e-Commerce Business Models

Since the mid 1990s, the Internet has grown from a curiosity that appealed to technology enthusiasts to the indispensable tool we know today. The first incarnation of e-commerce was businesses selling goods and services to consumers. This was soon followed by businesses selling goods and services to each other, which became the largest volume use of e-commerce in 2001. As technology and connectivity improved, other forms of e-commerce came into being.

Types of Business Models

There are four main types of e-commerce business models:

Business to consumer (B2C): Amazon is an example of one of the first and still one of the most successful B2C e-commerce companies. The B2C model sells goods or services to the consumer, generally using online catalog and shopping cart transaction systems. Services such as subscriptions to information sites or online data backup are also examples of B2C e-commerce.

Business to business (B2B): Cisco is an example of one of the first B2B catalogs online. Other examples of B2B e-commerce are intranet services and Web meetings.

Consumer to business (C2B): Elance is an example of C2B where the consumer posts a project and businesses answer with bid proposals. Another example of C2B are online loan brokers.

Consumer to consumer (C2C): Craig's List and e-Bay are examples of C2C where consumers can post classified ads or offers to sell their property to other consumers. This is the fastest growing segment of e-commerce thanks to the advent of social networking.

Sales of Products and Services

There are five traditional revenue streams in e-commerce, and sales of products and services is the primary revenue stream and the cornerstone of all other online revenue streams. The sale of products and services is a major reason people visit a website. Information is another reason, and that is why many of the online stores have expanded their online offerings to include customer reviews and product news in addition to their product catalogs. This means people will visit the online catalogs that offer additional information rather than those that don't offer this product knowledge. It also increases the time the shoppers spend on a website and it increases the likelihood that they will refer items to their friends. These are all important to a successful e-commerce business model.

Affiliate Programs

Amazon is an excellent example of an online business that makes use of affiliate programs. Many other websites and blogs provide their visitors with suggested reading lists, and nearly all those reading lists link directly to Amazon's pages relating to the suggested books. Anyone wishing to purchase one of those books can do so using their normal Amazon customer account, but the referring site will be credited with a small commission for facilitating the transaction by recommending the book. Affiliate programs are credited with generating as much as 80 percent of transactions on some websites. This makes affiliate marketing an extremely important aspect of e-commerce.

Sponsorships

Many manufacturers provide extensive product information for use on websites that carry their products. This is a very successful form of advertising because it allows the manufacturer to construct a product image and soft sell the product's advantages. Online shoppers respond well to this type of advertising particularly when the manufacturer sponsors a section of information that features its products. Such sponsorship of sections of a website or its online catalog is a valuable advertising opportunity for the manufacturer and, therefore, an attractive form of advertising revenue for the website.

Advertising

There are many forms of advertising in e-commerce. Sponsorship is one form, but in addition to traditional banner ads there are other less obvious types of advertising such as links within content, text box advertising and several types of pop-ups, pop-unders and pop-overs. Revenue from advertising is significantly enhanced by the number of visitors to a website, the amount of time they spend on the site and how many pages they visit. That is one reason why a website should have a lot of information to attract visitors and keep them on the site.

Demographic Data

When a visitor interacts with a website, nearly everything that person does is tracked and recorded. While it is not considered good form to collect personally identifiable data on visitors, it is normal to identify visitors using a cookie that carries no personal identifying information. This tracking allows a website to serve up advertising that matches the visitor's browsing history. This kind of demographic and psychological data is very valuable to advertisers, and the collection of this data for use by advertisers represents a revenue stream that has become more of an enhancement to a website's revenue than an independent source of revenue, because privacy concerns generally require the online merchant to resist selling this information to third-party users.

Mobile

Though mobile e-commerce is considered a new and undeveloped territory, as technology improves and connectivity enables faster access to the Internet, mobile e-commerce will follow many of the aspects already key to e-commerce business models, and it will likely develop a few important qualities of its own.

Resources

• History of e-commerce
• E-commerce models
• Affiliate program information