that adopts new technologies for creating "content" and sharing "content", yet many traditional business academics still choose to use examples from consumer product companies when discussing new ideas. The author of this website chooses to explain examples a bit differently !

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AMAZON

Amazon's competitive Structure p. 39 - 40 in Turban text   KEY POINTS ? "Is the cooperating model of Amazon and Ingram more effective than the cyber book-retailing channel barnesandnoble.com with the traditional nationwide store network" Basically, the question asked by Turban et al, is "which is better, a pure-play, or a click and mortar?". WTGR . Additional information above and beyond the text reference to Amazon is linked below.

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Business models  and the patenting  of them

Business models and the patenting of them "Patents on Internet Business Models"  www.webpr.co.uk/news/patents.asp Nicholas Schmidt's article March 2000 on the Cybersavvy website is good reading because it explains the consequences if patent protection becomes to extreme. "Why should you care?" Why? Because you'll find out, that most, if not all of the business practices that are completely common and obvious on the Internet today... will have been PATENTED by corporate behemoths like Amazon.com or Priceline.com... making it outright ILLEGAL for you to: 1.) Set up an affiliate program on your own; 2.) Create a site that conductions auctions or reverse auctions; 3.) Create a site where the customer will name their own price on items; 4.) Create a Web site with a button that allows one-click ordering; 5.) Create a Web site that does any kind of e-commerce at all?    ...unless you ask Amazon.com for permission to do so;    ...unless you buy the software from the single (or one of few) vendors that have been licensed by Amazon.com or Priceline.com, etc. to legally sell such software;  ...unless you pay a hefty MONOPOLY PREMIUM because all competition in the Web software market has been virtually eliminated;"     KEY POINTS Schmidt's article may seem a bit sensationalistic but the concern is that the U.S. Patent Office may grant Patents in situations where it would be against the best interests of future competition and good business practices for consumers and vendors. In the offline world, Patents are given only after a very rigorous process. For example; McDonald's make a lot of money from drive through service - but they cannot patent that since they could establish that they were first to do it, and it would be considered unenforceable since so many other businesses adopted that model for fast food retail. However in the online world, companies are seeking patents for particular process of payment execution, product information, web page layout etc. and they are trying to justify protection by claiming they are the originators of the concept. WTGR

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Business models  and the patenting  of them

Schmidt explains "What damage has been done? Amazon.com owns a patent on their "groundbreaking" idea of one-click ordering: This is the idea of placing a button on your Web site that allows ordering without entering  credit card details every time you place the order.  The USPTO should have said: DUH! Instead, they granted patent number 5,960,411 on 9/28/99. Now Amazon.com received a patent on "affiliate programs": The idea of issuing someone commissions as a reward for all sales that have been generated by a hyperlink  from their site to yours. Again, anybody who ever created just one Web page would say: DUH! But the USPTO granted patent number 6,029,141 on 2/22/00. BOTH IDEAS ARE PLAIN AND OBVIOUS. But, due to a loophole in U.S. patent law, you, me, or anyone, could have applied for a "patent" on these business processes, so as to extort royalties, or impose a de-facto e-commerce tax on virtually all transactions made anywhere on the Web, from anyone in the world who ever chooses to create Web sites that employ the same, inevitable, and obvious IDEAS."

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Business models  and the patenting  of them

Business models and the patenting of them - the Law Firms Involvement www.jonesaskew.co Jones and Askew - (noted in IEC 719), has an article on their web site discussing Patent Protection for E-Commerce Business Models    KEY POINTS A number of law firms are trying to substantiate themselves as being able to offer e-businesses protection for their idea - and of course billing out large fees for this advice. . The premise, that Jones and Askew operate on is based on attracting traffic. They explain... "To succeed in this competitive e-commerce market, a business must attract as many consumers as possible to its Web site, while building and retaining consumer loyalty. Sometimes, a Web site is more attractive to consumers because it is built with cutting edge technology that provides advanced audio/visual user interfaces, services and security measures. E-commerce proprietors have recognized that a competitive advantage may be gained by securing patent protection for such technological innovations. Other times, the appeal of a Web site does not lie in cutting edge technology, but rather is due to an innovative business model. E-commerce proprietors may be surprised to learn that patent protection also may be available to protect innovative business models embodied in computer software." "To obtain a patent, an inventor must demonstrate that an invention is directed to patentable subject matter and is useful, novel and non-obvious over the prior art. An invention must fall into one of four classes of patentable subject matter: machines, articles of manufacture, compositions of matter, and processes. For example, a computer software invention can be viewed as a machine when combined with a computer, an article of manufacture when distributed on a diskette or a CD-ROM, or a computer-implemented process. An improvement to an invention included in these classes may also be patentable. Examples of "unpatentable" subject matter include a mere idea, printed matter, an inoperable device, e.g., perpetual motion machine, and an obvious improvement of an old device. Typically, any arguable use for an invention will suffice to meet the usefulness requirement. To qualify for patent protection, an invention must be novel when compared to prior solutions to the problem solved by that invention, i.e., the prior art. Two broad categories of prior art which may destroy novelty include (1) events which occur prior to the date of invention and (2) events which occur more than one year prior to the filing date of a patent application directed to the invention. If an event satisfies either requirement, it is considered prior art. " Permission to quote from the old www.jonesaskew.com website given by Tony Askew in an email 2005 May 16th, copy of the email is on file in the permissions binder.

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"Web 1.0 was primarily a publishing and transactional environment.
 Web 2.0 as a space where users co-create value.
 Web 3.0 as a semantic space where machine intelligence combines with human intelligence to create new insights.
 Web 4.0 as a mobile space where users and real and virtual objects are integrated together to create value.
 Web 5.0 a sensory emotive space where we are able to move the web from an emotionally flat environment to a space of rich interactions."
from Title: What is your Web 5.0 strategy?
Ajit Kambil, Journal of Business Strategy Year:2008 Volume:29 Issue: 6 Page: 56 - 58
 

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