-Why the company created the site?
-How can they earn money from Internet?
-How the information sites can survive without charging any fees?
As we know, most of the businesses' main purpose will be earn money and continue survive and growth in the market. Same as e-commerce company, they also doing business on the Internet to earn money.
Firstly, we need to know what is the revenue model of e-commerce businesses. Revenue model is defined as how an organization earns revenue, produces profits and produces a superior return on invested capital. There are five major types of e-commerce revenue models.
1) Sales revenue model: A company gets the revenue by selling goods, information or services.
2) Transaction fee revenue model: A company receives a commission for enabling or executing a transaction. It is based on the volume of transactions made.
3) Advertising revenue model: A company provides a forum for advertisements and receives fees from the companies that advertise their products.
4) Subscription revenue model: A company charges a subscription fee for the users that access to the content and services offered.
5) Affiliate revenue model: A company receives commissions for referring customers to others web sites.
* I'm just simply explain the 5 revenue models here, readers that wish to know more can refer to any e-commerce books.
Now, i will like to take 3 largest company in different sector as example for me to explain how the e-commerce businesses get profits. They are Google, Amazon and eBay.
Google (http://www.google.com.my/) is the biggest free information sites in the world. As the questions asked by my friends, how Google earn money without charges any fees from users? Actually Google didn't earn money from the users but from the advertising and others.
The main source of Google’s revenue is from advertising, more than 90%. For the 2006 fiscal year, the company reported US$10.492billion in total advertising revenues and only US$112million in licensing and other revenues. For the year 2008, only the company's first half total advertising revenues already reach US$11.5billion.
Most of the google's revenue is generated by Google AdWords. It is a pay per click advertising program that is designed to allow the advertisers to present advertisements to people at the instant the people are looking for information related to what the advertiser has to offer.
Pay per click advertising (PPC) means the advertiser need to pay everytime the advertisement received a click. The Advertisers decide the keywords relevant to their offer that should display their advertisement and the maximum amount they are willing to pay per click for that keyword and these keywords may be a link to their own websites. This function is a very useful function and will continue to bring about an increase in income especially if the number of people clicking on these advertisements increase.
The other feature provided by google to let advertisers do their advertising are AdSense and Froogle. AdSense is a fast and easy way for website publishers of all sizes to display relevant Google ads on their website's content pages and earn money.Website owners can enroll in this program to enable text, image, and more recently, video advertisement on their websites. These advertisements are administered by Google and generate revenue on either a per-click or per-imoression basis. You can access to http://en.wikipedia.org/wiki/AdSense to know more about AdSense. Froogle is a price engine website launched by Google Inc. It is a service from Google that makes it easy to find information about products for sale online.
Amazon (http://www.amazon.com/) is the well known largest online book store in the world. Amazon generates revenue primarily by selling books, videos, electronics, and kitchen equipment on domestic and international Web sites, such as Amazon Marketplace. It is using sales revenue model to earn its income.
Amazon Marketplace is something like eBay. It is a fixed-price online marketplace that allows sellers to offer their goods alongside Amazon's offerings. Buyers can buy new and used items sold directly by a third party through Amazon.com using Amazon Marketplace. Moreover, the users are allows to comment on reviews.
For more information about Amazon, please access to http://en.wikipedia.org/wiki/Amazon.com.
Ebay (http://www.ebay.com/) is the largest online market place in the world. It allowed individual businesses and consumers can buy and sell products or services worldwide.
EBay generates revenue from a number of fees such as insertion fees (a nonrefundable fee that charged when seller listed the product on eBay), promotional fees (fees that charged for additional listing options that help attract attention for an item, such as highlighted or bold listings), and final value fees (commission that charged to the seller at the end of the auction).
With eBay, consumers now can just shopping at home without going here and there. The product provided in eBay will also usually sell at lower price compare to the market. This is the reason why so many people like to access to eBay to buy and sell their products including 2nd hand products.
In conclusion, different e-commerce businesses will have different way to earn their revenue with different revenue model - Google using advertising model, Amazon using sales model combine with transaction fees and eBay using transaction fees.
I will always encourage people learn more about e-commerce and at least they can create some web site on the internet and earn some extra money for themselves, especially students.
Work harder, you will be the next successful example in e-commerce. Thanks for reading my blog.
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