A revenue model is the business plan for a company or website to make money. It is also known as business model. It is the amount of money that a company actually receives during a specific period, including discounts and deductions for returned merchandise. It is the “top line” or “gross income” figure from which costs are subtracted to determine net income. Revenue is calculated by multiplying the price at which goods or services are sold by the number of units or amount sold. There are many different types of revenue models but because of the importance of an Internet presence for any viable company, the below will discuss different revenue models which can be used on the Internet. It describes how the firm will earn revenue, generate profits, and produce a superior return on invested capital. It specifically describes different techniques or skills used in generating income from the publisher’s websites and the way a business, typically an online business, to convert its services.
Common e-commerce revenue models:
Web catalog revenue models
Digital content revenue models
Advertising-supported revenue models
Advertising-subscription mixed revenue models
Fee-for-transaction revenue models
Fee-for-services revenue models
Web catalog revenue models
In this revenue model, the sellers print catalog and mail to prospective buyers. Buyers place order by mail or by phone to sellers. It proves to be successful for wide variety of consumer item. It is often called as the mail order or catalog model. When this company wishes to enter the e-commerce market, they transfer their catalog with online version. It is then called the Web Catalog Revenue Models after the catalogue model is expanded in this way. It works best for standardized products with little quality concerns such as (New) Books, music, videos, computers and consumer electronics and also wish to purchases such as gifts and electronics.
A personal shopper application is used to create an interface that customer can virtually choose and purchase the products or goods. This is an intelligent program that learns the customer’s preferences and makes suggestions.
Benefits of Web Catalog Revenue Model
Such catalog can offer a high degree of configuration flexibility to its customers.
To sell products and services such as books, music and videos.
Luxury goods are made to provide information to shoppers not to generate revenue.
Computer companies such as QQeStore has a great success selling on the Web.
Advertising-Supported revenue models
Most television channel output is allowed by an Advertising-Supported Revenue Models. Broadcasters provide free programming to an audience along with advertising messages. It provides free programming to attract viewers, and then sell ads to marketers based on viewership. Some major problems had stopped the total success of online advertising. First is no proper usage has emerged on how to measure and charge for site visitor views. It is difficult for web advertisers to develop a standard for advertising charges.
Stickiness of the website has an ability to retain visitors.
Sticky content: e-mail, message boards and chat
Non-sticky content: news and search
In addition to the number of visitors or page views, stickiness is a critical element in creating a presence that attracts advertisers. If a website is sticky, people will spend more time on it, visit it always and bookmark it.
The second problem is that very few websites have a sufficient number of visitors to interest large advertisers.
Not very effective:
Low CPM rates due to low ad effectiveness.
Non-sticky content costs money
Web portal- Site uses as a launching point to enter the web. Almost always includes a Web directory and search engine.
Advertising-Subscription Mixed Revenue Models
It has been used for many years by traditional print newspaper and magazines. Subscribers or visitors have to pay a fee and accept some level of advertising. Subscribers are generally subjected to much less advertising.
Subscription fee charged for preferred content (like cable TV) examples like:
New York Times (crosswords)
Wall Street Journal (special articles)
CBS Marketwatch (archived articles)
AOL (monthly fee for ISP connection)
Pornographic web sites.
Usually a combination of free and premium content:
Attract customers using free content, and then try to make them pay for premium content.
Business Week- Offers some free content at its Business Week online site and requires visitors to buy a subscription to the Business Week print magazine.
Fee-for-Transaction Revenue Models
Businesses offer services or charge a fee based on the number or size of transactions processed. Commission earned based on the volume of the transactions (the higher the volume, the higher the transaction fees will be) or fee per transaction conducted at the website (a fixed fee per trade regardless of the volume). A number of online travel agency began doing business on the web. Stock brokerage firms use a fee-for-transaction model. They charge their consumer a commission for each trade carry out but much cheaper than traditional transaction service providers.
E-bay: Listing free + percentage of highest bid (commission).
Ameritrade: $8 flat per trade.
Expedia: $5 surcharge per ticket.
Ticketmaster: Commission per ticker purchased.
Plagiarism services: Surcharge per term paper downloaded
Removal of an intermediary from a value chain.
Introduction of a new intermediary.
Online banking and financial services: important feature offered is account aggregation – ability to obtain bank, investment, loan and financial account information from many websites and show it all in one location at the bank’s website. A bill presentment service provides an electronic version of an invoice or billing statement.
Benefits of Fee-For-Transaction Revenue Model
Automobile Sales- Auto dealers buy cars from the manufacturer and sell them to consumers.
Insurance Brokers- Insurance companies have been slow to offer policies and investments for sale on the web.
E-Bay- earned transaction fees from each successful transaction made by the bidders.
Fee-for-Service Revenue Models
The fee in this model is based on the value of the service provided. These are broker services or based on the number or size of transactions processed. Services range from games and entertainment to financial advice.
Channel Conflict and Cannibalization
Channel conflict: sales activities on a company’s website create with its existing sale outlets-aka cannibalization because the website’s sales consume sales that would be made in the company’s other channels.
Giving customers access to products through coordinated channels-channel cooperation.
Benefits of Fee-For-Service Revenue Models
Online games- Growing number of sites include premium games in their offerings and site visitors have to pay to play these premium games.
Concerts and films- As more households obtain broadband access to the Internet, companies are providing streaming video of concerts and films to paying subscribers
Professional services- State laws are one of the main forces preventing U.S professional from extending their practices to the web. Prepaid legal, dental insurance, warranty and others services marketed and sold through the Web.
The best revenue models that suit Cricket Sport E-Zine website are Advertising-Supported Revenue Model, because Cricket Sport E-Zine website services are either free. It also provides free programming to attract viewers and subscribers. Website are present accurate and helpful resources for subscribers. Stickiness of the website have an ability to keep visitors and attract repeat visitors. The publishing company earns money from advertisements and visitors or readers no longer have to pay to access. The content is basically paid for by money from the advertisers who in turn, gain exposure among the readers.
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